A federal appellate court reversed the dismissal of criminal charges against a Utah man accused of masterminding a $100 million Ponzi scheme, ruling that the trial judge abused his discretion by dismissing the case with prejudice - meaning the charges could not be refiled - after concluding that prosecutors had failed to timely pursue the case. The Tenth Circuit Court of Appeals issued an opinion last week concluding that U.S. District Judge Clark Waddoup's decision to toss all eighteen charges against Claud "Rick" Koerber with prejudice over violations of the Speedy Trial Act did not adequately address several factors, including Koerber's own actions that contributed to the delay. Koerber, who touted himself as a "Latter day capitalist" during the mid-2000's, was indicted in 2009 but had the charges dismissed nearly 18 months ago in August 2014.
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.
Koerber Obtains Dismissal With Prejudice
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 Tenth Circuit's opinion painstakingly recites the procedural history of the case beginning with the government's 2007 investigation, noting various missteps along the way including the government's failure to provide timely and sufficient proposed orders extending the time under the Act. These and other missteps eventually prompted Koerber to move to dismiss the case for violations under the Act, which the Tenth Circuit noted subsequently resulted in the government's decision to turn over nearly 1,500 pages of additional discovery. The district court's analysis resulted in a dismissal with prejudice.
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.
While the Tenth Circuit's ruling is, on paper, a win for the government, the tone of the opinion suggests that this triumph may be more of a pyrrhic victory. The opinion concludes with an ominous condemnation of the government's handling of the case, including its disagreement with the government's contention that its "role in the admitted STA violation was unintentional." The opinion cites several instances, including the government's inexplicable loss of 27 discs of information, the delayed production of thousands of pages of documents, and the protracted nature of the case involving the passage of five years of time and a "dozen Assistant United States Attorneys," in concluding that this conduct could justify "the more serious sanction of dismissal with prejudice."
The case will now be remanded back to the district court, where Judge Waddoups will be required to address the deficiencies noted in the opinion.
A copy of the Tenth Circuit's opinion is below.