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A jury late Monday found an Orem man not guilty of fraud-related charges involving an associate of Rick Koerber, the real estate guru who took in $100 million in investments before his Provo-based empire crashed in 2007.
The federal court jury heard final arguments at the end of a five-day trial during which Jason Vaughn, former chief instructor for Koerber's real estate investment seminars, took the stand and said he relied completely on assurances from Koerber that the investments were safe because they were backed by equity in real estate.
Vaughn, of Orem, faced four counts of interstate transportation of money obtained by fraud, wire fraud and money laundering. He was found not guilty on all four counts.
Prosecutors did not comment after the verdict.
Vaughn owed investors nearly $2.9 million when Koerber's Founders Capital company stopped payments to investors in mid-2007. Vaughn testified Monday that Koerber told him there were 200 properties with equity that guaranteed the investments.
However, pressed by Assistant U.S. Attorney Stewart Walz about his and other companies that poured money into Koerber's operation, Vaughn admitted he never tried to gauge the accuracy of the information Koerber provided.
"But you never verified it?"
"Did you do a calculation relative to the equity?"
In fact, any equity in the properties was never recovered for investors, Vaughn admitted.
Koerber was first indicted in May 2009 and accused of running a Ponzi scheme in which he allegedly used half of the $100 million he took in to pay to investors or lenders. Koerber's companies, generally known as FranklinSquires, were not profitable and his alleged promises of returns of up to 10 percent a month came from other investors or lenders, the indictment says.
Koerber has pleaded innocent and a six-week trial is now scheduled to begin June 13 to hear evidence of the 18 fraud-related charges he's facing.
On the witness stand, Vaughn repeatedly denied he had intended to defraud investors in his Freestyle Holdings company. He said monies that he had used for a family trip to Disneyland and other personal expenses had come from his portions of the profits from Founders Capital. Vaughn took 2 percent a month of the 5 percent return that came from Founders Capital before it crashed.
But Assistant U.S. Attorney Stewart Young pointed to a testimony from an investor who said Vaughn had told her he had used her $200,000 investment to pay interest to other investors.
"What's that? A Ponzi scheme," Young told the jury in closing arguments.
Vaughn's was one of a number of companies formed by Koerber associates that took in money from investors and then poured it into Founders Capital for what was supposed to be secure real estate investments. But, according to indictments, Koerber used at least half of the $100 million to repay some investors to make his companies appear profitable.