DETROIT (Aug. 13, 2008) — A Detroit federal district court has frozen the assets of a Livonia, Mich.-based tire recycling firm, its president and his son, after the Securities and Exchange Commission (SEC) issued a fraud complaint.
Paul Merklinger, president of Encore Association Leasing L.L.C., raised more than $7.2 million from investors for an interest in a tire shredding truck. According to the SEC, Mr. Merklinger told investors that a working prototype of the truck existed; that Encore Leasing would pay them $15,000 in monthly leasing fees and interest; and that within five years they could expect returns on their investments of up to 372 percent.
“However, as alleged in the SEC's complaint, the tire shredding equipment did not work, there was no reasonable basis for Merklinger's income and return figures, and the investors never received a dime from their investment,” the SEC said in its press release.
Among other things, the agency alleged that Mr. Merklinger used more than $950,000 of the money for his personal benefit, and also gave his son, Brian Merklinger, more than $172,000.
The SEC has charged Paul Merklinger and Encore Leasing with violating the antifraud provisions of federal securities laws and seeks permanent injunctive relief, disgorgement of investors' funds, and civil penalties, as well as disgorgement of all investor funds allegedly given to Brian Merklinger.
Tim Warren, associate regional director for the SEC's Chicago office, declined to say what caused the agency to investigate Encore and the Merklingers. The next action in the case, Mr. Warren said, will be Paul Merklinger's reply to the charges.
Raymond Henney, Paul Merklinger's attorney, could not immediately be reached for comment.