Paul Erickson Devised Fraudulent Schemes For Over A Decade
According to federal indictment filed Feb. 5, 2019 with the
U.S. District Court in South Dakota, Vermillion native Paul Erickson was active
from 1996 to August 2018 in devising schemes to fraudulently obtain money.
Last November, Erickson, 58, pled guilty to one count of
wire fraud and one count of money laundering. On Monday, he was was sentenced
to seven years in federal prison by U.S. District Judge Karen Schreier.
The court papers state that Erickson he operated several
businesses in recent years, including Compass Care, Inc., Investing With Dignity,
LLC, and a venture to develop land in the Bakken oil fields in North Dakota. A
grand jury in February 2019 found that Erickson used these businesses to
defraud investors.
He told investors in Compass Care, Inc., for example, that
returns on their investment in the company would be repaid within a year.
Erickson promised to personally repay investors the original amount they had
paid if the returns failed to materialize. He made several other claims about
the company that weren’t true.
A grand jury found that Erickson’s business “Investing With
Dignity, LLC” was also used to defraud investors. Erickson claimed the company
was in the business of developing a wheelchair that allowed people to go to the
bathroom without being lifted out of the wheelchair.
He told investors in this company that they would double or
triple their original investment in six months to a year.
The February indictment also lists his Bakken housing scheme
in North Dakota. He formally changed his not guilty plea regarding this scheme
to guilty during a November 2019 hearing in Sioux Falls.
The February indictment indicates that Erickson conducted
wire fraud through interstate wire banking communications involving two Sioux
Falls banks and the Federal Reserve Bank in Minneapolis, Minnesota.
The indictment lists over 20 examples from April 1999 to May
2017, in which Erickson deposited over $1.2 million to the accounts of his
three fraudulent businesses or to his personal account with Wells Fargo Bank.
From October of 2014 through March of 2017, Erickson also
made money laundering payments to several individuals which involved the
proceeds of his unlawful wire fraud.
The investigation was conducted by the Federal Bureau of
Investigation and the Internal Revenue Service Criminal Investigation.
Assistant U.S. Attorney Jeffrey C. Clapper prosecuted the case.
Erickson grew up in Vermillion and has had a Sioux Falls
apartment in recent years. He is a 1979 graduate of Vermillion High School who
holds a bachelor’s degree from Yale and a law degree from the University of
Virginia.
His colorful life prior to his involvement with Butina
included working as a top staffer in Pat Buchanan’s 1992 presidential campaign,
and serving as an entertainment agent for John Wayne Bobbitt after Bobbitt’s
penis was infamously severed in 1993.
Erickson and Butina, 31, reportedly met several years ago
while she was operating a gun-rights group in Russia and was cultivating
connections with American gun-rights activists.
Butina’s activities brought her to South Dakota several
times. She gave a lecture on the University of South Dakota campus in
Vermillion in the spring of 2015. Her address at the university was entitled
“The Right To Bear Arms In Russia … Where Neither Currently Exists.”
Butina’s appearance was sponsored by the university’s W.O.
Farber Center, The Criminal Justice Club and The Political Science League.
Also, Butina reportedly visited Yankton several times, as
recently as June 2018.
In 2016, Erickson and Butina co-founded a South Dakota-based
company named Bridges LLC, according to a February report in the Rapid City
Journal. The incorporation papers say nothing about the company’s purpose.
Posing as a Russian gun activist, Butina had ties to a
powerful Russian oligarch who’s a friend to President Vladimir Putin. Last
year, she pleaded guilty to conspiracy to act as an unregistered foreign agent
and was sentenced to 18 months in federal prison.
She took a plea deal and pleaded guilty Dec. 13, 2018 in
Washington, D.C. She acknowledged conspiring with a Russian official and
someone else described as “U.S. Person 1” to infiltrate and influence American
political groups on behalf of Russia, without required registration as a
foreign agent.
“U.S. Person 1” is widely believed to be Erickson.
Butina was released from prison in October 2019 and deported
back to Russia, where she received a hero’s welcome and a job with the Russian
government.
Erickson’s victims, according to court documents, range from
people well-known on a national basis, to those well-known in Vermillion and
South Dakota.
The FBI was issued a search warrant to allow the search of
Erickson’s apartment and a variety of his records.
According to an April 2018 court 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.”
A 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 two
years ago that he was aware of 78 investors who gave Erickson approximately
$2.3 million.
February 2019 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.
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.
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.
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