Pastor's sentence: 15 years for scam

U.S. District Judge Michael Davis sentenced a Forest Lake minister to 15 years in prison for his role in a multimillion-dollar pyramid scheme Thursday, but he wasn't happy about it.

Davis, Minnesota's chief federal judge, upbraided the U.S. Justice Department for its handling of a case in which Neulan Midkiff, the minister, will serve more time than the fraud's ringleader.

Terrence Correll, architect of the Ponzi scheme that bilked 519 people of up to $390 million, received a 12-year term.

Under the sentencing guidelines, Davis said, "the more you steal, the better off you are."

Midkiff, 66, wept as he apologized for his part in the scheme, although he said that he did not realize at the time he was committing fraud.

Davis expressed doubt. "You can't hide behind being an unsophisticated person," he said. Midkiff was blamed for at least $18 million lost in the scam.

"This is such a difficult sentence," said Davis, recalling the testimony of victims who were ruined by the venture. "I heard all the pain and agony."

Davis criticized the Justice Department for having the cases tried in different states. Correll pleaded guilty in Atlanta.

"It could have been handled in Minnesota," Davis told Assistant U.S. Attorney Timothy Rank.

While longer than Correll's, Midkiff's sentence was shorter than it could have been. Sentencing guidelines called for 27 to 33 years. "And that would be totally inappropriate," Davis said.

Midkiff was convicted in August of 21 counts of mail and wire fraud and tax evasion. His partner Jerry Watkins has pleaded guilty to fraud and testified against Midkiff.

Friends and family invested

The scam paid investors "interest" using their own principal or money from new investors.

A former barber, roofer and construction worker, Midkiff moved to Minnesota, bought a $1.3 million lake home, luxury cars and a motor home and paid himself about $3 million. The SEC has frozen his assets.

In urging a long sentence, Rank said nearly 30 victims testified. He recalled how Midkiff went to Colorado to pressure one investor, spending hours talking about religion.

"The crime in this case goes beyond money," said Rank. "It goes to a breach of trust."

Midkiff said he had not intended to swindle anyone.

Midkiff must pay $18 million in restitution. While that seems unlikely, victims may receive some funds once authorities complete their work.

Because Midkiff has a serious heart condition, Davis recommended that he be imprisoned at the Federal Medical Center in Rochester.

Victims give split verdict

Sitting in the front row in the courtroom were Phyllis and Gordon Holtz, of Forest Lake, who said they lost $190,000 along with their house and had to declare bankruptcy.

"It's embarrassing," said Gordon, a retired carpenter. "I think he should have got quite a bit more [time]," said Phyllis, a retired machinist.

Midkiff's son said the family would have no comment. Also not commenting was Doug Olson, a federal public defender and Midkiff's attorney.

Rank, who had to weather Davis's criticisms during the hearing, said Davis's sentence was "well reasoned" but did not comment further.