Accused of $100 Million Ponzi Scheme, Utah Man Walks Free On Technicality

Accused of $100 Million Ponzi Scheme, Utah Man Walks Free On Technicality

 A Utah federal judge dismissed criminal charges against a Utah man accused of operating one of the largest Ponzi schemes in Utah history, ruling that prosecutors' failure to timely pursue the case was a violation of federal law and warranted dismissal.  Rick Koerber was originally indicted in 2009 on multiple tax, money laundering, and fraud charges and accused of duping investors of tens of millions of dollars. However, at a hearing earlier today, U.S. District Judge Clark Waddoups ruled that a dismissal with prejudice was warranted, meaning that prosecutors could not refile in the future and that Koerber would forever avoid prosecution on the charges. 

Background

Back in the mid-2000's, Koerber called himself a "Latter day capitalist," enjoying significant fame and recognition for his purported real estate investing prowess.  Koerber was well known in the community, owing not only to his membership in the Latter Day Saints church, but also his own radio show and regular hosting of real estate seminars that commanded 4-figure attendance fees.  Through his companies, Founders Capital and Franklin Squires, Koerber touted his "equity milling" program that promised lucrative returns through buying and selling residential real estate.  Investors came in droves, entrusting tens of millions to Koerber's operations.  Even Koerber's radio show changed its opening theme song to, "Money, Money, Money" by Abba.  Koerber also appealed to listeners' religious beliefs, even remarking to one listener who questioned his motives that "God is a capitalist."  In total, Koerber raised approximately $100 million from investors.  

However, the collapse of the real estate bubble in 2007 was catastrophic to Koerber's operations, as the majority of FranklinSquires's assets were in the form of real estate that quickly erased any equity as housing prices declined.  He was indicted in May 2009, and a superseding indictment handed down six months later included twenty-two charges including wire fraud, money laundering, and tax fraud.  

Koerber Seeks Dismissal

In April 2014, nearly five years after the first indictment was handed down, Koerber filed a Motion to Dismiss for Impermissible Delay citing multiple grounds, including the violation of Koerber's right to a speedy trial.  The Speedy Trial Act (the "Act"), codified at 18 U.S.C. § 3161, requires that the trial of a defendant entering a plea of not guilty was to start within 70 days of the later of the filing of the indictment or appearance by the defendant in front of a judicial officer.  While the Act also allows for certain exemptions, Koerber's motion argued that at least 125 non-exempt days had passed without a trial or other resolution.  

At a hearing, the Government conceded that a "technical" violation of the Act had occurred, but urged the Court to "cure" the violation by entering an Order pursuant to the Act essentially making a finding that the "ends of justice" warranted a retroactive continuance and outweighed the best interests of the public and Koerber.  However, the Court cited precedent standing for the proposition that such a retroactive mechanism was prohibited and that a violation of the Act would have occurred even of such actions were taken.  In deciding whether or not to allow prosecutors to refile the charges, the Court noted not only the seriousness of the offenses but also the "Government's problematic conduct in prosecuting this case."  Further evaluating this latter factor, the Court made a series of observations supporting its conclusion that the Government's conduct suggested a "pattern of neglect":

But in addition to this administratively dilatory conduct and  pattern of neglect, the court has already found significant problems with the substantive prosecution of this case essentially amounting to “a pattern of widespread and continuous misconduct.

...

The court agrees that the discovery practice of the Government in this case has been puzzling and raises a strong inference of tactical delay on the part of the Government in its prosecution of the case. 

...

The court also acknowledges that it has found that the Government had inappropriately based the superseding indictment in substantial part on attorney-client privileged information... The court found this troubling at the time but viewing it now in the context of this case’s five-year prosecution history, it fits into a larger pattern justifying dismissal with prejudice.

...

Finally, and most egregiously, the court has already written at length about the Government’s tactic of illegally planning and conducting impermissible ex-parte interviews with Defendant in February 2009 when he was represented by counsel, thus violating his due process rights, interfering with his attorney-client privilege, and inquiring into or attempting to interfere with his advice of counsel defense, though he was as yet unindicted, resulting in the suppression of those interviews and all fruits derived therefrom.

Noting that it would be impossible to reprosecute the case and that prejudice to Koerber was presumed, the Court granted the Motion and ordered that the case be closed.

It is unknown whether the government will pursue an appeal.

The Order granting the Motion

  For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

For more information about LexisNexis products and solutions, please connect with us through our corporate site.