All Bets Are Off 

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The Million-Dollar Lifestyle
nDennis and Marietta Baca, an elderly couple from Colorado, have been waiting since February 2008 for the outcome of a civil lawsuit filed in a Denver state court against Koerber and his company. Their suit claims that Koerber and his former FranklinSquires vice president, Gabriel “The Invisible Hand” Joseph, lured the Bacas into an elaborate and classic Ponzi scheme—in which new investors’ money was used to pay earlier investors. They say they were bilked of more than $170,000—money they pulled from credit-card advances, their life savings, Marietta’s pension and their home’s equity. Koerber has maintained the couple never finished his investment course for which they had registered nor did they ever invest with him. Their suit alleges Koerber acted as a “control person” who convinced unsavvy investors like themselves to put money into a variety of “down line” companies, which then invested with Koerber for interest payments. In one of several interviews with City Weekly, Koerber calls this charge “ridiculous.” Yet, while the Bacas’ suit names Gabriel Joseph’s company as one of these “down lines,” besides Joseph, three other senior employees of Koerber’s company are facing similar charges of soliciting unsecured and unregistered securities.

The Bacas allege they were pulled in by Koerber and Joseph’s promise of a lavish lifestyle and convinced to invest unregistered securities in Founders Capital through the business scheme.

Like real-estate rock stars, Koerber and Joseph never shied away from the finer things. In 2005, Creative Real Estate Lifestyles—a glossy magazine published by Koerber’s cousin—profiled Joseph with a photo depicting the young FranklinSquires exec leaning magnanimously against a shiny black sports car, a cell phone in one hand and a laptop in the other. A caption reads, “Gabriel’s newest toy is a 2006 S55 Mercedes-Benz with 493 horsepower. A purchase price of $120,000 dollars will take you 0-60 in 4.7 seconds.”

During the go-go real estate market for much of this decade, the “Free Capitalist” Website flashed images of a Free Capitalist project fair, with people milling about a parking lot filled with Maserati and Lamborghini sports cars. Another image shows Koerber handing dollar bills to children, like the Santa Claus of Capitalism. (For more on Koerber, see “House of Cards,” March 6, 2008; “White Collar Greed,” July 31, 2008; and “House Poor,” Aug. 14, 2008; City Weekly)

The Creative Real Estate Lifestyles piece features lavish shots of Joseph’s $1.3 million Cedar Hills home, and it quotes Joseph saying the house makes him approximately $3,000 a month. The article reads, “The secret? ‘We teach it,’ smiles Gabriel. ‘It involves a process Rick Koerber developed called ‘equity milling,’ which involves extracting equity out of real estate and putting it to work in high-return investments.’” Joseph downplays the risks involved by saying: “We teach very specific ways to mitigate risks through every single step of the process.”

Three years later, Joseph’s mansion has been foreclosed on and the state of Idaho has recently ordered Joseph’s business Annuit Coeptis (a Latin phrase printed on the $1 bill which Koerber translates—rather loosely—as “God prospered us”) to repay $2.4 million in illegally generated investments. Joseph could not be reached for comment, nor did he appear for his December 2008 Idaho court date.

Another lawsuit now pending in U.S. District Court for Utah alleges St. George couple Tom and Peggy Tibbs were defrauded of more than $600,000 invested through another FranklinSquires partner, Jason Vaughn and his holding company Freestyle Holdings.

According to documents filed in the federal court, “Bank records in the possession of the Utah Securities Division reveal that of the $606,463.49 invested by the plaintiffs, the Vaughns used $47,000 to pay a personal insurance premium and used other loan proceeds to make interest payments to several investors, including to the plaintiffs themselves.” Vaughn is also the subject of a UDS complaint alleging the unlicensed sale of $1,450,000 in securities. Vaughn could not be reached for comment.

Koerber relays the same message he taught Joseph and others about high returns and high risk. “The good news is that it’s not true; you don’t have to increase your risk to increase your profitability. It is a ridiculous myth,” said Koerber, according to a transcript of a 2006 seminar he gave at the Provo Marriott Hotel.

Koerber’s message however, at times shifts suddenly from the “myth” of risk to quickly chastising investors who feel they’ve been jilted for taking part in what they considered a safe investment.

“Quit looking for a get-rich quick deal! Quit looking for a good investment!” Koerber shrieks on a 2007 Free Capitalist radio broadcast. The show, videotaped and posted on the Internet, shows Koerber waving his arms to unseen radio listeners like a sports talk-show host railing on a draft pick. He sits crumpled in his chair wearing a purple T-shirt with a roaring cartoon tiger on the front, doing a mocking impersonation of a troubled investor.

Ron Brown, a 76-year-old Springville resident has become one of those troubled investors. His relationship with Rick Koerber began easily enough. He still remembers Koerber as the nice young man who gave him a job and told him how to take equity from his own home and invest it with Koerber for high returns, Brown says. He now faces foreclosure on his only home.