After listening to Rick Koerber testify for seven days in his federal trial on fraud accusations, veteran prosecutor Stewart Walz asked a barrage of questions aimed at calling Koerber’s credibility into question.
And after about three hours of rapid-fire questions, Walz abruptly sat down, surprising the courtroom audience who had seen Koerber on the stand since Sept. 18, under questioning from his own attorney.
The sudden end even prompted U.S. District Judge Robert Shelby to ask Walz if he was done with his cross examination.
Koerber is facing 17 charges in an indictment that alleges that, from 2004 to 2008, he took in about $100 million from investors and used about half as interest payments going back to investors to give the appearance of profitability.
Prosecutors have said their case is about Koerber’s alleged operation of a Ponzi scheme; that he used the money for different purposes than what he told investors he would; and that he used investor monies for personal purposes but didn’t pay taxes on those amounts.
In the early 2000s, Koerber had touted himself as a guru of real estate investing who offered expensive classes to teach his “Equity Milling” strategy. That led him to head a real estate investment operation using that strategy, running, in part, on loans from investors.
Koerber has admitted on the witness stand that at times he used investor monies to pay interest to investors. But he has said their money was backed completely by equity in real estate, and asserted that meant he was using the equity to pay interest.
“Actually, the interest came from other investors [and not equity], is that correct? Walz asked.
“No, that’s not true,” Koerber said.
He repeated earlier testimony that he and other owners had decided to buy properties or make loans to accumulate assets for 24 months to 36 months before they started “cash flowing” the properties.
Koerber had spoken confidently and with authority during his previous days on the witness stand, when being questioned by attorney Marcus Mumford. But under cross examination, his volume lowered and he spoke softly and more slowly.
Walz hit hard on the questions of how much net worth Koerber’s Utah County companies had before they became illiquid in about mid-2007. He asked whether it was Koerber who decided to lend money from one of his companies to another, and then used the loans and unpaid interest as assets on company balance sheets.
Koerber said he made all those decisions in consultation with other owners. He also said his definition of a Ponzi scheme involved a business that did not engage in any real business operations and did not try to make a profit.
“I,” Koerber said, “was engaged in substantial profit-making activity.”
But that profit, he said, was postponed while the companies gathered properties and equity in business.
In ending his testimony during direct examination by Mumford, Koerber said that by the end of 2007, his real estate investment business had equity of $31.8 million —against $27.5 million owed to investors who had loaned money before the real estate market collapse began.
And he said after the crash, he said, he tried desperately to keep the operation afloat. “I used every penny I had to keep things going,” he said. “Every penny.”
Mumford asked him why he testified as the first witness in his own defense. “I wanted to be the first one because it was my responsibility,” Koerber said, “and, as I said before, I had confidence in in what we did. … I was on the side of truth.”