Prosecutors used a key witness in a federal trial on Friday to pierce the veil between Rick Koerber and a downline of investors who poured $17 million into his real estate investment companies before their collapse in the late-2000s financial crisis.
Michael Isom of St. George was one of a small number of investors who gathered money from others and gave it to Koerber on implications that they would receive 1 percent to 5 percent interest per month and that their money was safe.
Isom, testifying at the end of the first week of what could be an eight-week trial, said it was Koerber who helped him set up the procedures for bringing in money from others.
“I had multiple conversations with him about that,” Isom told a federal jury.
Isom also identified an email Koerber sent him with a sample promissory note to provide to Isom-recruited investors. Other investors similar to Isom are on the government’s list of potential witnesses.
Koerber is on trial on 18 charges of fraud, money laundering and tax evasion related to his operation that brought in nearly $100 million in investments that were to fund the purchase of undervalued homes that could be flipped for resale or rented out for more than monthly mortgage payments.
A January 2017 indictment says Koerber operated a Ponzi scheme in which about half of what he took in was turned back to investors as interest payments to make his operations appear profitable when they were not. It also says he used investor funds for personal expenses or investments unrelated to real estate.
Koerber in the past has argued that he only allowed a small group of investors to put money into his companies. Any promises made to others who invested through that group did not come from him, Koerber has said, nor did he have specific knowledge of them.
Isom, however, testified that he had discussions with Koerber “to bring in money from other people [in order] to send money to him.”
Isom also said that in about 2005, Koerber required those investors to first attend Koerber’s real estate seminars to understand his “equity milling” strategy before they were allowed to invest.
But things went south in June 2007, when Koerber’s companies stopped sending interest payments to Isom’s companies for distribution to investors.
Koerber’s attorney, Marcus Mumford, likely will have a chance to cross-examine Isom after the trial begins its second week Monday.
Mumford could bring up Isom’s guilty plea to a misdemeanor charge of aiding and abetting related to his interaction with an Koerber investor. In that case, Isom said he obtained an investment in August 2007 and forwarded it to Koerber’s company even though interest payments to previous investors had stopped in May of that year.
Isom’s sentencing has been postponed numerous times. No hearing is scheduled for it.
Isom’s name also came up in the fraud case of Dee Randall, who is serving a prison sentence, as one of the insurance agents or financial advisers who funneled investor monies into Randall’s fraudulent enterprises.
Isom testified Friday after St. George resident Nick Bartetzko, who said he was influenced to invest after attending a Koerber seminar and seeing advertisements or magazine articles from Koerber’s companies or partners.
“Let Us Show you how to SAFELY EARN 1-5% PER MONTH ON YOUR CASH!” one advertisement said.
But Mumford’s cross-examination of Bartetzko highlighted documents showing that Isom’s companies were responsible for the investments, though Bartetzko said he understood that the $505,000 he invested was intended for Koerber’s companies.
Mumford also raised doubts about whether Bartetzko had invested before or after seeing the magazines promoting Koerber’s investment strategy.
