Court documents relating to Vermillion native Paul Erickson that were unsealed last April paint a portrait, according to a Rapid City Journal report, of rampant, lucrative, brazen and long-lasting fraud allegedly committed against both high- and low-profile victims by Erickson.
The victims range from people well-known on a national basis, to those well-known in Vermillion and South Dakota.
Erickson has plead guilty to one count of wire fraud and one count of money laundering through a written agreement that was filed on Friday, Nov. 15, in federal court in Sioux Falls. According to a court spokesperson contacted by the Plain Talk, he was scheduled to enter the guilty plea in open court in Sioux Falls on Tuesday, Nov. 26.
Investors swindled by Erickson, according to the court documents, include Mark Sanford, a former U.S. representative and governor from South Carolina, Vance Thompson, a well-known ophthalmologist surgeon from Sioux Falls, and Greg Johnson, a childhood friend of Erickson’s who was a co-pastor of Trinity Lutheran Church in Vermillion for several years during the 1990s. Today, Johnson is pastor of a Lutheran church in Brandon.
One of the unsealed documents was an affidavit filed by an FBI agent on April 18, 2018 in Sioux Falls requesting a search warrant be issued to allow the search of Erickson property in Sioux Falls, described as a “large, multi-use apartment building and home office.”
Items belonging to Erickson that likely would be seized by federal officials, according to the warrant, included a wide range of paper documents, including books, records, emails, receipts, bank records and correspondence.
The warrant also included Erickson’s electronic media, electronic devices, electronically stored instructions, such as computer hardware, application software and utility programs, and printed instructions concerning the operation of computer systems, computer software and related devices or passwords.
According to the April document, “It appears Erickson has obtained approximately $2.2 million from 76 investors, but has not used this money toward the projects he indicated it would be used for.”
“An analysis of these records revealed multiple individuals who have deposited money into Paul Erickson’s bank account,” the affidavit later states. “This analysis revealed money given to Erickson was not used to invest in real estate, wheelchairs, or nursing homes.
“Instead, the money was used on flights, motels and other personal expenses incurred by Erickson,” the April document states. “The list of depositors discovered from bank records showed approximately 51 investors who gave Erickson $720,400.”
The federal investigator, with help from a Brookings police detective, was able to find an additional 10 investors who gave Erickson $293,000 for his plans to building housing in the Bakken Oil region.
The federal agent stated in his affidavit from over a year ago that he was aware of 78 investors who gave Erickson approximately $2.3 million.
February’s court papers in Erickson’s fraud and money-laundering case contained few details of those alleged crimes until April 2019, when previously secret documents pertaining to the April 2018 searches of Erickson’s Sioux Falls apartment and office were unsealed.
Among those documents is the April 2018 affidavit filed by FBI Special Agent Matthew Miller in support of a warrant to search Erickson properties. The affidavit spells out the specifics of the allegations against Erickson and names some of his alleged victims who were identified only by initials in the indictment.
According to the affidavit, Erickson came to the attention of the FBI in 2016 when Joan Sammon reported a fraud by Erickson. Sammon was selling parcels of land in Williston, North Dakota, in the Bakken region for residential development. In about 2015, Erickson contacted Sammon and wanted paperwork to evaluate the possibility of investing in Sammon’s land.
Sammon emailed him paperwork related to the property but Erickson did not invest. Later, however, Sammon was contacted by a group of investors who indicated they had paid Erickson $100,000 for an investment in the same land. Because Erickson did not have an interest in the land (which was owned by Sammon), Sammon believed the investors had been defrauded.
The FBI then obtained bank records in an attempt to learn of other investors. The FBI reviewed bank records subpoenaed from Wells Fargo Bank for accounts held by Erickson from December 2012 to October 2017 and found that several individuals had deposited money into Erickson’s bank account.
This analysis revealed that these funds were not used to invest in real estate, wheelchairs, or nursing homes. Instead, the money was used to pay for flights, motels and other personal expenses incurred by Erickson. The list of depositors discovered from bank records showed approximately 51 Investors who gave Erickson $720.400.
The Brookings Police Department helped the FBI in revealing an additional 10 investors who gave Erickson $293,000 regarding the Bakken oil field scam.
The FBI interviewed Todd Williams, who invested $25,000 into a wheelchair company (Investing with Dignity) being run by Erickson. Williams provided a list of additional investors that was given to him by Erickson. This list contained 15 additional Investors who gave the Vermillion native $622,530. In addition, Williams indicated Bob Elmen invested $500,000 and Brett Bozell Invested $250,000 with Erickson.
Bakken Oil Field Investment
The FBI interviewed several investors in Erickson's Bakken housing project, according to the affidavit, including David Gillian, John Galbreath, and Loretta Waltner, all of whom invested money with Erickson for real estate development in the Bakken Oil Fields.
In each case, Erickson described real estate he was acquiring in that region of North Dakota, including housing for oil workers. He indicated that investors would receive a high return.
For example, Erickson told Gillian he would receive a return of between 25 percent and 75 percent within approximately one year.
This motivated Gillian to wire transfer $100,000 from Virginia to Erickson's bank account in Sioux Falls, on Feb. 28, 2017. After complaining to Erickson about a lack of return on his investment, Gillian received $5,000 on March 29, 2018.
In the affidavit, Agent Miller wrote, “I believe this was a ‘lulling payment.’ That is, Erickson provided Gillian with a small sum of money in order to provide the illusion that Gillian's $100,000 investment was secure. In reality, the bank records indicated that Gillian's $100,000 was not invested in real estate or anything else. In fact, that money was used to pay routine expenses and to pay off a previous investor, Congressman Marshall Sanford.”
Sanford is a former U.S. representative and governor from South Carolina who infamously claimed in 2009 that he was hiking the Appalachian Trail while he was actually having an extramarital affair in Argentina.
Sanford invested $25,000 with Erickson, according to information in the affidavit and additional information in an indictment against Erickson that lists an investment from someone with the initials “M.S.”
Some of Gillian's money went to Erickson's girlfriend, Maria Butina. Before Gillian's investment, Erickson's bank account balance was approximately $110, according to the affidavit. Within one month, all of Gillian’s money was spent and none of that money was used for real estate investment purposes.
The court document also states that Erickson convinced John Galbreath of Reston, Virginia, to wire transfer $100,000 to him on May 30, 2017, by promising him a 50 percent return within one year. Erickson said he had a buyer ready to purchase the housing he had built. The buyer was a group known as “Five Guys.” The FBI interviewed members of the “Five Guys” who indicated that they did not have any plans to make any purchases. Galbreath has not received any principal or any profits.
The FBI interviewed Loretta Waltner, who invested approximately $58,000 with Erickson for real estate development in the Bakken region in 2014 and 2015. She had been promised her money back several times but has not yet received it. The FBI’s review of financial records shows that none of this money has been put into anything which appears to be related to real estate investment.
The FBI’s investigation also shows that Erickson has not purchased any land in North Dakota. He did pay $10 in June 2017 for a mineral and royalty conveyance in Williams County, North Dakota to obtain the rights to drill for oil in one section of land.
The FBI interviewed multiple investors in Compass Care, a company Erickson said he is involved in building and or managing retirement homes, including Vance Thompson, Waltner, and Todd Williams.
In the spring of 1999, Thompson invested $500,000 based on representations that he would make a 50 percent return on his money in four or five years and that the investment was a virtual guarantee. Erickson told Thompson that Erickson had options on land for about 12 locations "already locked in.” Thompson paid Erickson by giving him a check.
In January of 2007, Waltner invested $ 1,000 in Compass Care. Erickson provided Waltner with a document which indicated, "Compass senior operations team oversaw 27,000 nursing homes, assisted living and apartment beds in 26 states. No other assisted living company boasts that experience."
The FBI interviewed Todd Williams whose father, Randy Williams, was a minister. Upon retirement, Randy was hired by Erickson to do marketing and recruitment of potential retirement home residents. Todd Williams stated that his father successfully recruited potential residents as well as investors between 1999 and 2002, but was not paid by Erickson for his labor as Erickson promised.
The affidavit also states that Randy Williams did not see any evidence of any retirement homes being constructed or acquired by Compass Care. Todd Williams invested $25,000 in 1999 and Erickson told him it would grow to $800,000 in five to seven years.
Investing With Dignity
The FBI interviewed multiple investors of "Investing with Dignity,”' including Kristen Hertog and Michelle Ward. Erickson represented to them that “Investing with Dignity” had developed a unique wheelchair (the Dignity Wheelchair) which allowed people using the wheelchair to go to the bathroom without being lifted off of the chair.
Rev. Greg Johnson, a Lutheran minister in Brandon, who served at Trinity Lutheran Church in Vermillion in the 1990s and was a childhood friend of Erickson’s, was interviewed by the FBI. In 2005, Johnson and a friend invented the Dignity wheelchair and obtained patents for it. The chair and Johnson's company was at first known as J and L Products (later changed to "Dignity Medical Devices" in 2007).
In 2010, Johnson signed a contract with Erickson (dba "Investing with Dignity") in which Erickson agreed to seek out venture capital firms who might be willing to buy the patents for Johnson's wheelchair. Erickson was unsuccessful and this arrangement ended in May of 2012 with a letter from Johnson's lawyer to Erickson.
Subsequent to this letter and unbeknownst to Johnson, Erickson began to raise money for the Dignity wheelchair from investors.
“I believe this may reflect a pattern; that Is, as with Joan Sammon's properly development,” Miller states in the affidavit, “Erickson used Dignity’s existing literature as props to convince investors to give Erickson money based on the false premise that Erickson was using the money for business development. In reality, all of the money that I am aware of was used to pay for Erickson’s routine lifestyle expenses, pay for his girlfriend’s (Maria Butina’s) college tuition, travel and also occasionally paid to previous investors.”
On Aug. 9, 2012, three months after his relationship with Johnson ended, Erickson pitched Michelle Ward on an investment in the Dignity wheelchair which he now claimed as his own. Erickson told Ward her investment would pay 125 percent to 150 percent and guaranteed she would be paid back the principal.
Erickson also mentioned that Congressman Mark Sanford had invested in the Dignity wheelchair opportunity, a fact which helped persuade her. Interestingly, Congressman Sanford told the FBI that, in fact, he invested in the Bakken scheme rather than in the wheelchair scheme. Based on these representations, Ward wire transferred $15,000 from her account in Virginia to Erickson's account at Wells Fargo Bank in Sioux Falls.
Since that time, Ward has received neither her principal nor any profits and Erickson told Ward the delays were because the patents were stalled.
“Because Erickson's relationship with Dignity was terminated approximately five years before this conversation with Ward,” Miller states in the affidavit, “I believe that at the time Erickson mentioned the stalled patents to Ward, Erickson knew the statement was false.”
According to the court document, in April of 2013, Erickson pitched Kristen Hertog to invest in the Dignity wheelchair. The pitch appealed to Hertog because her uncle suffers from Multiple Sclerosis and is confined to a wheelchair. Hertog believed the product would help her uncle and others like him. Hertog, however, was concerned because she was not a sophisticated investor and told Erickson she did not have "any retirement savings."
Erickson said he would double her money in a year and she could then use her earnings to invest in a traditional retirement account. Erickson also told her his investment was a "sure bet." Based on these representations, Hertog gave Erickson a check for $5,000. Since that time, she has received neither her principal nor any profit.
In August of 2017, Hertog encountered Erickson in Sioux Falls and he told her that the project had "gone up in smoke."
The FBI’s analysis of bank accounts did not show any use of the money to produce or create wheelchairs.