Cliff Buchan
News Editor

More trouble is in the wind this spring for Neulan D. Midkiff, the apostle of Shiloh Church in Forest Lake.

After nearly four months of a federal investigation into an alleged bank fraud scheme, Midkiff, 64, is now facing a Texas date in court later this month to face possible contempt of court charges.

He is slated to appear in federal district court in Fort Worth, TX on April 25 following a motion filed on March 20 by the Security and Exchange Commission, said Marshall Gandy, an SEC attorney in Texas.

The motion accuses Midkiff of civil contempt for his ìfailure to comply with the Order of Preliminary Injunction and Order Appointing Receiverî entered by the court on Dec. 7, 2005.

Midkiff is a central figure in a massive federal investigation into a multi-state and international bank fraud scheme or Ponzi program.

Officers of the court, acting on orders from the December ruling, have frozen more than $2 million in cash from Midkiff bank accounts and are attempting to seize and claim assets in an inventory of personal property that includes two homes in Forest Lake, cars, boats and other items.

According to the SECís motion, Midkiff has failed to turn over assets and records to Hays Consulting of Atlanta, GA, the court-appointed receiver.

In addition, Midkiff has interfered with the duties of the receiver by communicating false and misleading information to the defrauded investors regarding the SECís civil injunctive action and failing to provide an interim accounting under oath, the motion said..

The SEC also said Midkiff has filed actions outside the receivership court naming SEC staff and fiduciaries and containing documents that purported to be financial instruments drawn on the United States Treasury in the amount of $100 million with instructions to use the funds to settle the SECís claims against Midkiff for monetary relief.

New allegations

The contempt charge that will be heard April 25 follows new allegations and complaints against Midkiff.

In a document filed with the court on Feb. 5, Midkiff asked that Marshall Gandy, the SEC attorney, be named fiduciary with authority to use the $100 million to settle claims against Midkiff.

That came as news to Gandy, the attorney said.

ìI have no idea of what the document is about,î Gandy said. ìMr. Midkiff is going to have to explain that to the judge.î

Gandy said the motion for contempt follows continued roadblocks by Midkiff in participating with receivers from the Hays office in Atlanta.

Along with refusal to provide information and records, the SEC filing also presents documentation that Midkiff sold a secured motor home to PleasureLand RV Center in Ramsey for $51,000. That sale allegedly took place on Dec. 12, 2005, five days after the court had frozen all of Midkiffís assets, SEC records show.

ìThat is just unacceptable,î Gandy said. ìThe other defendants have cooperated.î

The actions, he said, will be part and parcel of an ongoing probe by other federal agencies that include the FBI, U.S. Marshalís Office and Postal Service Inspectorís Office. No determination has been announced on any criminal charges against any of the defendants and such action would likely involve a federal grand jury, Gandy said.

S. Greg Hays and Mark King of Hays Consulting, both expressed frustration this week with the lack of progress in working with Midkiff.

King, the investigator who has been to Minnesota multiple times in attempts to secure assets, said he believed the Midkiff plan to involve the treasury department was bogus.

ìThey (the SEC) would have taken that offer in a heart beat if it was true,î King said.

ìThere is nothing to it,î Hays said from Atlanta last week. ìItís just a piece of paper. He (Midkiff) hasnít cooperated at all.î

Background

The alleged Ponzi scheme hit the legal system on Dec. 7 of last year when the SEC filed an emergency action in United States District Court for the Eastern District of Texas seeking permanent injunctions, disgorgements plus prejudgment interest and civil money against Travis E. Correll of Atlanta, individually and doing business as Horizon Establishment, and his companies, The Net Worth Group, Inc. and Travis Correll & Company, Inc.

The order also named Gregory Thompson of San Antonio, TX and his TNT Office Supply, Dwight J. Johnson of Garland, TX, Harry Robinson ìRobbieî Gowdey of Frisco, TX and his Atlas and Jerico Productions, Grant Cardno of Norfolk Island, a territory of Australia, and his entities, the Liberty Establishment, Inc. and Sovereign Capital Investments, and also Neulan D. Midkiff of Forest Lake and his entity, Joshua Tree Group LLC.

The court order charges that the defendants were engaged in an ongoing fraudulent high-yield investment scheme by which they raised approximately $36 million since July 2004.

The court granted a temporary restraining order, asset freeze and other emergency relief against defendants Correll, Thompson, Johnson, Gowdey, Midkiff and their companies or entities.

In its complaint, the SEC alleged that the defendants offered interests in putported foreign and international bank deposit programs promising four to 12 percent monthly returns without risk to their investment principal.

In reality, according to the complaint, the bank deposit program does not exist and none of the investorsí funds were invested. Instead, the SEC said, all of the investor funds were commingled among various Correll-controlled accounts and used to make Ponzi payments to investors, run the business operations of the defendants or misappropriated by the defendants.

No cooperation

Court records filed in Fort Worth on March 20 point to a lack of cooperation on Midkiffís part.

In a declaration filed with the court, King said Midkiff has refused to provide the receiver with ìan accounting of his assets or to turn over or account for the existence of many business records, insurance policies, computers and computer files, passwords and identifying information and other information related to the receiver estate.î

King declared that he had made numerous attempts to see Midkiff in person or communicate by phone and was denied entrance to the Midkiff home on Hilo Lane on most visits or did not have messages returned.

On one occasion, Dec. 15, 2005, King said he was allowed to enter the home to take photos and to inventory Midkiffís possession. On that day, King said, he was accompanied by a U.S. marshal.

King has documented attempts to claim assets in the home on Hilo and a second Midkiff home on SE Bay Drive.

As of the March 20 court filing, Midkiff had not turned over control of the home at 7580 Hilo Lane N. to the receiver.

According to court documents, Midkiff purchased the Hilo Lane home on a contract for deed from Fred and Sandy Dewall for $1.3 million. In the declaration, King states that Midkiff is believed to have used $400,000 in bank deposit proceeds as part of the purchase.

The Dewalls, who have received no payments from Midkiff on the $935,000 balance since last November, have commenced foreclosure steps. Hays and the Dewalls are negotiating a settlement that would result in a payment of assets from the home to the receiver.

An interim report filed by Hays with the court in January said records recovered in Atlanta by the receiver indicate some $153 million in principal investment was owed to investors.

Records this winter also said that over the course of the bank offering the total investment in the bank deposit program may exceed $390 million. The figure, which is 10 times the amount stated by the SEC in its December action, includes rollover and reinvestment of principal.

Under the alleged fraud, the offering is a purported ìhigh yield investment.î Court records indicate investors were enticed to invest in the bank deposit program by promises of high monthly interest payments and no risk to the principal investment.

Investors were told their principal was being used to fund international loans and financial transactions, that the money involved was being managed by someone having special expertise and that their principal investment was safe and secure, according to court documents.

By September of last year, payments stopped, apparently for lack of funds.

The January report filed by Hays listed more than 1700 investors in 40 states, many of which had multiple individuals making up a group or team of investors. At least 300 Minnesota investors, many from the Forest Lake area, have been identified by the receiver.

Friday, March 31 was the receiverís deadline for filing names of investors that was required in order for an investor to be in line for any refund from a principal investment that may result from the SEC action.

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