Jury Finds Forest Lake Minister Guilty of Defrauding 519 People Out of More Than $30 Million in Scheme
After four hours of deliberation, a federal jury issued a guilty verdict today against a 66-year-old Forest Lake man who was charged with defrauding 519 people nationwide out of
approximately $30 million in an investment scheme.
At the United States Courthouse in Minneapolis, Neulan Midkiff was found guilty August 1st of
eight counts of mail fraud, eight counts of wire fraud, one count of conspiracy to commit mail
fraud, and four counts of failure to file tax returns.
U.S. District Court Chief Judge Michael Davis thanked the jury for their efforts during the
18-day trial, and turned Midkiff over to the U.S. Marshals. A sentencing date has been
tentatively scheduled for Oct. 1. Midkiff faces a potential maximum penalty of 20 years in prison
on each mail fraud count; 20 years on each wire fraud count; five years on the conspiracy count;
and one year on each failure to file count.
Midkiff was indicted in December 2006 in connection with the scheme. A second defendant
named in the indictment, Georgia resident Travis Correll, pleaded guilty in Georgia for his
participation in the scheme. A third defendant, Jerry Watkins, pleaded guilty Jan. 9, 2007, to five
criminal counts for his participation in the scheme.
From April 2004 through December 2005, Midkiff devised and intended to devise a scheme
to defraud and to obtain money by means of materially false and fraudulent pretenses, and did
knowingly cause to be sent by the U.S. Postal Service and interstate commercial carrier various
mailings for the purpose of executing such scheme.
It was part of the scheme to defraud that Midkiff fraudulently obtained money from
individuals by falsely representing that the individuals’ money was being invested and that other
investors were obtaining high rates of return on their investment, when in fact, he knew that the
investment was not producing interest payments.
In the spring of 2004, Midkiff and Watkins began soliciting investors using the business
name “Central Financial Services of Minnesota,” and promised a return on their investment of 6 -
8 percent per month. In May 2004, Central Financial Services entered into an agreement to
invest money they had collected from the investors with West Wing Financial. The agreement
called for Midkiff and Watkins to provide West Wing $1 million, and in exchange, West Wing
promised to pay a minimum of 8 percent interest per month for 14 months.
In May 2004, Midkiff and Watkins wired more than $1 million to West Wing.
Prior to the agreement with West Wing, from 2002 through the spring of 2004 Midkiff
worked as an “intermediary” on behalf of Correll, and recruited investors to send money to
Correll purportedly for investment with a business operated by Correll called Horizon
Establishment. Midkiff directed the investors to send the money to Correll and each investor
received a “contract” from Horizon, along with an oral promise of a return on the investment of
5 percent or more per month.
In the summer of 2004, Midkiff and Watkins learned that most of the $1 million they had
sent to West Wing had disappeared. Midkiff and Watkins did not tell this to the investors, but
instead said the money had been “transferred” to Horizon. To conceal the disappearance, Midkiff
entered into an agreement with Correll whereby the West Wing investment falsely appeared to
have been transferred to Horizon. Horizon then began paying monthly “interest” payments to
Midkiff, which was then used to pay the investors whose money had been stolen by West Wing
as if nothing had happened to their principal.
Midkiff directed that all the Horizon payments be paid to “Joshua Tree Group,” a Nevada-based
corporation that Midkiff formed in September 2004, using a Nevada bank account held in
the name of Joshua Tree. After September 2004, Midkiff conducted all business through Joshua
Tree, and the arrangement between Midkiff and Correll to pay West Wing investors was
characterized as a “loan” from Horizon to Joshua Tree.
From August 2004 to October 2004, Midkiff and Watkins solicited investors for more than
$1 million, which was sent to Correll at Horizon. Initially, Correll paid Midkiff and Watkins
under the terms of the agreement on a monthly basis, and these payments were used to fund
monthly interest payments to Joshua Tree investors, after Midkiff and Watkins had taken their “commission.”
In December 2004, the monthly interest checks from Horizon to Joshua Tree failed to clear,
and stopped entirely in February 2005. Midkiff, however, continued paying the investors their
regular monthly interest, and in order to make those payments, Midkiff used money he was
collecting from new investors. Midkiff also did not inform any of the investors that the payments
from Horizon had stopped or that new investor money was being used to pay their monthly
returns.
Midkiff even directed potential investors to speak with existing investors for confirmation
that the existing investors were receiving regular interest payments as a method of attracting new
investors.
Midkiff paid himself or otherwise used for personal expenses in excess of $2.5 million out
of the funds provided by investors, and Watkins was paid in excess of $1 million.
This case is the result of an investigation by the U.S. Postal Inspection Service, the Internal
Revenue Service - Criminal Investigation Division and the Federal Bureau of Investigation. It is
being prosecuted by Assistant U.S. Attorneys Tracy L. Perzel and Tim Rank.