Accused Ponzi scheme operator Rick Koerber pleaded not guilty Tuesday to his latest federal court indictment charging him with fraud, tax evasion, the sale of unregistered investments and money laundering.
The 20-count indictment alleges he used half of the $100 million his Franklin Squires Cos. took in from 2004 to 2007 to pay returns to investors, making it appear his real estate investments were profitable in what's known as a Ponzi scheme. If Koerber is convicted, the case would rank among the top financial frauds in Utah history.
Koerber appeared in a courtroom in downtown Salt Lake City to enter his plea before U.S. Magistrate Sam Alba.
A new grand jury indictment was filed in September, nearly 2Â½ years after he was first charged in the case. Koerber was originally indicted on three counts in May 2009, with 19 additional charges added in a second indictment that November. A third indictment was sought by prosecutors after U.S. District Judge Clark Waddoups tossed out a key piece of evidence from the first two.
Koerber ran FranklinSquires Cos. and an investment company called Founders Capital LLC in Utah County starting in 2004. He promoted a real estate investment strategy called the Equity Mill and said investors could make as much as 5 percent a month, according to the indictment.
But the companies lost money from 2005 through 2007, when they stopped making payments to investors who were still owed about $50 million, the indictment says.
Federal prosecutors are pressing to have a trial date set for Koerber, citing the length of time the case has dragged. A hearing has been set for February on a motion by Koerber's attorney, Marcus Mumford, to dismiss the new indictment.
Mumford argues that the latest indictment, like the previous two, is largely based on the draft of a letter from Koerber to investors that Waddoups has ruled could not be used as evidence because it was a privileged communication with attorneys. Mumford also wants Waddoups to disqualify prosecutors and investigative agents because he argues they have had access to evidence the judge tossed out and could still make use of it in a trial.
"The government is taking the position that the law entitles them to incompetent and unconstitutionally seized evidence," he said.
The U.S. Attorney's Office declined to comment, but said in a reply to the Koerber motion that he had not shown the grand jury was influenced by the disputed letter in deciding to issue the third indictments.
Koerber "has presented no evidence that the document or its contents were in any way presented to the grand jury," prosecutors said in the court filing.