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Thursday
Nov022017

After Mistrial, Feds Will Retry Accused $100 Million Ponzi Schemer

Nearly eight years after a Utah man was indicted on charges he masterminded a $100 million Ponzi scheme, federal authorities announced that they will retry the man after a recent trial ended in a mistrial.  Rick Koerber was originally indicted in 2009 on twenty-two charges relating to his operation of several companies that promised investors monthly returns ranging from 1% - 5% through real estate investments.  Koerber initially prevailed in having the indictment dismissed when a federal judge agreed that prosecutors had waited too long to file charges, but an appeals court reversed the decision and set the stage for a recent trial that resulted in a mistrial.  If convicted of the 17 charges he is facing, Koerber could spend the rest of his life in prison.

Background

Koerber, who called himself a "Latter day capitalist," garnered a growing following for his purported real estate investing prowess and was well known in the community not only for his membership in the Latter Day Saints Church but also for hosting a radio show and frequent real estate seminars.  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 Franklin Squires'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.  

District Court Dismisses Indictment

 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 extensions, 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 while a "technical" violation of the Act had occurred, the Court should "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 grant dismissal with prejudice, which would prevent prosecutors from re-filing the charges, the Court referenced the seriousness of the offenses and also the "Government's problematic conduct in prosecuting this case," including a "pattern of neglect," tactical delays, an inappropriate use of attorney-client privileged information, and ex parte interviews with Koerber that violated his due process rights.  Noting that prejudice to Koerber was presumed, the Court opined that re-prosecuting Koerber would be impossible and ordered that the case be dismissed with prejudice.

The Appeal

The Tenth Circuit faulted the district court's analysis in dismissing the charges on two grounds.  First, while the district court correctly embarked on an analysis of the seriousness of the offenses pursuant to 18 U.S.C. § 3162(a)(2), the Tenth Circuit found that this analysis had included several unrelated factors - the presumption of innocence, issues with the "indefiniteness of the information contained in the indictments," and the government's alleged misconduct.  Rather than stopping its analysis at the seriousness of the allegations, the Tenth Circuit found the district court had abused its discretion by considering:

the indictment’s allegations, which are beyond what this factor measures: the seriousness of the charged offenses

...

The strength of the allegations and of the evidence against a defendant is irrelevant to [the seriousness of the offense] factor.

...

The district court strayed off-course by weighing the strength of the government’s allegations instead of the seriousness of the charged offenses themselves.

The Tenth Circuit concluded that the district court abused its discretion in both weighing the seriousness of the offense and applying that finding to whether or not dismissal with prejudice was warranted.

Next, the Tenth Circuit agreed with the government's argument that the district court had failed to "fully consider Koerber's responsibility in the [Act] delay," noting that the "district court was not free to ignore Koerber’s other acts that may have partially contributed to the STA violation."  The government pointed to instances where Koerber "disregarded his STA rights by waiting passively and acquiescing to the postponement of his case," including his waiting months or even years to file motions directed at certain specific events or dates.  The Tenth Circuit agreed, noting that:

One such motion is Koerber’s April 2012 motion to suppress statements from the February 2009 interviews. The district court held a hearing in November 2012 and additional argument in April 2013. Not until August 15, 2013, did the district court grant Koerber’s motion.

The Tenth Circuit ordered the district court to review whether Koerber's actions contributed to delays under the Act, and whether those delays would change the district court's review of the second factor of its analysis given the government's conduct.  

The First Trial and Jury Controversy

Trial began in late August 2017 and lasted for eight weeks, with jurors deliberating for seven days before announcing they were unable to reach a verdict.  While the District Judge overseeing the trial declared a mistrial, Koerber's attorneys declared victory in noting that their private discussions with certain jurors following the trial suggested that 11 out of the 12 jurors had voted for acquittal.  However, in a recent filing indicating their intent to retry Koerber, federal prosecutors took issue with that characterization and instead indicated that:

“Based upon what we learned from these candid and informative discussions, and based upon the serious crimes alleged and unresolved, the United States will move forward with retrying this case.”

Unsurprisingly, Koerber's attorney fired back and described a scene of a 'rogue' juror trying to influence the remaining jurors to convict Koerber:

“It was described how that one juror attempted to influence the others with private meetings outside the courthouse, private gifts and benefits, and undisclosed conflicts of interest that had been concealed from the court during the voir dire process and throughout the trial...When it appeared that the rest of the jury was ready to render at least a partial verdict acquitting Mr. Koerber, that one juror refused to go along and, in a last-ditch effort, tried to bargain with the other jurors — if they would just vote guilty on any one count, pick one, he would agree to acquit on the rest....And when the other jurors pointed out how improper it was to even make such a proposal, that one juror terminated deliberations.”

 Prosecutors have asked U.S. District Judge Robert J. Shelby to set a scheduling hearing to determine a new trial date.

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