Federal authorities can claim one victory in their two-year pursuit of the leaders of TelexFree Inc., an alleged $3 billion global fraud: the Massachusetts man who ran the local operation has agreed to plead guilty.
James Merrill of Ashland, who rose from cleaning company owner to chief executive of TelexFree, will face a federal judge in Worcester on Monday to plead guilty to numerous counts of wire fraud for his role in an enterprise that ensnared nearly 1 million people, many of them housekeepers, painters, and other working people.
Meanwhile, Merrill’s business partner, Carlos Wanzeler, remains a fugitive in Brazil, where he faces charges, after fleeing the United States in April 2014.
TelexFree started in Brazil and was run from Marlborough from 2013 until April 2014, when federal agents raided the offices and the company filed for federal bankrutpcy protection. Until now, Merrill and Wanzeler have maintained their innocence, insisting that they were running a legitimate Internet phone service company.
In reality, TelexFree was a Ponzi scheme, prosecutors say, using money taken from an ever-growing network of small investors to pay off earlier participants.
Participants would buy shares for about $1,400 a piece, and were allegedly promised fast, double-digit returns. They received incentives for bringing in family and friends, and the alleged scheme spread like wildfire in the United States in just over a year.
Prosecutors say it was the largest fraud of all time in terms of the number of people affected, with victims in almost every country.
Merrill, 55, accepted a plea deal just weeks before he was set to go to trial before a jury. If found guilty, he faced a sentence that could have meant spending the rest of his life in prison. Prosecutors filed notice of Monday’s hearing with the court Friday but did not release details of the plea agreement.
Merrill is known as a family man, well-liked by neighbors and friends who wrote letters supporting his release on bail after his arrest in May 2014. Many believed he was duped by Wanzeler and a third TelexFree partner, Carlos Costa. Costa lives in Brazil, where he is facing charges. He has not been charged in the US criminal case.
To US securities regulators, Merrill presented himself as unfamiliar with the details of the business and unaware of the pyramid scheme. He could not explain why Costa’s share in the company had been transferred to him, raising Merrill’s stake from 20 percent to 50 percent in 2013.
But in videos, Merrill appeared at rousing conferences of TelexFree participants eager to cash in on easy money. In the hill towns around Vitoria, Brazil, where the company was once headquartered, young men interviewed by the Globe once vouched for the money they made with the company. In their view, TelexFree only failed because the government interfered.
Merrill and his business partners allegedly took advantage of Brazilian and Dominican immigrants in Massachusetts, even though Wanzeler himself was once a new immigrant here, searching for work. Indeed, that’s how the two met, back in the 1990s, when Merrill hired Wanzeler and other members of his family to work at the cleaning firm.
Wanzeler, Merrill, and Costa went into business together in 2010, according to the criminal indictment filed in July 2014. TelexFree’s operation in Brazil was shut down by authorities there in 2013 and the headquarters shifted to Marlborough.
In April 2014, with investors suddenly having trouble getting their money out of the company, federal authorities raided the Marlborough offices of TelexFree, catching a temporary chief financial officer trying to flee with a bag containing millions of dollars in cashiers checks.
Wanzeler slipped across the Canadian border and flew to Brazil. He left his wife and family in suburban Northborough. US authorities have tried to get him to return to face charges, but under Brazil’s extradition treaty with the United States, he was not compelled to return.Beth Healy can be reached at firstname.lastname@example.org.
Follow her on Twitter @HealyBeth.