SALT LAKE CITY — Federal prosecutors want to come down hard on a Utah real estate magnate who bilked investors out of tens of millions of dollars in one of the state's largest Ponzi schemes.
Saying his crimes are emblematic of Utah's reputation as a hotbed for fraud, the U.S. Attorney's Office is recommending that Claud R. "Rick" Koerber spend 20 years behind bars.
"Like-minded potential fraudsters must be deterred through an expectation of just punishment should they follow Koerber’s footsteps," prosecutors wrote in a new court filing.
After nine years of court wrangling, including a dismissal and a mistrial, a jury last fall found Koerber guilty of 15 counts of wire fraud, fraud in the offer and sale of securities and money laundering. The eight-man, four-woman jury acquitted him on two tax evasion charges.
U.S. District Judge Frederic Block is scheduled to sentence Koerber on May 13.
Koerber, 46, used his businesses — Founders Capital, and related companies Franklin Squires Investments and Franklin Squires Cos. — as a $100 million Ponzi scheme from 2004 to 2008.
Koerber profusely proclaimed his innocence throughout the prolonged case. He has maintained that he defrauded no one but ran a profitable business and was singled out by bureaucrats angered by his radio show, "The Free Capitalist."
While investors believed their money would be used in secure real estate deals, Koerber spent it instead on luxury sports cars, like Spykers and Ferraris, producing a low-budget horror movie and minted his own "vanity" gold and sliver coins, according to prosecutors. Investors lost $45.2 million when the scheme collapsed.
"Koerber’s scheme crashed like a wrecking ball through the lives of his investors," prosecutors wrote in a sentencing memorandum filed Wednesday.
People lost their homes, savings, credit and ability to pay bills or put food on the table, according to prosecutors. Some declared bankruptcy, others postponed or came out of retirement.
Prosecutors say Koerber "preyed" on friends and fellow members of The Church of Jesus Christ of Latter-day Saints.
"Koerber was able to gain the trust of his investors, in part, because he appeared to be a faithful Mormon, and he used vocabulary and concepts designed to appeal to a Mormon audience," prosecutors wrote. "Koerber’s pitch of high but safe returns, combined with Mormon ideology, enabled him to obtain nearly $100 million from investors."
A native of Casper, Wyoming, Koerber promoted himself as a rags-to-riches real estate genius.
According to his "self-created legend" he came to Utah after a failed attempt to run an internet company in Wyoming. He read some books on real estate investing, bought a house with no money down, and then started to teach others about real estate investing.
In his seminars, Koerber made overt references to the Latter-day Saint faith, often comparing himself to church founder Joseph Smith. Like the 13 statements Smith wrote about the church's core beliefs, Koerber created his own “13 Principles of Prosperity."
"He told his followers, in front of a pulpit similar to those in Mormon church houses, and in a tone familiar to any who have attended a Mormon testimony meeting, that 'I am telling you with all the soberness I can muster, though this is not a church pulpit, I know that what we are doing is being inspired by God,'" according to court documents.12 comments on this story
Koerber's "religious-laden pitch for money" ultimately brought in $98.6 million, prosecutors wrote. He spent a large amount on what he called "posturing" or creating the idea that he was a successful real estate mogul. Another chunk went to Ponzi payments to investors. He spent only 20 percent on real estate ventures.
Federal prosecutors first filed charges against Koerber in 2009.
Judge Clark Waddoups dismissed the case before it reached a jury in 2014, citing prosecutors' "pattern of widespread and continuous misconduct" and violations of the Speedy Trial Act.
Prosecutors filed charges against Koerber a second time, but the jury couldn't reach a unanimous decision. Judge David Nuffer declared a mistrial, leaving the door open for prosecutors to refile the case in which Koerber was convicted.