The Department of Justice has filed a professional conduct complaint against Marcus Mumford even as the prominent defense attorney is representing alleged scammer Rick Koerber in a federal trial.
Mumford revealed the news Wednesday during a heated day in court as he argued with prosecutors over whether the government could introduce evidence that Koerber had used investor funds to buy an Iceberg Drive Inn that Koerber then gave to Mumford to pay for his legal fees.
Koerber is in the midst of a trial over whether he operated a Ponzi scheme through his Provo-based real estate companies that took in nearly $100 million in loans and investments. He allegedly used about half of that to make interest payments before the operation went broke in 2007.
Mumford said in court while the jury was out of the room that he had been informed that the DOJ filed the complaint with the Utah State Bar, the self-regulating organization of lawyers.
Mumford said he had no other information on the bar complaint, but he believes it was filed to prevent him from effectively defending Koerber at the trial that’s in its third week.
The DOJ’s Office of Professional Responsibility in Washington declined to comment on the filing.
Mumford has repeatedly clashed with prosecutors over the charges against Koerber that go back to 2009 when an indictment was first handed up.
That case ended in 2014 with Judge Clark Waddoups agreeing with Mumford that prosecutors had not followed speedy-trial guidelines and had engaged in misconduct. The judge dismissed the case, but a new grand jury indictment was issued in January after a ruling by an appeals court.
In the first case, Mumford had accused the government of trying to retaliate against him after negotiations didn’t end in a plea agreement.
The day after the talks broke down, prosecutors issued a grand jury subpoena for records of the real estate transaction involving the Iceberg restaurant in Bountiful.
Mumford, in a court filing, said the subpoena was “indicative of an effort on the part of the government to harass defendant’s counsel and interrupt the attorney-client relationship.”
Waddoups quashed the subpoena.
On Wednesday, Kelly Christensen, a former owner of the restaurant, testified about how he went to Koerber to raise capital to keep the Iceberg going and to expand its franchise system.
But Mumford objected when Assistant U.S. Attorney Stewart Walz started to ask Christensen about how Koerber obtained the Bountiful restaurant for use in paying his legal bills.
Mumford argued that the matter was not part of the January indictment of Koerber on 18 charges and that the transactions occurred outside the time frame of the alleged fraud.
But Walz argued that it was specifically mentioned in the indictment in an allegation that investor money had “ended up in the defendant’s pocket.”
“If that’s isn’t evidence of fraud then nothing is evidence of fraud,” Walz told U.S. District Judge Robert Shelby.
Shelby allowed Walz continue to question Christensen about the transaction.
Also on Wednesday, certified public accountant Clark Wilkinson finished up testimony about his firm’s compilation of the finances of a Koerber company called Founders Capital.
Wilkinson said he had questions about the company’s listing of total assets of $124 million because that figure included $72 million in notes payable from related companies that carried interest rates as high as 72 percent.
“They are very high interest rates,” Wilkinson said, “much higher than you would see on arms-length transactions.”
And he said following generally accepted accounting principles also meant that the company’s valuing of its real estate holdings at a market value of $27.9 million would be reduced to $4.22 million, the amount it actually paid for the properties.
Making that change means Founders Capital had a negative net worth of about $4 million instead of the $20.4 million, it said.
But under cross-examination, Wilkinson said that as an investor he would have wanted to know the market value of properties the company held.
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