Utah real estate guru accused of fraud said people begged him to take their money
Scott Sommerdorf | The Salt Lake Tribune
Rick Koerber, center, confers with his attorney Marcus Mumford, right prior to speaking at a news conference the day after a federal judge tossed out 18 charges against Koerber that had alleged he operated a giant Ponzi scheme through his real estate company, Friday, August 15, 2014.
Back in the high-flying days before the Great Recession, Rick Koerber said, people were begging him to take their money.
But, Koerber testified Tuesday in his federal court trial, he told participants in his popular real estate investing courses
that he wasn’t there to take their money and get them the kinds of returns he preached about making.
Still, Koerber’s FranklinSquires Cos. ended up absorbing about $100 million in investments and loans
, and an indictment alleges he used about half of it to make interest payments to investors as part of a Ponzi scheme
During the second day of Koerber’s testimony, defense attorney Marcus Mumford
played video clips from several of Koerber’s popular free seminars and from courses that cost up to $7,000. Koerber taught about a real estate strategy he labeled the “Equity Mill” and about his “13 Principles of Prosperity.”
In one clip, Koerber described people who approached him to take their money, hoping he would generate the 3 percent to 5 percent returns
he claimed he was making by buying under-valued single-family homes.
“People begged me to take their money,” Koerber said in one clip. “Literally, there was one guy who begged me to do this.”
But, he said, he wouldn’t take the $250,000 check or an offer of $700,000. “I didn’t want a job being his cash flow generator.”
And on the witness stand, testifying on his own behalf in the fifth week of the trial, Koerber said he and his partners weren’t out to solicit loans or investments from those who attended his seminars and classes.
“We weren’t looking for outside participants,” Koerber told the jury. “We were trying to sell our education materials.”
Prosecutors contend that Koerber used those gatherings, magazine articles and other means to solicit investors with promises of extraordinary returns while failing to tell them that his companies weren’t making money or that he was using their funds to make interest payments.
Koerber also advanced another defense theme, saying that the company was building up equity in properties that secured loans and investments against losses and to provide revenues that would allow it to meet its financial obligations. By July 2007, he said, “We had just acquired enough property where they would be cash flowing to pay off debt.”
That process was interrupted by the drastic drop in property values in mid-2007, he said, though he tried to keep the operation going until June 2009 when a grand jury returned an indictment.
Mumford has said that Koerber’s companies had $124 million of assets that backed the loans and investor monies. But an FBI agent testified that the companies’ books showed the properties were encumbered with loans and their equity was only about $30 million.
Koerber is to resume testimony on Wednesday.