UPDATE: Five years after the initial indictment charging Rick Koerber with one of the biggest financial frauds in Utah history, last week United States District Court Judge Clark Waddoups ruled that he will dismiss the case because federal prosecutors failed to follow speedy trial requirements. This is a blow to the U.S. Attorneys Office’s efforts to prosecute Mr. Koerber, not to mention all of the hundreds of victims who were hoping to recover some of their lost funds through a possible plea deal or conviction that would likely include a requirement that Mr. Koerber provide some restitution to the victims of his Ponzi Scheme.
According to the Salt Lake Tribune, Judge Waddoups has not yet decided whether the charges can be refiled.
The U.S. Attorneys has office filed a new indictment against Rick Koerber, who is alleged to have run a Ponzi scheme that took in more than $100 million from Utah investors. Last week a federal grand jury returned a new 20-count indictment alleging that Koerber engaged in widespread investment and tax fraud.
According to an article in the Salt Lake Tribune last week, this new indictment follows a federal judge’s decision in July to throw out a key piece of evidence in Koerber’s case. “Assistant U.S. Attorney Stewart Walz previously said the ruling by U.S. District Judge Clark Waddoups affected a “significant” part of an existing 22-count indictment alleging fraud, money laundering and tax evasion by Koerber in his operation of FranklinSquires Cos. and related real-estate investment businesses.” This ruling meant that prosecutors had to file a new indictment containing small changes to a section of the indictment describing the alleged scheme and artifice to defraud.
Both the old and the new indictments accuse Koerber of operating a large Ponzi scheme which involved something he called “equity mining” through his company Franklin Squires. Koerber was originally investigated by the Utah Division of Securities, but he effectively used his political contacts with influential politicians, including Rep. Carl Wimmer (R-Herriman) and Utah Attorney General Mark Shurtleff, to stymie the investigation. The City Weekly newspaper published a detailed article about Koerber’s alleged friendships with these people in June of 2009. According to this and other reports Koerber asked his friends Shurtleff and Wimmer to pressure Wayne Klein, then head of the Division, to drop the investigation which he ultimately did.
Because the Utah Division of Securities found it politically difficult to bring charges against Koerber it handed the case over to the U.S. Attorneys Office to investigate. As a result of that investigation Koerber was indicted in May 2009, and nineteen additional charges were added in November of 2009, including one count of mail fraud, six counts of fraud in the offer and sale of securities, one count of sale of unregistered securities, ten counts of wire fraud, two counts of money laundering and two counts of tax evasion.
The irony of Koerber’s efforts to use his political contacts to squelch the Division’s investigation is that if he is ultimately convicted on federal charges his sentence will be far worse that he would have received under State law.
Koerber had a diverse employment background that included stints as a seminary teacher for Mormon Church, high school instructor, debate coach, and founder of six businesses. In 2000, the Wyoming Securities Division issued a cease and desist order against Koerber and a company he started called National Business Solutions for violating the state’s securities laws.
Koerber then moved to Utah and started a number of real estate investment businesses, including a company called Franklin Squires. The Salt Lake Tribune ran a terrific article detailing the history of Koerber and his companies which can be found here. He charged large fees for seminars and classes about investing in real estate using procedures he called “equity milling” and encouraged class attendees to invest with him. Prosecutors have alleged that he attracted hundreds of investors with promises of high returns (5% percent per month) before the companies collapsed in 2008.
The indictment alleges that in addition to using new money to pay investment returns Koerber used investors’ money to pay for his housing expenses, purchased exotic cars, and to purchase Iceberg Drive Ins (where investors could eat for free).
My favorite story about Koerber is that he used to invite investors to his 13,850-square-foot mansion in Alpine to show off his exotic cars. He fed the investors hot dogs while they ogled his $1 million car collection. It is unclear whether it ever crossed the minds of any of these investors that the exotic cars were looking at purchased with their money!
Koerber had a radio show and still maintains a website called Free Capitalist. Koerber characterizes himself as a “Capitalist, Mormon, Entrepreneur, Talk Radio Host, Father, Husband” presumably in that order. Like most of the stories on this blog, there is a significant connection with the LDS Church here. He often described himself as a “latter-day capitalist” — an obvious reference to his membership in the Mormon church. According to an October 2009 article in the Salt Lake Tribune, Koerber frequently used his church membership and connections to influence investors:
“In at least one presentation in St. George, Koerber announced the presence of Hartman Rector Jr., a former LDS general authority. Gordon Hamm, a software engineer in attendance, thought Koerber’s actions were inappropriate.
“The church wouldn’t have wanted that, and that was my beef,” said Hamm, who wrote Koerber and Rector letters protesting the implied endorsement.
Members of several LDS wards Koerber lived in also invested, influenced by his church membership, said David Doerr, a real estate broker who Koerber sued over comments on a blog.
“I know of at least two families who lost their homes because they invested,” said Doerr, who attended the same Spanish Fork ward as Koerber. “But that’s the tip of the iceberg.”
James W. Smart of Salt Lake City cited religion as a factor when he and his wife invested equity from their home with Gabriel Joseph, a co-founder of Franklin Squires Cos. who ran one of the companies, Annuit Coeptis, that also fed money into the operation.
“He’d say the right things … ‘Some people use the money to go on missions’ and stuff like this,” said Smart, a church employee.”