Former Bank Prez Charged in $10 Million Ponzi Scheme

Richard A Freer is in Northampton County jail under $10 million bail 

At one time, he was President of Lafayette Bank. But Richard A. Freer, age 67, is now in jail. He's charged as the mastermind behind a $10 million Ponzi scheme that defrauded 81 local, and mostly older, Lehigh Valley residents of $10 million over the past four years. Northampton County District Attorney John Morganelli announced the charges on Friday morning after Freer was arrested at his Palmer Township home. Based on a Grand Jury Presentment, Freer has been charged with 90 counts of theft by deception and theft by failure to make the required disposition of funds; forgery (50 counts); deceptive or fraudulent business practices (42 counts); failure to register under the Pennsylvania Securities Act (1 count); and sales and purchases in violation of the Pennsylvania  Securities Act (1 count). "He deserves to die in prison," said Morganelli. "I hope he has a long life because it's going to be spent in jail."

ADA Bill Blake handles white collar crime

Ironically, Freer succeeded James P Greer as president of Lafayette Bank when Greer was convicted of tax evasion in 1987. According to the Presentment, Freer was forced to resign his position as President in 1991. Public records reveal that he was plagued by financial problems after he left Lafayette Bank, with numerous judgments filed against him. He sold his property, after which he and wife Beverly rented a home on Tatamy Road.

There is no evidence that Freer or his wife lived a lavish lifestyle, or had a drug or gambling dependency, according to Assistant DA Bill Blake, who is also handling this prosecution.

According to the Presentment, Freer bounced from job to jab after his departure from Lafayette Bank until 2002, when AVIVA Insurance hired him. From their Bethlehem offices, Freer began offering high yield investments to customers who agreed to invest their money with him privately. He promised to place their money in a real estate investment trust or with his employer. But he instead deposited the money into his personal checking and savings accounts.

In addition to his work with AVIVA, authorities claim that Freer carried on his Ponzi scheme through Financial Services Group, Richard A Freer and Associates and Limerick Properties, LLC. But he never registered these businesses with the Department of State, as required by law. Nor has he ever registered as a broker-dealer, agent or investment adviser. In fact, he failed the examination for mutual fund and variable annuity salesmen on four separate occasions.

Freer operated by referral, visiting people at their homes. Though he did sub-let office space at 65 E. Elizabeth Avenue in Bethlehem, he had no working phone or computer. His office consisted of a desk, television and filing cabinet.

Jane Morris Annuity Led to Investigation

Morganelli began this investigation based on concerns raised by Bethlehem Attorney Nicholas E. Englesson and William Koscinski, an Allentown Certified Public Accountant. Their client, Hanover Township resident Jane Morris, age 80, had signed over an annuity to Freer worth $48,000. She invested an additional $106,000 with Freer based on his assurances that she would double her income. But last November, Morris began receiving notifications from the IRS that she owed $15,000 in taxes for prematurely cashing out the annuity. Koscinski contacted Freer, and later received a telephone message that "all necessary information was sent to the IRS and you should not contact Mr. Freer or Mrs. Morris regarding this issue any further."

Koscinski then learned that Freer had provided nothing to the IRS and that the income tax issue remained unresolved. As he continued pressing the issue, Freer ultimately paid the $15,000 in income tax from his own account. But by this time, Morris had entrusted Freer with over $400,000.

Based on this information, Morganelli began a Grand Jury investigation.

Ted and Lois Walters

According to the Grand Jury Presentment, Easton residents Ted (age 64) and Lois (age 63) Walters invested over $600,000 with Freer, beginning in 2004. He deposited this money in his personal account. When they asked for monthly annuity payments, he provided them with $5,000 per month. They also invested $10,000 with Freer as a deposit on a vacation home in Delaware. He told them their mortgage was denied, but they subsequently learned from the owners of the vacation home that there had never even been an agreement of sale. The Walters asked Freer to transfer their money to another investment broker, but he provided nothing but excuses.

The Gencarelli Family

At least ten members of this family, located in Bethlehem and Easton, entrusted  $1,450,000 to Freer for trusts that would enable their children to attend college. Freer told them he ran a big business with 19 employees, an attorney and his accountant. He promised to set up annuities with AVIVA, but instead deposited their money into his personal account. He used the money for personal expenses and to make payments to other victims of his Ponzi scheme.

The Steads

Kenneth (age 83) and Shirley (age 77) invested over $630,000 with Freer, starting in 2006. He cashed out their life insurance policies and an IRA, which went into his own personal account. Their money is gone.

Freer Claims He Has Special Investors

Detective Gerald Walsh executed a search warrant at Freer's home on May 29. At that time, Freer told Walsh he finds "special investors" for his clients, with a guaranteed  5-11%  rate of return. He acknowledged that most of his clients are between 55-75 years old. He told Walsh that his files were at his Bethlehem office, but Walsh found 82 files in an upstairs bedroom. According to Walsh, they reveal a "significant fraud" against numerous people, totaling $10 million. There were no documents indicating Freer had invested the money with legitimate investment firms or "special investors."

Freer Continues Fraud After Accounts Frozen

During the course of the investigation, Freer's bank accounts were identified and frozen in July. Freer opened up a new checking account and took $189,000 from an elderly couple. He made out a cashier's check to himself for $20,000 and used other money to make payments to some of his victims.

Morganelli Outraged

Calling this "one of the most outrageous cases I've ever seen of theft," Morganelli condemned Freer's "despicable conduct". His office is looking for additional victims. "I gotta' believe there's more people out there," stated Assistant DA Bill Blake. "Hopefully, they'll reach out as time goes on."

"We're not done yet," added Morganelli.