Cliff Buchan
News Editor

At 71, all Gordy Holtz wanted in life was retirement with financial security. He thought he and his wife Phyllis had found it in 2003 with an investment plan that offered no capital risk and a guaranteed return.

As a retired carpenter, Holtz and his wife bring in just under $1300 a month in Social Security and a small union pension of $79 a month. But at a time in their lives that they once thought would be their golden years, Gordy and Phyllis Holtz are both looking for work and new housing.

They recently went through personal bankruptcy and they have lost their Wyoming home to foreclosure. By Oct. 10, they have to be out. The couple has been busy this spring, running a garage sale and trying to sell most anything in their home that they can do without. Few personal belongings have been spared.

The garage sale revenue, Phyllis Holtz says, is money the couple needs to live on.

A bad dream

A little more than four years ago it wasn’t that way for the couple. As a husband and wife on a fixed income, they had built a good credit rating but needed some extra income to live a comfortable retirement.

They thought they had found it with Neulan D. Midkiff, a Forest Lake man who led the Shiloh Church. They met Midkiff through a daughter who attended the Forest Lake church.

“He (Midkiff) was a good man,” the couple said. He knew the Bible well, talked often about Christ and was personable, they said.

It was through Midkiff that the Holtzs thought they had found an investment plan that would allow them to live comfortably.

But through a series of investments that eventually went bust, the couple has been slapped with the reality that retirement will not be as comfortable as they once hoped.

Long gone are investments of more than six figures and so are many of their personal possessions.

The dream

When the couple learned of Midkiff’s investment program in 2003, it seemed safe and a good bet, they said recently.

They had been granted a $20,000 line of credit at an area bank while buying a car in 2003 and those dollars were pooled with $5000 of Holtz savings for the first purchase of a $25,000 investment in Horizon Establishment, a company that involved Midkiff.

That investment led to others through Midkiff and another of his companies, Joshua Tree. The couple used low-interest credit cards to draw another $70,000 to invest and later used $50,000 in home equity from a home refinancing to swell their investment portfolio.

It all made sense and money at the time, Holtz said.

“It made things affordable,” he said. “We thought we couldn’t go wrong. It sounded so good.”

The premise with the two investment programs was clear, they said. They were promised monthly interest payments and a guarantee that their principal payment was safe.

And the plan did work for an extended time, the couple said. For a little more than two years, they received monthly interest payments of about $5000 and they lived comfortably and had money to spare.

The couple became suspicious, however, after a year in the Horizon plan when they tried to pull out their cash and roll it to the Joshua Tree program. Although communication with the Horizon home office in Atlanta, GA led to promises that the cash would be turned out, the funds never came.

In the meantime, in order to catch the promise of a higher interest return with a Joshua Tree investment, they used several credit cards to collect investment dollars.

The profit from the Joshua investment would easily cover the debt on the credit cards and the earlier bank loan and leave extra income, they believed.

Confident with what they thought was good fortune, the Holtz’s refinanced their home. They turned their old $99,000 loan into a new loan for $239,000. They used equity to do upgrades on the home and to fund another $50,000 investment with Joshua Tree.

What was once a house payment of about $1000 was now a monthly mortgage payment of $1800.

At the same time, Holtz purchased the truck of his dreams, a 2004 Ford F-350 one-ton diesel for $42,000.

“This was the first new vehicle I had ever owned in my life,” he said of the vehicle that was repossessed by the bank.

When bankruptcy became inevitable in 2006, the couple was saddled with $404,000 in personal debt.

They had managed to save some funds from earlier interest payments and those dollars were used to live on. “By August (of 2006), we were done,” Phyllis Holtz said.

House of cards

The interest payments continued through 2004 and most of 2005 until checks stopped arriving late in the year.

That was when the financial truth began to hit home, they said.

By late in 2005, Midkiff and a host of other associates from Texas to Georgia were implicated by the U.S. Security and Exchange Commission for their involvement in an alleged bank fraud plan, called a Ponzi scheme that is offered on the premise of high monthly interest returns with no risk to investment principal.

The SEC was granted authority from the federal courts in Texas to intervene in the matter and freeze all assets tied to Midkiff and others implicated in the case.

In January of this year, Midkiff, 64, and a co-defendant, Jerry L. Watkins, 53, of Forest Lake, were indicted by a federal grand jury for their alleged involvement in the multi-million dollar Ponzi scheme that has been under investigation since late in 2005.

According to the federal indictment, Midkiff was 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. He was released from custody after surrendering his passport.

On Jan. 9, Watkins entered a guilty plea to four counts of mail fraud and one count wire fraud.

According to the federal indictment, Midkiff and Watkins devised a scheme to defraud others, including members of Shiloh Church 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 a company called 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.

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 period, Midkiff and Watkins allegedly paid themselves more than $3.5 million in “commissions.”

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.

Next steps

Gordy and Phyllis Holtz aren’t sure what their future holds, but they remain close to their strong spiritual beliefs and that God will guide them.

They say they have no hatred toward Midkiff but wonder how someone who was so rooted in the Bible could lead friends and church members to such financial destruction.

“Where this turns out, who knows,” Phyllis Holtz said. “I feel sorry for Neulan, I really do. He will have to answer to his maker.”

A common man by his own description, Holtz understands that some who invested with Midkiff may have been caught up in the “greed” of an investment plan that had no risk, just high returns.

But that is not him and never has been, he said.

“It wasn’t greed,” he said. “We are not greedy people.”

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