'Apostle' believers lost $30 million

ElVera Weyhrauch remembered the Depression, when a piece of fresh fruit was a special treat. So during the 17 years she built pacemakers for Guidant Corp., she was careful to squirrel away money, because she didn't want her retirement to be a mirror image of her childhood poverty.

But after her kids mentioned that they'd discovered an overseas investment run by a born-again minister in Forest Lake that paid 7 percent monthly interest, ElVera decided to meet with Neulan Midkiff at the Blaine offices of his company, Joshua Tree Group.

"Mr. Neulan talked a lot about God's word," Weyhrauch said. "He said, 'ElVera, don't believe a man by his word, believe a man for his works.' Then he showed me a picture of an orphanage he was building in Russia. I felt very secure."

The 76-year-old Ham Lake woman gave Neulan, a self-styled apostle, $40,000 of her savings. A short time later, she gave him $100,000 more.

She never saw the money again.

Telling her story this week in U.S. District Court in Minneapolis, Weyhrauch lowered her head and cried. "I really thought he was a good Christian man, I really did," she said

Midkiff, 66, is on trial for mail and wire fraud, money laundering and failing to pay taxes on millions of dollars of income. Authorities say he orchestrated a pyramid scheme that robbed hundreds of Minnesotans out of more than $30 million.

For many of the victims, the bedrocks of their lives -- faith and family -- became the source of their undoing. A large percentage were drawn to the investment scheme either through their church or a family member. Within the Weyhrauch family alone, at least three members were affected, together losing more than $300,000.

Midkiff was part of a larger national scheme that bilked perhaps thousands of investors of hundreds of millions of dollars, investigators say, but Minnesota was one of the active centers.

Midkiff's attorney doesn't deny Midkiff's clients are victims. But he said he intends to show that Midkiff himself was duped by Travis Correll, an Atlanta man who ran a larger scheme called Horizon Establishment. Correll has admitted he ran a pyramid scheme and has been sentenced to 12 years in prison.

Families conned

The Joshua Tree scam, which operated from April 2004 to December 2005, spread mostly through families and friends.

Weyhrauch's son, Randy, was suspicious at first. "It seemed too good to be true," he said. He resisted the temptation to invest for more than a year. But as he watched neighbors and friends cash checks month after month, he became a believer.

However, after he sent his initial checks, a contract arrived that showed "amount donated," instead of invested. He had never intended to donate money to Midkiff's church, Shiloh Family Church, but figured it was a mistake. All of the contracts contained the same wording.

Then there was the time the Weyhrauchs invited some people from their own church in Forest Lake to meet with David Midkiff about investing. One of the guests had a license to sell financial products and asked some probing questions.

Neulan Midkiff called Randy later, angry. "He didn't want those type of people involved because they just caused trouble and asked financial questions," Randy Weyhrauch said. "But I'm very much a born-again Christian, and I thought I could trust somebody like that."

Midkiff also persuaded Randy, who put about $160,000 into the pyramid scheme, to invest an undisclosed amount in an "insurance opportunity" in Texas called ABC Viatical. Federal authorities convicted its founder of fraud and its assets were frozen by the Securities and Exchange Commission (SEC) in 2007.

Midkiff, aided by his son David and brother Jerry, told potential investors that a special arrangement allowed them to package smaller sums into $1 million blocks, which were then brought to banks in Madrid. By pooling money, the "little people" could get interest rates usually reserved for the wealthy, they said.

Investors had to sign a one-year contract. When it expired, they could let their investments ride or withdraw the principal without losing the "interest payments" they'd already received. The program was bonded and insured, Midkiff told them.

Profiting from scheme

But Midkiff and Correll were actually just sending back portions of clients' original investments, or money obtained from new clients. Midkiff also was profiting from the scheme, according to prosecutors.

The onetime barber, roofer and construction worker bought a $1.3 million lake home, luxury cars and a motorhome, and paid himself about $3 million. The SEC has frozen his assets, and he is being represented by a public defender.

Most investors, like Cindy Weyhrauch, started small, contributing money first to Horizon, where Midkiff served as an "intermediary," and later to spinoffs called Central Financial Services and Joshua Tree.

Midkiff's attorney said in opening statements that the local spinoffs were all orchestrated by Correll. But several victims testified this week they were told by Midkiff he had "avoided the middleman" -- Correll -- and gone straight to the "traders" in Europe, getting them a better rate.

Because Cindy Weyhrauch got her monthly installments, and even her principal, back from Horizon, she felt comfortable enough with Midkiff to tap a fund she'd saved for a child with a developmental disability. It's doubtful she will recover the more than $80,000 she invested.

While Midkiff was persuading Minnesotans to invest, his brother Jerry was in DeRidder, La., where the Midkiffs are originally from, selling to workers at the local Boise Cascade plant.

One was Allen Jeane, who attended the trial this week with his wife, two daughters and in-laws. After watching co-workers apparently reap the benefits of the program for 18 months, Jeane used his savings and tapped his 401K to get in.

"[Midkiff] said he was just hoping to help the little guy out and also do good with his ministries," said Jeane, who lost most of his $35,000 investment.

Kenneth Bailey recalls discussing Joshua Tree with Neulan Midkiff on the phone before cutting a check.

"He said, 'We're going to eradicate poverty one investment at a time, God bless you,'" said Bailey.

It's unclear to what extent, if any, the money taken from investors was used for charitable purposes.

Outside the courtroom this week, his heavy losses didn't stop Randy Weyhrauch from nodding and smiling at Midkiff as the two men passed in the hallway.

"God says I can't forgive you unless you forgive," Weyhrauch said. "An I upset? Yes. But I forgive him."

He says his faith has not been shaken by his dealings with Midkiff.

"My faith is not in Neulan," Weyhrauch said. "It's in God."

Jon Tevlin • 612-673-1702