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.

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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. 

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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.

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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.

A copy of the Order granting the Motion is below:

236850730 Dismissal of Charges Against Rick Koerber

Feds: Ponzi Schemer Hid $400,000 In Gold, Silver, And Cash With Wife And Brother

Federal authorities announced criminal charges against a convicted Ponzi schemer, as well as his wife and brother, for conspiring to hide more than $400,000 in gold, silver, and currency in ammunition canisters out of the reach of authorities.  Ronnie G. Wilson, Cassie Wilson, and Tim Wilson each face a single charge of conspiracy to obstruct justice.  Ronnie Wilson, who is currently serving a 19.5-year prison sentence after pleading guilty to a $58 million Ponzi scheme, also faces an additional charge of making false statements to an agent of the U.S. Secret Service.  

Wilson was arrested by authorities in early April 2012 on accusations that his company, Atlantic Bullion and Coin, Inc. ("ABC") was operating a massive Ponzi scheme that promised above-average returns to investors through the purchase and sale of silver futures contracts.  While the contracts entailed the purchase of significant amounts of silver, Wilson told investors that he would manage and store the silver on their behalf at a Delaware depository.  From 2001 to 2012, the scheme raised more than $90 million from approximately 1,000 investors.  Wilson subsequently pleaded guilty to two charges of mail fraud and received a 19.5 year sentence.

Around the time of his arrest in April 2012, authorities now claim that Wilson gave his brother, Timothy Wilson, an ammunition canister containing gold, silver, and U.S. currency to hide from authorities. Later that summer, Wilson allegedly gave another ammunition canister full of bullion and currency to his wife, Cassie Wilson, who would later conceal this fact from the court-appointed receiver testify tasked with recovering assets for victims.  In total, the bullion and money totaled over $400,000.

In an announcement, court-appointed Receiver Beattie Ashmore indicated that the assets had been recovered for the benefit of Wilson's victims, and promised that:

This indictment will be followed by a number of lawsuits to be filed by the Receiver against those that profited from the Ronnie Gene Wilson Ponzi scheme.    

The Receiver's website is here. 

The indictment is below:

Wilson Indictment

California Man Fires Lawyer; Claims He Was Forced To Plead Guilty To $125 Million Latex Glove Ponzi Scheme

Due to be sentenced for masterminding a $125 million Ponzi scheme, a California man instead told a federal judge that he wanted to fire his lawyer, claiming he had been "intimidating" him and had coerced his guilty plea.  Deepal Wannakuwatte, 63, had previously pleaded guilty to a single count of wire fraud and was set to receive a prison sentence no longer than the statutory maximum of 20 years.  In a handwritten note provided to U.S. District Judge Troy Nunley, Wannakuwatte indicated that he had hired a different attorney and wished to fire his current lawyer.  Judge Nunley postponed sentencing indefinitely, and a status hearing is scheduled for this Thursday.

Wannakuwatte operated International Manufacturing Group ("IMG") and RelyAid Global Healthcare Inc. ("RelyAid") (collectively, the "Companies"), telling potential investors that the Companies had lucrative contracts providing surgical gloves to various government agencies.  Investors were told that the Companies had annual sales exceeding $100 million, including more than $125 million in contracts from the U.S. Department of Veteran Affairs ("VA") alone.  Based on these representations, Wannakuwatte and the Companies took in more than $200 million from at least 100 victims.  

However, authorities allege that Wannakuwatte grossly overstated the extent of the Companies' dealings with the VA - indeed, rather than $100 million in sales from the supply of medical gloves, authorities claim that the actual amount of the contracts were $25,000, and the Companies; total 2013 sales were just $5 million.   The scheme began unraveling late last year when Wannakuwatte, his wife, and the Companies were sued by a creditor, General Electric Capital Corp. ("GE Capital"), who claimed that RelyAid had defaulted on a loan it had taken out to purportedly build a latex glove factory.  Wannakuwatte was ordered to turn over a $3 million King Air private plane that had been pledged as collateral on the loan, and multiple government agencies began investigating Wannakuwatte and the Companies shortly thereafter.

After being arrested in February on mail fraud, wire fraud, and bank fraud charges, Wannakuwatte pleaded guilty several months later to a single count of wire fraud.  As part of that plea agreement, prosecutors agreed to seek a 20-year sentence - the maximum allowed under a wire fraud charge.  After accounting for distributions received by victims, total losses are estimated at approximately $108 million.

However, at the sentencing hearing, Wannakuwatte's lawyer presented Judge Nunley with a note claiming that his current lawyer, Donald Heller, had been "intimidating" towards him and that he had retained another attorney.  Heller, a well-regarded criminal defense attorney and former federal prosecutor, later denied the accusations to a reporter and stated that it was in Wannakuwatte's best interests to plead guilty given the "overwhelming" case against him.  

Wannakuwatte faces an uphill battle in his quest to undo his guilty plea.  Prosecutors will focus on his appearance before Judge Nunley to enter his guilty plea, known as his plea colloquy, which would have consisted of a lengthy and detailed exchange between Judge Nunley and Wannakuwatte as to the charge in the plea agreement.  Wannakuwatte would have testified under oath that he was pleading guilty voluntarily and because he was, in fact, guilty.  Further, Wannakuwatte's plea agreement would have included an affirmation that he was pleading guilty on his own accord and that he was not being forced or coerced.  

A Washington woman recently had a similar request denied after she entered a guilty plea to all 110 charges she was facing for an alleged $128 million Ponzi scheme.  Doris Nelson had asked a Washington federal judge to grant her request to withdraw her guilty plea on several grounds, including her discovery that she could retain private counsel and the discovery of new evidence.  In denying her request, the court noted her acknowledgement of her guilt in her plea colloquy and observed that her claims were simply not believable.  

Criminal Charges Dismissed Against Alzheimers-Stricken Attorney Accused Of $6 Million Ponzi Scheme

A federal judge has granted a request by federal prosecutors to dismiss criminal charges against a Pennsylvania attorney accused of operating a $6 million Ponzi scheme and recently deemed unfit to stand trial after being diagnosed with Alzheimers disease.  U.S. District Judge Robert Mariani granted a request by prosecutors to drop an indictment against Anthony Lupas, 80, and ordered that Lupas be released from a federal medical prison once private transportation was secured.  Lupas's condition also means that his victims cannot pursue an ongoing civil lawsuit.  

Lupas was a once-prominent local attorney who once served as counsel to a local school board and whose son was a local judge.  According to authorities, Lupas solicited clients to invest with him, promising steady 5% returns through an investment in tax-free trusts.  This continued for years, until Lupas suffered injuries in a 2011 fall that allegedly diminished his mental faculties.  Lupas's injuries resulted in his inability to keep up with investor payouts, and his son, Judge David Lupas, later contacted authorities after discovering certin suspicious circumstances surrounding his father's investment operations.  After an investigation, the elder Lupas was arrested and charged with 29 counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering.

Last November, Judge Mariani held a competency hearing after Lupas's attorneys sought to have their client declared unfit to stand trial.  After hearing testimony, Judge Mariani sided with Lupas's attorneys and found that Lupas had "lost his perception of reality."  While Judge Mariani's order ordered that Lupas be reevaluated in several months, the move by prosecutors to dismiss the charges demonstrates that Lupas's condition certainly has not improved.

While Lupas's victims may not have the ability to see Lupas face the allegations in court, they have had the benefit of recouping a significant amount of their losses due to Lupas's status as an attorney.  Last November, it was announced that victims would share in a $3.25 million payout from a Pennsylvania state fund supported through annual attorney registration fees.  Additionally, prosecutors have signaled that they may seek to distribute funds seized from Lupas during the investigation to victims.  Further updates are expected in the coming days.  

Court: Seattle Woman Can't Withdraw Guilty Plea To 110 Charges In $128 Million Ponzi Scheme

Earlier this year, a Seattle woman accused of defrauding investors out of nearly $100 million in a massive Ponzi scheme made headlines when she rejected a plea agreement and instead decided to plead guilty to all 110 criminal charges she was facing - a decision that essentially guaranteed a severe sentence.  However, weeks before her sentencing, Doris Nelson asked the court to allow her to withdraw her guilty plea on several grounds, including her discovery that she could retain private counsel and her newfound access to a certain computer hard drive.  U.S. District Judge Robert H. Whatley recently issued an order denying Nelson's request, questioning her credibility and finding that her proferred reasons were less than persuasive.  Nelson is now scheduled to learn her fate on November 3, 2014.

Background

Nelson was indicted in late 2011 and charged with 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering.  Nelson was accused of operating a payday/short-term lending business called the Little Loan Shoppe ("LLS") in which she began soliciting investors in mid-2000 with the promise of large profits on short-term investments.  These purported returns ranged from 40% to 60% annually, and were often paid via post-dated interest checks provided at the time of investment.  LLS moved its operations from British Colombia to Spokane, Washington in or around 2001, and shortly thereafter ceased retail operations and conducted business solely over the internet.  When the operation began faltering in late 2008, Nelson tried to offer reduced interest rates to investors but the scheme later collapsed.

According to authorities, LLC was a massive Ponzi scheme that used investor funds to pay fictitious returns and sustain Nelson's lavish lifestyle.   Nelson alone received over $3 million in funds diverted from investor funds, which were used to purchase, among other things, a motor home, a Chevrolet Corvette, and a Mercedes Benz S550.  Additionally, Nelson used investor funds to gamble at Las Vegas casinos, losing nearly $500,000 between 2005 and 2008.  Nelson also paid commissions to several investors in return for directing further investment to Nelson's operation. 

Little Loan Shoppe filed for bankruptcy in 2009, and the trustee appointed to oversee the liquidation process has filed clawback lawsuits against LLS investors who received interest payments in excess of their original investment.  In addition to the criminal charges, Nelson was also charged by the Securities and Exchange Commission, and later faced charges by Canadian securities regulators.

The Guilty Plea and Withdrawal Attempt

In April, Nelson appeared before Judge Whatley to reject a proposed plea agreement and instead plead guilty to each of the 110 charges she faced.  Several months later, and on the eve of her sentencing, Nelson filed her Motion to Withdraw Plea of Guilty (the "Motion"), claiming that her guilty plea warranted withdrawal on (1) her ability to retain counsel, (2) assistance from her former counsel, and (3) access to a computer hard drive.  

After determining that Nelson's plea colloquy was adequate and clearly contained an acknowledgement by Nelson of her guilt, Judge Whatley addressed each of Nelson's bases for withdrawal.  First, Judge Whatley deemed Nelson's discovery that she could retain private counsel - rather than utilize her court-appointed lawyer - "ingenuous," noting that Nelson had previously retained private counsel.  Next, Nelson's claim that she had access to a former attorney that specialized in securities law after her plea was also dismissed by the Court, noting the lack of evidence that Nelson did not have access to that attorney prior to her plea.  Finally, Judge Whatley noted that Nelson had access to the computer hard drive prior to her sentencing, and her insinuation that she discovered new evidence that was previously inaccessible was not believable.

The government recently filed papers indicating it seeks to forfeit a myriad of real and personal property previously seized from Nelson, including real estate, cash, cars, boats, and an extensive jewelry collection.  Nelson was advised by Judge Whatley to be prepared to enter custody at her November sentencing.

Nelson's Motion and the Court's Order is below:

Motion to Withdraw Plea

Order Denying W-d of Plea