Updated April 6 at 11:30 a.m. with statement from Terry Charles Diehl’s attorney.
SALT LAKE CITY — Federal prosecutors filed criminal charges against a former UTA board member late Wednesday for allegedly misrepresenting in bankruptcy court more than $1 million he made on a commuter rail real estate development.
A federal grand jury returned a 12-count indictment charging Terry Charles Diehl, 61, with filing a false declaration and concealing assets in connection with his Chapter 11 bankruptcy reorganization.
Diehl, a high-profile Utah real estate developer, resigned from the Utah Transit Authority board under fire in 2011 over the Draper FrontRunner station project.
“We seek to protect the integrity of the bankruptcy court from those who would exploit its protections because of selfish motivation,” said Utah U.S. Attorney John Huber.
The charges came a day after the U.S. Attorney's Office announced an agreement to not prosecute the transit agency itself for any possible wrongdoing.
UTA issued a statement Wednesday evening: "Mr. Diehl left the UTA board years ago. In August 2015, UTA sent Mr. Diehl a letter demanding that he cease and desist from any and all contact with UTA. We are not aware of anyone at UTA having contact with Mr. Diehl since that time.
"UTA is cooperating with the U.S. Attorney’s Office. We trust the justice system to resolve this matter appropriately."
Peter Stirba, Diehl's attorney, issued a statement Thursday morning calling his client's case "a serious case that will be intensely litigated. The only appropriate comments about this case should be made in a courtroom."
Stirba said a courtroom "is where the true facts of this case, not mere allegations, will be established and determined. Mr. Diehl is innocent unless and until the government has proven its case."
Diehl, of Salt Lake City, was no stranger to controversy during his time on the UTA board and with some of his real estate projects, including the Tavaci housing development at the mouth Big Cottonwood Canyon.
In 2008, Diehl consulted for and later held ownership in development company Whitewater VII, which wanted to develop land next to the proposed FrontRunner stop at 12800 South.
While he was on the UTA board, Diehl sold the development rights to land near what is now the Draper station to another developer, Jeff Vitek. According to documents released in 2011, Diehl made millions of dollars but less than $24 million on the deal.
Legislative auditors in 2011 found that Diehl had a conflict of interest when he profited from the sale of the land for the Draper station.
Utah House Speaker Greg Hughes, a former UTA board chairman, is a friend and business partner of Diehl. Hughes’ attorney, Brett Parkinson, said in a statement Tuesday that the speaker was not a target of the federal investigation. Hughes met with federal authorities as recently as last week and "continues to offer his assistance," according to Parkinson.
The speaker didn't immediately have a comment Wednesday.
Hughes told the Deseret News in January that he continues to do business with Diehl, calling him "a character." He described their dealings as Diehl finding land for him to develop and receiving a finder’s fee.
The speaker said then that while their association may raise questions about whether he used his influence as a lawmaker or UTA chairman on land deals, they both followed the required disclosure laws.
"The guy’s not been arrested, he’s not got a criminal record, it’s not like I’m hanging out with known criminals,” Hughes said then. "Characters, yes. But not criminals."
In March 2012, Diehl filed bankruptcy for $41.7 million in debt — including $500,000 to the MGM Grand in Las Vegas.
Several months before filing for bankruptcy, Diehl set up a company called Skyline Ventures Associates Inc., owned by his two daughters but managed by him, prosecutors say. The indictment alleges that although the authorized signatories on the company account were his daughters and office manager, Diehl controlled and directed all funds in and out.
Diehl filed false declarations with the bankruptcy court, knowingly and fraudulently omitting or misrepresenting facts about Skyline Ventures and the funds he controlled in the account, according to the indictment.
Prosecutors allege Diehl also omitted more than $1 million in income stemming from the UTA FrontRunner transit-oriented development in Draper from his bankruptcy filing.
Diehl allegedly failed to report the money he directed in and out of the Skyline Ventures account. Rather, he reported only a fraction of his monthly cash receipts on his bankruptcy filings from April 2012 to May 2013 when his reorganization plan was approved.
The indictment comes a day after the U.S. Attorney's Office announced a nonprosecution agreement had been signed with UTA that meant there would be no criminal action brought against the agency.
Under the agreement, UTA is required to cooperate with ongoing investigations and will be subjected to federal monitoring for up to three years.
As recently as 18 months ago, Diehl was trying to influence UTA board members, executives and staff members on UTA projects, according to a letter included in the nonprosecution agreement.
"As you may be aware, pending legal matters call into question the propriety of your ongoing contact with UTA. For this reason, I write to request that you cease and desist from any and all contact with UTA, effective immediately," UTA general counsel Jayme Blakesley wrote in the August 2015 letter to Diehl.
Federal authorities say they will issue a summons for Diehl to appear in court on the charges. The potential penalty for each of the 12 counts is five years in prison and a $250,000 fine.
Whether more indictments come out of the two-year federal investigation into UTA rail and development projects remains to be seen.
"UTA has been cooperating as best we could up to this point," UTA President and CEO Jerry Benson told KSL Newsradio's Doug Wright earlier Wednesday.
Benson said the agency was "now releasing to them literally thousands of documents" that had been protected under attorney-client privilege, including correspondence between inside and outside legal counsel.
UTA has implemented "what really is the gold standard" for a conflict of interest and financial disclosure policy, Benson said, calling it the "strictest policy of any agency in the state."
He said board members and managers in the past were subject to "an internal policy for self-disclosure" and could voluntarily recuse themselves from voting or other actions.12 comments on this story
Under the new policy put in place several months ago, he said the agency no longer relies on someone coming forward with a potential conflict but requires a full disclosure of personal and family interests that is reviewed independently.
As a result of that review, board members or employees may be ordered to recuse themselves from something even if they don't agree they have a conflict of interest, Benson said.
"It's important for us to be proactive and upfront about any potential conflicts," he said.