Trickling Springs Creamery owners accused of bilking investors of nearly $8 million

The owners of Trickling Springs Creamery, which is set to close Saturday, are facing allegations that they bilked nearly $8 million from investors across the country. 

The Department of Banking and Securities filed paperwork last November, ordering the company to respond to charges that four owners were involved in a scheme that resulted in the sale of promissory notes to at least 110 investors, without disclosing pertinent financial information and ultimately failing to pay the investors their proceeds in the end. 

Public Opinion learned of the investigation after the document was posted by a person in the comments of the Facebook post last Thursday in which Trickling Springs announced its imminent closure. The company - which buys milk from 32 family farms to make products that it sells in stores up and down the East Coast - shut down its production the next day, and its retail store on Molly Pitcher Highway south of Chambersburg will close at 4 p.m. this Saturday. 

"We would like to express appreciation to our wonderful employees for their dedication and hard work as well as the farmers who stood beside us and supported our mission. We are especially grateful to the community who has supported and loved our products throughout the past 18 years," the company said in the post.

In addition to the company, the document lists as defendants majority owner Philip Elvin Riehl and owners Gerald Byers, Elvin Martin and Dale Martin. 

It states that in or around February 2015, the company began offering the sale of notes to fund the company's operations. 

It is worth noting that this occurred around the same time that Trickling Springs was undertaking an expansion project at its operations plant in Guilford Township.  It also began construction on a "state of the art" cheese production facility in Newville in 2015. 

By October 2017, 175 notes had been sold to 110 investors, yielding the company $7,803,829, according to the document. Of those, 20 were sold to 15 investors in Pennsylvania for a total of $963,104. 

More:Community 'heartbroken' over closing of Chambersburg's Trickling Springs Creamery

"Respondent TSC failed to provide some or all of the Investors with financial statements regarding Respondent TSC, which disclosure would have been material for a reasonable investor to make an informed investment decision. To the extent that Respondent TSC did not have disclosure documents, Respondent Riehl failed to disclose their nonexistence, which would have been material for a reasonable investor to make an informed investment decision," the document states. 

The document states that several months after the sale of the notes began through early 2018, the owners received various-size checks payable from the company's bank account. Riehl received $954,250; Dale Martin receive $379,930; Elvin Martin receive $40,000; and Byers received at least $31,688. In addition, nearly $1,184,318 in cash was withdrawn from company bank accounts within about the same time period. 

Specifically, the Department of Banking and Securities charges the company and owners with 370 counts for violating multiple rules of the Pennsylvania Securities Act of 1972. They include: 

• 20 counts for illegally selling notes to people in Pennsylvania;
• 175 counts for making untrue statements or omitting material facts; 
• and 175 counts for engaging in business that is fraudulent or deceitful.

"At all times material herein, Respondent TSC was insolvent and was unable

to fulfill its financial obligations stemming from the sale of the Notes," the document states. 

The department could suspend or revoke the company's registration, or censure the owners, according to the document. The investors also have the right to sue to recoup the money they paid for notes. 

In addition to providing Trickling Springs the opportunity to respond to the charges within it, the document announces that the company was to respond within 30 days if it wished to request a hearing. Otherwise, the department could issue a final order and set consequences. 

The case is ongoing, as a final determination has not been made. 

The attorney listed on the document for Trickling Springs Creamery and the four owners did not respond to a request for comment. 

More:Stress curdles idyllic Pennsylvania farm life, especially for dairy farmers

Trickling Springs opened in June 2001. The founders established strict guidelines for the farms producing their milk - including requiring grass-fed, heritage breed cows and no use of synthetic hormones - and would pay farms above-average prices to maintain these standards, according to the company's website. With this milk, the creamery used minimal processing and simple ingredients to produce its milk products, butter, cream, cheese, ice cream and other dairy products. 

The company was certified organic by 2002. It began selling its products throughout the Mid-Atlantic, and before long was distributing products throughout the East Coast. Calls come from world over about its artisan butter that Culture magazine described as "anti-matter" in 2012. Its plain yogurt has gotten similar accolades.