One of the largest alleged financial crime cases in Utah history has taken a tortuous path to the trial set to begin Monday.
Eight years after former Utah County real estate investment guru Rick Koerber was first indicted, jury selection is scheduled to begin before U.S. District Judge Robert Shelby.
Koerber, 44, is facing possible prison sentences if he’s convicted on any of 18 charges tied to allegations that he ran a Ponzi scheme that took in about $100 million on promises of returns as high as 5 percent a month.
About half of that total was used to pay back investors, and when the enterprise stopped making payments in 2007, investors were owed about $47 million, according to a January indictment. They lost life savings, retirement funds and equity in their homes that they had taken out as loans and poured into Koerber’s businesses.
Koerber has pleaded not guilty and has fought with state regulators and then prosecutors from the U.S. Attorney’s Office over the allegations and their conduct in investigating his enterprises. With attorney Marcus Mumford defending Koerber and pitted against Stewart Walz, a veteran prosecutor of white-collar crime, the trial promises to be contentious.
The rise of the free capitalist
Koerber’s road to the federal courthouse in Salt Lake City started in Wyoming, where he was born in 1973. Growing up in Casper, he excelled at debate. At age 17, he joined the LDS Church after missionaries knocked on a rainy Easter day.
Back in Wyoming after a stint of college and work in Colorado, Koerber started an internet service provider. But he ran afoul of Wyoming regulators when he sold shares by, according to regulators, misleading investors about the company’s finances. He filed for bankruptcy and later moved to Utah County with his wife.
After studying the Carleton Sheets real estate investment program, he came up with an investment strategy he called “equity milling.” In 2004, he was charging up to $2,000 for seminars that taught hundreds about his program.
The next year, Koerber and others created Founder’s Capital and then FranklinSquires Cos. The companies took in investments — he has called them loans — that were to be used to put equity milling to work on a large scale by buying homes and renting or reselling them.
Soon, he was rolling in cash as an inner circle of investors recruited networks of people to invest. Koerber moved from a humble Spanish Fork house to a 13,850-square-foot mansion in Alpine and drove luxury cars.
Meanwhile, he started his Free Capitalist Project and sometimes referred to himself as a “Latter-day Capitalist.” He had a radio program and a “university” to expound on what he sees as the core principles that guided the American revolution and the founding of the United States. Koerber promotes a brand of “liberty” and “self-government,” as opposed to government by local, state and federal entities.
Koerber once took exception to a caller to his radio program who suggested that a story he had told about buying a Ferrari so he didn’t have to wait for service on his Maserati was not in accord with Christian teachings.
“God is a capitalist, my friend,” Koerber retorted.
A case opened — and closed
But the underpinnings of Koerber’s enterprises — rapidly rising real estate prices — collapsed in 2007 as the U.S. bubble burst and the Great Recession began.
State securities regulators started poking around and Koerber fought back, making use of billboards and his radio program to taunt investigators. He also enlisted help from then-Rep. Carl Wimmer, who sought meetings with then-Gov. Jon Huntsman and then-Attorney General Mark Shurtleff to try to get regulators off his back.
The Utah Attorney General’s Office declined to file a civil case against Koerber, citing a lack of evidence. Angered, Utah Department of Commerce Executive Director Francine Giani took the case to the feds, who began an investigation.
A federal grand jury in Salt Lake City first indicted Koerber in May 2009.
Koerber soon hired Mumford, who had been admitted to the Utah Bar just two days before he registered his appearance for Koerber in federal court. Koerber initially paid Mumford with the title to an Iceberg drive-in restaurant, which prosecutors later claimed was purchased using investor funds.
Mumford had returned to Utah after working at a large international law firm in Los Angeles and New York following his graduation from law school at Brigham Young University in 1999.
Mumford said he was drawn to the case because “the government will too often mis-charge a so-called ‘white collar’ case because prosecutors and investigators don’t understand business or the regulatory burdens that businesses face.”
In Koerber’s case, Mumford said in an email, “I had an overwhelming sense that there was more to the facts than what the government alleged and the media portrayed.”
Mumford continually questioned how federal agents and prosecutors had investigated Koerber and their evidence. In 2011 and in 2013, U.S. District Judge Clark Waddoups tossed out significant pieces of evidence.
In August 2014, Waddoups canned the whole case, agreeing with Mumford that the government had violated the Speedy Trial Act by not getting proper waivers for delays. Waddoups also ruled the case couldn’t be refiled, and blasted prosecutors for what he said were violations of ethical standards and Koerber’s constitutional rights.
But that wasn’t the end of it.
Finally, a trial
Prosecutors appealed part of Waddoups’ dismissal to the 10th Circuit Court of Appeals, which sent the case back to Utah for reconsideration. That process resulted in a new indictment in January.
Koerber tried to get Mumford appointed as his publicly paid attorney, the role Mumford had in the first case after the attorney exhausted his proceeds from selling the Iceberg restaurant. But judges refused and Koerber was forced to choose between his publicly paid attorney, Rebecca Skordas, and Mumford. He chose Mumford, who is not being paid for his work.
“I faced a choice,” Mumford said. “I could either stand by and allow the government to reap the benefits of their misconduct that led to the dismissal in the first case, or stand up for Mr. Koerber.”
Mumford has gained prominence after winning or helping to win acquittals for a defendant in Jeremy Johnson’s bank fraud trial, for businessman Marc Sessions Jenson, and for Ammon Bundy, charged in the Oregon wildlife standoff involving a group of armed antigovernment protesters.
Walz has won convictions in high-profile cases, including those against former ClearOne Communications CEO Frances Flood, Kirk Koskella of Anglo-American Investment and Richard Taylor Cardall.
The office declined to comment on Koerber’s case. But in his trial brief, Walz wrote that the government will present witnesses and evidence that Koerber ran a Ponzi scheme, in which money from new investors is used to pay previous investors to make an enterprise seem profitable. Koerber’s business were not profitable, prosecutors contend.
“If in fact Mr. Koerber created and ran a ‘Ponzi’ scheme, that deceptive practice alone is sufficient for the jury to convict,” Walz wrote.
Prosecutors plan to put on witnesses to testify that Koerber diverted $15,000 a month for life insurance policies, over $20,000 to have his teeth fixed and funds for investments in movies and the Iceberg drive-in, as well as luxury cars.
Opening statements are expected possibly as early as Tuesday.
JURY BREAK DURING ECLIPSE
Jury selection in the federal court trial of Rick Koerber begins Monday — which is also the day of a partial eclipse that will peak in Salt Lake City about 11:30 a.m., while potential jurors are to be in the courtroom.
Judge Robert Shelby said at a hearing on Thursday that’s he’s concerned some potential jurors could take the eclipse as an “ominous” sign of something.
So the judge is going to send the jury pool out of the courtroom for the duration of the eclipse.
“Let’s not be in the courtroom when that happens so they don’t take anything from it,” Shelby said.