Cliff Buchan
News Editor

Neulan D. Midkiff is no longer the sole Forest Lake man facing legal trouble in connection to an alleged bank fraud scheme. A second Forest Lake man has now been named in a federal grand jury indictment released last week.

Midkiff, 64, and Jerry L. Watkins, 53, of Forest Lake, were named as co-defendants last week. They appeared in federal court in Minneapolis on Tuesday, Jan. 9 on criminal charges related to a multi-million dollar Ponzi scheme that has been under investigation for more than a year.

Midkiff, the founder of the Shiloh Church in Forest Lake, made his initial appearance before a federal magistrate judge on charges set forth in a federal indictment unsealed earlier in the day.

Watkins, in a court appearance earlier in the day on Jan. 9, entered a guilty plea to four counts of mail fraud and one count wire fraud. A sentencing date has not been set.

According to the federal indictment, Midkiff is charged with eight counts of mail fraud, seven counts of wire fraud, six counts of money laundering and four counts of willful failure to file tax returns.

Following his court appearance last week, Midkiff was released on bond, but ordered to surrender his passport and to refrain from participating in any investment activities. Midkiff's next court appearance has not been scheduled.

Midkiff was arrested by the FBI and other federal officers at his Forest Lake on Jan. 8 and jailed overnight at the Sherburne County Law Enforcement Center in Elk River where federal prisoners are detained.

Case details

According to the federal indictment, Midkiff and Watkins devised a scheme to defraud others, including members of the church founded by Midkiff, of their money by making false representations regarding financial investments.

Specifically, the indictment states that during the spring of 2004, Midkiff and Watkins began soliciting investors.

Under the business name Central Financial Services, Midkiff and Watkins collected more than $1.1 million from 15 investors, promising them returns on their individual investments of between 6-8 percent each month. In May of 2004, Midkiff and Watkins invested $1,056,467 of that money with West Wing Financial in exchange for a promise of a minimum return of 8 percent each month for the next 14 months, the indictment said.

During May of 2004, Midkiff and Watkins also allegedly entered into discussions with a person who operated a fraudulent investment company called Horizon Establishment. Midkiff has previously worked for Horizon as an "intermediary," collecting money from investors, according to the indictment.

The indictment states that as a result of the May 2004 discussions, Midkiff and Watkins provided Horizon Establishment with $1,009,000 collected from 21 new investors.

In exchange, Horizon promised to pay Midkiff and Watkins a 13 percent monthly return on the total amount invested with the company. Midkiff and Watkins planned to pay their investors between 6-8 percent each month, with the difference being retained by the two men as commissions, the indictment said.

In the summer of 2004, however, Midkiff and Watkins learned that most of the money provided to West Wing had disappeared. Rather than notifying investors accordingly, the men entered into an agreement with Horizon through which the West Wind investment began to appear as if it had been transferred to Horizon, the indictment said.

At that point, Horizon also started paying the West Wing investors their monthly "interest" payments as if nothing had happened to their principal, the indictment indicated.

Between August and October of 2004, Midkiff and Watkins, through Midkiff's company, Joshua Tree Group, allegedly continued to seek investors for Horizon Establishment. They also allegedly continued to receive 13 percent monthly returns on the total amount invested, from which they took their "commissions."

The balance was distributed to investors.

The indictment states that in December of 2004, some of the "interest" checks from Horizon Establishment to the Joshua Tree Group failed to clear. And in January of 2005, the payments stopped entirely.

Midkiff, however, withheld this information from existing or prospective investors, the indictment charges. Instead, he continued to pay existing investors with money collected from new investors.

According to the indictment, Midkiff and others working for him solicited more than $18 million in investments between December of 2004 and December of 2005. During that same period, Midkiff and Watkins allegedly paid themselves more than $3.5 million in "commissions."

In this case, each count of mail fraud, wire fraud and money laundering carries a maximum potential penalty of 20 years in prison. Each count of willful failure to file taxes carries a maximum potential penalty of one year in prison. Any sentences will be determined by a judge.

The case is a result of an investigation by the FBI, the Internal Revenue Service, criminal investigation division and the U.S. Postal Inspection Service. The case is being prosecuted by Timothy C. Rank.

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