Con man: He, pastor became scam cohorts

The man who ran one of the country's larger pyramid schemes testified Friday that he cheated and lied to Neulan Midkiff, the Forest Lake pastor accused of being the Minnesota leader of the scam, and "kept him in the dark" about his illegal activities.

But Travis Correll also said that Midkiff lied to investors himself and engaged in pyramid-style deals that Correll didn't direct.

The nature of the relationship between Correll, who was previously sentenced to 12 years in prison, and Midkiff is central to both the prosecution and defense.

Midkiff's attorney, Doug Olson, tried Friday to distance his client from Correll, who ran the $100 million Horizon Enterprise scheme out of Atlanta, and portray Midkiff as the most "gullible" of Correll's victims.

But prosecutor Tim Rank tried to show that Midkiff was perhaps Correll's most important associate, bringing in more than $45 million either directly to Horizon or through another related pyramid scam that conned hundreds of Minnesotans.

Midkiff is on trial in U.S. District Court in Minneapolis, accused of mail and wire fraud and failing to pay taxes on millions of dollars in income.

There is no dispute that Midkiff and Correll became close associates. Midkiff was one of Correll's earliest investors, and Correll loaned him $50,000 to open an office in Minnesota, Rank showed. Over a two-year period, the two men spoke on the phone 1,400 times.

But Olson asked Correll, "You did everything in your power to make him believe you were a legitimate company, didn't you?"

"Yes," said Correll. "I did for everyone."

That even included sending out Christmas cards.

Correll said he strung Midkiff along longer than any other person who raised money for him because of Midkiff's "lack of business acumen and sophistication."

Scam begot scam

Correll, the son of a Nebraska farmer, a former rodeo cowboy and college basketball referee, said he was an accidental scam artist.

While trying to augment his referee salary, Correll met a man from New Zealand who coaxed him to raise money from friends and family to invest in international banking. Correll who was 25 at the time, eventually wired $100,000 of pooled money to New Zealand. He never got it back.

To repay that money, he resorted to the same tactics, giving the new investment money to existing investors. As people heard of monthly payments of 8 percent, they clamored to give him more.

Asked if it was an illegal Ponzi scam from the beginning, Correll replied: "It was."

That didn't stop him from persuading his father and grandmother to invest.

Midkiff, who founded Shiloh Family Church in Forest Lake, invested within the first couple of months. He persuaded family and church members and hundreds of neighbors to join him. Eventually, Minnesotans lost some $30 million.

Midkiff also started several local spinoffs of the scam, including a company called Joshua Tree, which turned out to be little more than another funnel for Correll.

The money multiplied exponentially, making meeting the monthly "interest" payments more complicated and difficult. Still, Correll was able to keep it afloat for more than four years.

During that time, Correll and Midkiff made numerous deals to help sustain their ventures, including a "phantom" $1 million loan in which they simply traded IOUs. While Correll swore Midkiff was not an employee, his name was on early client forms.

Both men became millionaires through the deals. Midkiff, a onetime barber, roofer and construction worker, bought a $1.3 million lake home, luxury cars and a motorhome, and paid himself about $3 million. The SEC has frozen his assets, and he is being represented by a public defender.

Midkiff falsely told Minnesota investors that Joshua Tree was not connected to Horizon; Correll admitted Friday that Midkiff started Joshua Tree on his own. Correll also said he had nothing to do with Midkiff paying a former partner, Jerry Watkins, "to keep his mouth shut."

The pyramid imploded in December 2005.

Correll said he was left a "head case" afterward, unable to bring himself to shower or go out for weeks.

Meanwhile, Midkiff suffered a massive heart attack.

After hearing a sermon about "getting rid of the garbage in your life," Correll dropped his lawyers and began cooperating with authorities.

Asked how he felt about duping Midkiff, Correll said:

"It's awful, and I have a knot in my stomach I don't know how to explain."

Jon Tevlin • 612-673-1702