Back in 2006, Rick Koerber was a phenomenon.
He could charge up to $2,000 for his real-estate investing seminar and 200 people would show up.
So entranced were investors by Koerber's "Equity Mill" program that they poured at least $100 million into businesses operated under the FranklinSquires Cos. name.
Koerber called himself a "Latter-day capitalist." He had his Free Capitalist Project, a "university" and a radio program. He supported the failed school voucher movement and flexed political muscle against regulators. He had Ferraris and Maseratis and an Alpine mansion.
Then in 2007, credit tightened and housing values plummeted. The companies stopped making interest payments; lawsuits followed. Koerber lost his home and his car.
In May, a federal grand jury indicted him for operating an alleged Ponzi scheme, charging him with mail and wire fraud and tax evasion. More charges are expected.
Koerber claims innocence.
"Honestly," he said of himself and his partners, "we weren't that experienced in business, and we weren't that experienced in real estate. We were just ambitious."
A history » Claud Roderick "Rick" Koerber was born March 6, 1973, in Casper, Wyo., to an unmarried cocktail waitress. He never met his biological father.
When he was about 6 months old, his mother, Linda, married Ted Edward Koerber, who adopted Rick. They divorced when the boy was about 4 .
"He was a big drunk, an alcoholic," Koerber said in an interview before the indictment. He saw Ted only once after the divorce, visiting him in jail at Christmastime.
Linda raised him in Casper with her parents' help. Koerber excelled in debate in high school, but by 17 found himself searching for a foundation.
On a rainy Easter Sunday, he answered the door to Mormon missionaries. "I said, 'Tell me, does God have a Dad?' That's how I started. Less than a month later, I got baptized."
LDS capitalist » Koerber's LDS religion would figure prominently in his life and Utah businesses. But some think he went too far.
In at least one presentation in St. George, Koerber announced the presence of Hartman Rector Jr., a former LDS general authority. Gordon Hamm, a software engineer in attendance, thought Koerber's actions were inappropriate.
"The church wouldn't have wanted that, and that was my beef," said Hamm, who wrote Koerber and Rector letters protesting the implied endorsement.
Members of several LDS wards Koerber lived in also invested, influenced by his church membership, said David Doerr, a real estate broker who Koerber sued over comments on a blog.
"I know of at least two families who lost their homes because they invested," said Doerr, who attended the same Spanish Fork ward as Koerber. "But that's the tip of the iceberg."
James W. Smart of Salt Lake City cited religion as a factor when he and his wife invested equity from their home with Gabriel Joseph, a co-founder of FranklinSquires Cos. who ran one of the companies, Annuit Coeptis, that also fed money into the operation.
"He'd say the right things ... 'Some people use the money to go on missions' and stuff like this," said Smart, a church employee.
Wyoming failure » Koerber got an associates degree in liberal arts and general studies from Casper College, then attended the University of Denver on a debate scholarship from 1993 to 1996, studying religion and public policy but apparently never graduated.
He went to work for Xerox and managed to save $10,000 that he used to start a company that fixed computers. He returned to Wyoming and also formed Global Central, an Internet service provider. The company did well, according to Koerber, and in 2000 he decided to take the parent, National Business Systems, public. In doing so, he ran afoul of Wyoming regulators who alleged he misled investors about the company's financial condition and failed to reveal most of the money would fund sales commissions and current operations costs.
By September 2001, Koerber and wife Michelle filed for bankruptcy. In court, the couple listed their cash on hand as $5.
Flat broke, the couple moved to Orem, where Koerber wanted to become an LDS seminary teacher.
Lessons learned? » The Wyoming sanctions weighed on Koerber.
In organizing FranklinSquires in 2004 with seven former students from his seminars, Koerber said he consulted an attorney because he didn't want to get in trouble with regulators. He said the attorney told him, "If you're all business partners and you're all actively involved in managing the company and you're all using your own money, no problem."
But then, Koerber said his insurance agent, Les McGuire, asked him about investing after seeing Koerber's financial records when he purchased a policy.
Koerber went back to attorneys to see how McGuire, who later died in a plane crash, could invest. The question was how he could accept outside investors without registering with the state Division of Securities or federal Securities and Exchange Commission, which would trigger a number of requirements about disclosing financial and other information about the company and its owners.
He said he learned he could bring McGuire on as a partner. That advice led to the creation of Founders Capital, owned 50 percent by McGuire and the other half by FranklinSquires.
"Once we did that we did not have to comply with all these other regulations," Koerber said. "We had good attorneys giving us that advice."
Humble beginnings » Once in Orem, Koerber and his wife found a home they rented for $800 a month, though it was strewn with mouse feces.
Koerber studied to become a seminary teacher but said he eventually was told he could not teach LDS religious classes unless he made good with Wyoming investors.
"I didn't want to be in business; I wanted to pay back the investors I had from my previous business," he said.
Koerber had seen an infomercial for the Carleton Sheets investment program that promised to teach "how to invest in real estate with no money down." Without a credit card, he couldn't get the program, so he went to work as a telemarketer for FranklinCovey Coaching, which sold it.
"At night I'd go over and read it and pretty soon I made copies of it," Koerber said. "I'd sneak the videos out and watch them."
Using what he learned, Koerber and his wife bought a Spanish Fork home for $135,000 from owners willing to finance the deal themselves with no money down. The monthly payment was $805 for a house nearly identical to Koerber's in-laws' two blocks way.
"They worked their whole lives to have this house, and here I was this failure in business who had no money and no credit and we're moving into this house and I had increased my expenses $5 a month. I thought I was the smartest guy in the world and I said I got to do this some more. ... It was like hallelujah."
'Equity Milling' » Koerber built on the Carleton Sheets method to create his "Equity Milling" program. He began buying and selling houses and sharing his technique, charging students as much as $2,000.
"I thought to myself, geez, one or two sales a month and you're going to make as much as you make as a seminary teacher."
Dennis and Marietta Baca, a retired couple from Aurora, Colo., in September 2005 received an invitation from Koerber for a Denver seminar conducted by Gabriel Joseph, one of FranklinSquires owners.
According to a lawsuit they filed in Colorado, Joseph described Koerber as a "brilliant real estate investor" and encouraged attendees to sign up for an instructional program. The Bacas paid $7,285 for an Internet-based course and also traveled to Provo for classes.
The Bacas borrowed $55,000 against their rental property and used $40,000 from her 401(k) to invest in Koerber's operations. Eventually, they put in another $30,000 from credit card advances.
They received monthly interest payments until the checks stopped in October 2007.
'God is a capitalist' » His clients, Koerber said, were usually people "looking to supplement their income or get out of what they were doing."
"They stayed up at night watching get-rick-quick infomercials ... Most of these people were average lower middle-class people who didn't like being lower middle class."
For the once-broke Koerber, 36, and his partners, most 30-something Utah County residents, the money flowed in -- so much so that the lead-in song to his Free Capitalist show was "Money, Money, Money." by Abba.
Koerber graduated from the Spanish Fork house to a 13,850-square-foot mansion in Alpine.
At meetings and on his radio show in July 2008, Koerber told a story about the expensive automobiles he and others viewed as advertising their companies' success.
Koerber said he went to a car dealership with Joseph, who wanted to buy a new Ferrari.
"I had driven my lowly Maserati up there to get worked on," Koerber said. "Basically I was sitting there and didn't want to drive a loaner car back home ... So I found a Ferrari on the showroom floor ... and so I bought it for $205,000 and wrote a check for it."
But telling the story -- with relish --- on his radio show, Koerber was incensed by a listener who criticized him because he found the story clashed with Christian teachings.
"God is a capitalist, my friend," Koerber told listeners and his critic.
When Koerber drove the car home, a neighbor who owned a minivan remarked that people in other parts of the world were starving. But Koerber would have none of that, particularly after selling the new Ferrari a few months later for about $20,000 more than he paid.
"So I drove that car around for two months and it cost me less than it cost you to drive around in your self-righteous minivan," he said.
Out of control » After McGuire, who died later in a plane crash, bought in through the creation of Founders Capital, a real estate broker named Paul Bouchard who operated Hunters Capital asked about investing, Koerber said.
Other people set up funds and also began to "lend" money, with Founders Capital agreeing to pay, according to the indictment, around 5 percent per month. A number of these feeder funds began to create their own "downlines" of investors in which each person who recruited new money got a piece of the interest.
Koerber insists the funds and individuals were not investors but made loans, a legal distinction that could come into play in the government's case against him.
Federal officials declined to provide an estimate of the number of people involved, saying only it could be in the hundreds. David Shipley, a certified investment adviser, said FranklinSquires was all the buzz among some Utah County investors.
"If I were to guess, more money from Utah County investors ... went into this project, to put it politely, than any other business that ever has come into this area," Shipley said.
Koerber said his obligation is only to first-line lenders with whom Founders Capital had a contractual relationship.
He did not initially know of or encourage perhaps the largest investor, Hunters Capital, or others to form downlines of investors, Koerber said. Promoters such as Bouchard used him and his seminars to solicit investments without his knowledge, he claimed, even though he acknowledged Bouchard was a friend whose offices were in the FranklinSquires building.
"He would take a guy, a neighbor who wanted to invest and he would bring [him] to one of my seminars. He would use that as credibility. The next day he'd say 'OK, give me $200,000 and I'm just going to loan it to Rick.' "
Bouchard, who did not return a voice mail seeking comment, sent more than $10 million he gathered in Founders Capital. He pleaded no contest to criminal charges and has been ordered to repay $8.83 million.
Huge annual return » Koerber denies running a Ponzi scheme, and blasts the government for loosely throwing around that term. He said he told investigators the investments were all backed by equity in property or businesses.
"I can't say we've never paid interest with new capital," Koerber said. "That's not a big deal, and all our investors know that. But on balance, we're by far in the black in terms of more assets than liabilities."
Yet to meet its obligations of 5 percent or so a month, the "equity milling" operation would have had to produce a huge annual return. For example, $100,000 at a simple interest rate of 5 percent per month would mean that the funds would have had to return an interest rate of 60 percent after a year or $60,000 to meet the company's obligation. Interest compounded monthly would mean a return closer to 80 percent would be required.
"I don't see legitimately how anybody could take that promise [of investing in real estate as FranklinSquires did] and make a 5 percent a month return on investment," said Tom Eldredge, a partner at the Grant Thornton accounting firm in Salt Lake City. "That's very unusual."
Plus, the indictment alleges about half of the $100 million taken in by FranklinSquires was used for purposes other than real estate investing, thus making meeting its obligations even less probable.
'A lot of freakin' money' » In 2007 the housing bubble that provided the fuel for the "equity mill" to work on such a large scale burst, bringing Koerber's operation down. FranklinSquires had assets in the form of houses all over the country, Koerber said. But as prices fell, it no longer had equity in the houses and, even if it could sell, wouldn't make a profit needed to service its debt.
"So we became illiquid," Koerber said.
By that time, the 50 entities involved in raising money for Founders Capital had shrunk to nine. But to those, FranklinSquires still owes about $30 million after reducing the debt from $120 million, much of it through trading equity in FranklinSquires.
That $30 million is "still a lot of freakin' money," Koerber said, but he vowed to pay it back "even if takes another two years or five years."
Meanwhile, in court Koerber finally agreed in a foreclosure proceeding to vacate his mansion. The bank repossessed his Mercedes S600. A court-appointed attorney represents him.
Ripples in the pond » The FBI and the state Division of Securities continue to investigate. At least 13 of the investor companies face lawsuits or sanctions from regulators. More federal charges are expected.
Smaller investors are out the equity in their homes and are working to save again for retirement or to repay money borrowed on credit.
Doerr, the broker, said real estate in Utah County where FranklinSquires or its students bought homes likely will show still greater effects from falling prices and evaporated equity.
Some county residents now own investment homes they must pay mortgages on until they figure out what to do with them, said Shipley, the financial adviser. Others have second or first mortgages on homes they had already paid off.
"Especially for Utah County, some of the worst stories are the couples who are retired and put the entire equity value of their house or their entire life savings into this organization," Shipley said. "Now they don't know whether they have anything to show for it."