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August 13, 2008 02:00 AM

SEC charges tire recycler with fraud

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    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 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, Merklinger told investors 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 agency said in its press release.

    Among other things, 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 alleges.

    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.

    Raymond Henney, Paul Merklinger's attorney, could not be reached for comment.

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