The small town of Watertown, Wisconsin is the last place you'd expect to find a multimillion-dollar Ponzi scheme in full swing, but the feds say that's exactly what's been happening.

Investigators say Aaron Holzhueter and his dearly departed father ran a sophisticated fraud scheme, scamming innocent investors out of more than $10 million.

Those distraught investors tell Crime Watch Daily Milwaukee affiliate WITI they handed over just under $200,000 to Loren Holzhueter's now-defunct insurance service center know as the Insurance Service Center (ISC). But they claim they've never seen a dime.

Loren Holzhueter was a respected businessman who owned a chain of insurance and tax preparation businesses throughout the state. But when his clients failed to see a return on their investments, the federal government got involved.

People like Wendy Lippert, who says her father, on his deathbed, urged her to go to Loren if anything happened with their money. Wendy says she and her blue-collar worker husband gave over $50,000. But Wendy says something seemed fishy when Holzhueter never showed her any actual investment reports. She had no idea anything was wrong until the IRS came knocking at her door.

According to federal court documents, Holzhueter reportedly never put their dough into stocks, bonds or mutual funds. Instead, the feds say, he used the money of more than 120 other investors to fund his own insurance agency and pay his family more than a half-million dollars in salaries.

Employees like Michelle Brandt, who was sitting at her desk, stunned, when the feds raided the company headquarters.

"About 30 guys came in and told everybody to stay where they were," said Brandt.

ISC workers were shocked that their beloved boss appeared to be a con man.

Now Holzhueter's son Aaron is in the hot seat. But he has not been charged with any wrongdoings in connection with his dad's alleged scheme.

In March, Aaron Holzhueter, who investigators say pulls in a six-figure salary, reportedly filed for bankruptcy, declaring nearly $2 million in assets. About $1 million of that money is in farming. But when questioned by the government at a recent hearing, his answers were vague.

Since his dad's death, Aaron and his wife allegedly came into more than $9 million from his father's life-insurance policy. A federal judge froze the proceeds and there is ongoing litigation to figure out who will get the money.

And while another investor named Tony Milbrath's dreams of retiring are crashing down, he says he believed in the elder Holzhueter till the end, and even shook Aaron's hand at his dad's funeral.

"And I said 'How are things going to go now?'" said Milbrath. "He said 'Don't worry about it. Dad taught me well.' Exact words."

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