Continued: Ex-'apostle' facing trial in pyramid scam

To federal prosecutors, Neulan Midkiff was a main conspirator in a pyramid scheme that bilked more than 200 people -- including members of his congregation, his friends and neighbors in Forest Lake -- out of more than $30 million.

Some of the victims put so much trust in Midkiff, the founder and "apostle" of Shiloh Family Church, that they cashed out retirement accounts and got second mortgages on their homes to invest with him.

But Midkiff's attorney, Doug Olson, portrayed his client as a naive and unsophisticated investor who became a dupe for the scam that swindled "thousands of people out of hundreds of millions of dollars" nationwide. The scam, both nationally and locally, was run by Travis Correll, of Atlanta, he said.

The two faces of Midkiff, a 66-year-old former barber, roofer and construction worker who became a sudden millionaire through his involvement in the scam, will play out over the next few weeks in U.S. District Court in Minneapolis. Scores of witnesses and victims are expected to testify.

Midkiff is charged with 16 counts of wire and mail fraud, money laundering and for failing to file or pay taxes on more than $3 million earned in the scam, which lasted from April 2004 to December 2005.

One of the likely witnesses will be Correll, who juggled thousands of accounts through a fake company called "Horizon Establishment."

Correll told investors he had contacts who could put their money into foreign banks. The banks would then loan their money out multiple times, netting them payments of 6 to 8 percent per month. In actuality, Correll simply used money from new investors to pay earlier investors, who would spread word of their apparently fruitful deal, prosecutors charge.

Like all Ponzi schemes, the scam depended on an ever-growing base, and it finally collapsed. At the time, Correll was funneling $134,000 per month to prop up another company in Minnesota founded by Midkiff, Joshua Tree Investments, which essentially ran the same scam. When Horizon collapsed, so did Joshua Tree, affecting at least 238 Minnesotans.

Correll pleaded guilty and was sentenced to 12 years in prison. Assistant U.S. Attorney Timothy Rank told the jury that Correll may testify that Midkiff didn't know he was doing anything illegal, "to protect his friend."

'Violated trust'

There's no doubt Midkiff was near the center of one of the country's largest pyramid schemes, sometimes bringing in more than $1 million a month from Minnesota investors.

"Some of them were large investors, but most were smaller," Rank said. "Some emptied their savings accounts or took out loans on their credit cards. [Midkiff] ran a church. He quoted the Bible. He said he used the profits to build churches overseas. People gave him their money because they trusted him. He violated that trust."

Initially, Midkiff acted as an "intermediary" for Correll, bringing investors to Horizon from Twin Cities suburbs for a fee. He made between $150,000 and $1.5 million per year during that time. Then he started Joshua Tree and essentially ran the same scam locally, Rank said.

Midkiff's attorney acknowledged Tuesday that his client didn't file or pay taxes on that income, but said it was an oversight. "He's not a very good businessman," said Olson, an attorney in the Federal Defender's Office.

Midkiff used his gains to buy a $1.3 million home, a Lincoln Navigator, a Mercedes Benz, a boat and a motorhome, Rank said. Much of that property, including the church, has been frozen by the Securities Exchange Commission.

Both the local and national scams worked for a while. Correll and Midkiff used the initial principal, and money from new investors, to pay handsome monthly payments back to investors.

"People would show these big checks to friends and family, and they wanted to invest," Rank said. News of the deal quickly spread around Forest Lake and surrounding suburbs.

Midkiff also ran an office out of Blaine for a similar venture, Via Comp Financial, and employed his brothers and son to recruit potential investors.

Ex-friend to testify

Midkiff was involved in a third venture, Central Financial Services, with Jerry Watkins, a man who was a minister at the church and once lived with Midkiff and his wife, Donna.

Donna Midkiff held the title of "Prophetess of the Feast" at the church.

Watkins pleaded guilty and is expected to testify against his former friend and pastor.

Rank charged that Midkiff began the other operations when the Minnesota Department of Commerce began inquiries into Joshua Tree.

But Olson said his client was unaware of any illegal acts.

"Travis Correll conned, cheated and defrauded Neulan Midkiff," he said. "He defrauded him longer than anyone to keep him in the game."

Jon Tevlin • 612-673-1702