Cliff Buchan
News Editor

Just how deep is a multi-state and international investment scheme that cornered investors in the Forest Lake area?

Thatís a question to which the answer is unclear, but some who invested in the program and those with knowledge of the scam believe the number could be as high as 400 people.

Last month the U.S. Securities and Exchange Commission filed an emergency action in United States District Court for the Eastern District of Texas against Travis E. Correll of Atlanta, individually and d/b/a Horizon Establishment, and a string of companies and individuals that includes Neulan D. Midkiff of Forest Lake, and his entity, Joshua Tree Group LLC (ìJoshua Treeî).

The court action charges that the defendants are 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 including the appointment of a receiver.

The SEC says the action stretches from Atlanta to Dallas-Fort Worth and north to Minnesota with links to alleged offshore investment banks in Australia. The SEC, the FBI and the U.S. Postal Service are involved in the joint investigation.

The full scope of the high-yield offering fraud should be known later this month.

So says Greg Hays of Hays Consulting, Inc., of Atlanta, the court-appointed receiver. His firm continues to review bank records, identify investors and freeze assets that will eventually be liquidated for resources to repay investors.

While the SEC has said the scheme may have collected $36 million in assets, that figure could be closer to $150 million when the Hays investigation end, Hays said. So far, 1200 individual investors have been identified.

ìWeíve got 10 people all over the country working on this,î Hays said by telephone from Atlanta last week. ìWe are chasing assets all over the country.î

The probe in Forest Lake has already touched one dwelling. Hays Consulting has frozen the assets of a Midkiff owned home on Hilo Lane N. that he purchased last year for $1.2 million, Hays said.

ìWe plan to sell that house,î Hays said.

Skoglundís role

Ken Skoglund of Forest Lake and his late mother, Bea, were two of the investors initially recruited by Midkiff almost three years ago, Skoglund said.

In that time, Skoglund said, the family invested some $270,000 with Midkiff and his associates in the Atlanta firm. Skoglund says he received interest payments throughout that time until last fall when payments ceased.

ìWe thought we knew what we were doing,î Skoglund said of the investments he and others he knows made in the program. Skoglund said he and several others met with Midkiff at an office in Lexington in mid-2003 where the program was explained.

Although nothing was placed in writing, Skoglund recalls being told investors could count on receiving 5-7 percent a month in interest payments.

He initially invested $20,000 and followed with other contributions, including funds from his mother who died last year.

Skoglund believes as many as 200 people throughout this area likely invested in the program.

A woman from Woodbury who asked not to be named said she is aware of friends and relatives in the area who were recruited. She believes the number of individual investors is probably closer to 400 based on her knowledge of the scheme.

Skoglund said he knows of some in Forest Lake who borrowed money or took out a second home mortgage to fund investments.

In the time during which Skoglund said he was receiving monthly payments, he made regular tax and capital gains payments as required. He could be in line for a tax refund on some of those payments, Hays said.

An old fraud

In its complaint, the SEC alleges that Correll, Midkiff and other defendants were offering and selling interests in purported foreign and international bank deposit programs (collectively ìBank Deposit programsî) promising four to 12 percent monthly returns without risk to their investment principal.

The SEC also alleges that investors send or wire their money to TNT or to one of Correllís entities -- Net Worth Group or TC&Co, and that all of the funds are transferred to a Horizon Establishment bank account controlled by Correll.

According to the complaint, investors are told that Correll, the ìmoney manager,î forwards investor funds for deposit in an offshore reserve account. A ìtrader,î with exclusive contracts with international banks, supposedly uses the monies in the reserve account to participate in trading programs and loan programs.

In reality, however, the bank deposit program does not exist and none of the investorsí funds are sent to the trader or his entities or to any offshore account for investment, according to the complaint. Instead, as set forth in the complaint, all of the investor funds are commingled among various Correll-controlled accounts, and the ìinvestment returnsî paid to investors are Ponzi payments, i.e., they derive from the proceeds of more recent investors.

Ponzi schemes are named after Charles Ponzi who conducted such a scam in 1919-1920. A Ponzi scheme is an investment scheme in which returns are paid to earlier investors, entirely out of money paid into the scheme by new investors. The scheme is another form of Pyramid schemes.

SEC comments

Kit Addleman, assistant director with the SEC in Fort Worth, TX, said the Correll-led scheme based in Atlanta goes back at least to July 2004.

ìIt is possible that it has been going longer,î she said by telephone last week.

She said the civil action being pursued by the SEC could be followed by criminal complaints. Any decision on a criminal action would be made by the Department of Justice U.S. Attorneyís Office in Atlanta.

Addleman said no trial date has been set on the SEC matter and any settlement would not be made until the complete scope of the scheme is documented. Any settlement must be approved by a judge, she said.

The SEC assistant director said it is such scams that continue to keep officials busy.

ìI am amazed pretty regularly by the number of fraudulent schemes and the number of investors they are able to entice,î Addleman said.

She said when it comes to making investments, investors should keep this old adage in mind: ìIf it sounds too go to be true, it may well be,î she said.

Hays, the Atlanta-based receiver, agrees.

He said investors should seriously question the validity of an investment plan that offers 10 percent a month in risk free income. ìEven seven percent,î Hays said.

In the Correll case, Hays says he is finding that many of the investors are middle-aged folks with respectable incomes. He believes their reason for investing is simple.

ìIt is just greed,î Hays said. ìPeople wanting a higher return.î

As the receiver for all Midkiff assets, Hays said he continues to seek names of those who invested in the scheme. Investor declarations can be made by calling Hays Financial Consulting, LLC of Atlanta at 404-926-0060.

Applications can also be found on line by following the Correll links on the Hays web site: www.haysconsulting.net.

Anyone who invested and lost money on the investment must be identified and listed with Hays in order to be eligible for any refund once Midkiff assets are liquidated.

As he establishes the list of investors and Midkiff assets, Hays said he will also be attempting to determine how much in payments were made to the early investors who got in on the ground floor of the Midkiff investment plan.

Midkiff and church

Midkiff and his wife, Donna, have not been available for comment.

They have ties to Shiloh Church on Harrow Ave. N. in Forest Lake. The Shiloh Church web page identifies Midkiff as an apostle.

Donna Midkiff is a prophetess with the church.

Hays said his firm is continuing to explore documents to determine if Midkiff personally owns the church building. If so, that property would be subject to seizure, he said.

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