Page 3 of 5
A Sure Thing
“I’ve always been pro-Rick,” Brown says. “I haven’t looked for anything to condemn him. I didn’t want to look for anything to condemn him by; I believed in him.” Brown says he’s lived a life of hard work. He’s been a homebuilder since 1958, with short stints as a beaver farmer and a coal miner.
Brown met Koerber in 2004 when Koerber purchased a home next to his that Brown had built. Koerber asked Brown if he would add a two-car garage to the property. While working the job, Brown befriended Koerber and his wife, Michelle.
“We kind of took ’em in just like our kids,” Brown says. “They’d come in for Sunday dinner, and we’d visit and talk about the [LDS] gospel and other things.”
During these conversations, Koerber mentioned he was making about $15,000 a month from the equity of the home that Brown had built and was currently adding the garage to. Brown recalls Koerber drawing a detailed diagram to explain how equity from a home could be invested for high returns practically risk-free. The offer was so appealing, Brown asked if Koerber could do the same for his own residence.
Brown had fallen behind on his mortgage payments, and felt that Koerber’s program would pull him out of the red and give him extra income by investing the equity with Koerber’s company, Founders Capital. Koerber, however, says Brown never invested with him. “My business bought Ron’s home to keep it from being foreclosed on,” Koerber says in a recent interview, adding, “Ron is a good friend of mine and to say that we did not improve his situation is not an accurate reporting of the facts.”
Brown, however, says Koerber assured him the transaction was an investment. “All of this was done on trust,” Brown says. The trust factor resulted in no exchange of promissory notes or written contracts with the terms of what Brown calls an investment with Founders Capital. Koerber did do him a favor by employing Brown and his sons to care for some of Koerber’s investment properties. The job kept Brown out of foreclosure.
Since Brown is an unaccredited investor (an individual accredited investor by state law must have a yearly income of at least $200,000), direct investment with Founders Capital would constitute securities fraud, as the law seeks to protect investors like Brown who can’t afford to lose their investments. Brown says he didn’t receive interest payments from Founders Capital for his equity investment, which is consistent with Koerber’s claim that there never was an investment. Nonetheless, Brown says he only deeded over his home under the impression he would receive interest payments and that Koerber would eventually pay off the mortgage and deed it back to him.
Several other holding companies affiliated with Koerber’s Founders Capital have been under investigation for raising money from unaccredited investors like Ron Brown. Paul Bouchard, owner of one such company, pleaded no contest to felony charges before the UDS on Dec. 4, 2007. While companies like Bouchard’s turned the money over to Founders, Koerber has always maintained he never knew where the money came from or how it was raised. In a February 2008 Free Capitalist radio show, Koerber explained: “I’ve occasionally seen people get discouraged when I tell them that they cannot invest with me or with Founders Capital,” adding that he often warned people about being “misled by their own assumptions.”
But, Brown says, another time, he approached Koerber directly with $10,000 he had received through an inheritance from his mother-in law and another $10,000 he received from the sale of a forklift, asking to invest it directly with Founders Capital. Brown says Koerber said, “Yeah, we can take care of that,” and referred him to one of his company managers who had a holding company to handle the investment.
Koerber’s reaction to this claim: “His characterization of that is not accurate.”
When asked if he recalls such a meeting with Brown, Koerber draws a blank. “I don’t remember having any conversation with Ron about investing any money.” Because of Brown’s investments with Koerber he, too, has found himself under UDS scrutiny for something he says he did not know was illegal, especially since he recalls several employees who invested with Koerber the same way he did.
The transactions Brown describes raise serious allegations of securities fraud. If Koerber funneled illegal investment money into holding companies, his real-estate acquisition funds would jeopardize the strength of his investments and pump up the real-estate bubble with dangerously unstable dollars.
