Rick Koerber’s businesses owned $127 million worth of properties when they collapsed amid plunging values during the real estate crash nearly 10 years ago, his attorney told a federal court jury on Tuesday.
Koerber, the one-time Utah County real estate investment guru, is facing 18 charges related to allegations he ran a giant scam from 2005 to 2007 as his businesses took in about $100 million and he used about half of that to pay interest owned to investors to make the enterprise appear profitable.
A jury of 16 people, including four alternates, was sworn in Tuesday morning to hear witnesses and testimony during the trial that could stretch into October.
Koerber’s attorney, Marcus Mumford, told the panel in opening remarks that Koerber will take the witness stand to explain that his business focused on accumulating assets and that parts of it were profitable.
Prosecutors don’t mention the assets Koerber’s companies held, Mumford said, or that their value was wiped out by the real estate crash.
“That is not a Ponzi scheme,” he insisted.
Mumford drew an objection from prosecutors when he added, “Every business in America could be accused of running a Ponzi scheme according to the government’s definition of that term.”
Prosecutors say the collapse of Koerber’s businesses meant that investors were out more than $40 million.
Assistant U.S. Attorney Tyler Murray outlined the prosecution’s case, saying Koerber came up with an investment strategy he named “equity milling” and then sold the concept to investors through seminars and advertisements.
Investors were promised returns of up to 5 percent a month and told their funds were safe because they would be used to make short-term loans to companies controlled by Koerber to buy real estate.
Instead, Murray said, Koerber’s businesses were not profitable and Koerber used investor funds to make interest payments.
“Over the course of this trial you will see the defendant ran a Ponzi scheme,” he said.
Koerber also used investor monies for his personal expenses, which included buying two Ferraris on the same day and a Lamborghini on a trip to Las Vegas, he said. Koerber also invested about $5 million in a horror movie called “Evil Angel,” paid for adoptions and to have his teeth fixed, Murray said.
Mumford, however, said that Koerber bought the luxury cars as illustrations of his business strategy of buying undervalued assets. He later sold the cars at a profit and poured that money back into the companies, Mumford said.
The attorney also suggested that problems with Koerber’s businesses stemmed from associates of his one-time partner, Les McGuire, who died in a plane crash.
Koerber faces charges of fraud in the offer or sale of securities, wire fraud, money laundering and tax evasion.