Home / FAQs / Press Room / SubFeatured / Interview with C. Rick Koerber
PROVO | 20 FEBRUARY 2008 | Utah County financial professional and small business owner David Shipley recently contacted FranklinSquires with questions related to its operations and its relationship to Founders Capital. Mr. Shipley is not affiliated with FranklinSquires, Founders Capital or any of its related companies.
According to Mr. Shipley, he has become interested in the operations of these companies after reading certain online discussion boards and being asked about FranklinSquires and Founders from several of his clients. FranklinSquires CEO Mr. C. Rick Koerber granted the request for an interview to be aired over broadcast radio via “Free Capitalist Rado” and Mr. Koerber also agreed to answer Mr. Shipley’s questions in writing to be posted online for the public. At 5pm this evening Mr. Shipley is being hosted as a guest on Mr. Koerber’s “Free Capitalist Radio” program to conduct his interview. In addition, the following questions were delivered via email by Mr. Shipley. The answers are from Mr. Koerber.
Shipley #1: How are you unaffiliated and affiliated with multiple investment companies? How is it that on one site you claim them as part of your group of companies, and then on another claim no affiliation or interest? Do/did you have ownership interest in the investment companies (Hill Erickson, Founders Capital, Hunters Capital, etc.)? If you had any ownership interest, and claim them as Franklin Squires companies, how is it that you have no (even partial) responsibility for their actions?
Koerber: The question itself broad, and without context it could be easily misleading. Depending on how you use the term “affiliated” I am affiliated with hundreds of companies in the United States. However, to answer what I think you are asking its important to start with FranklinSquires Companies, LLC. I started this company with several partners (Gabriel Joseph, Steve Freestone, Sonny Jensen, Jason Vaughn, Peter Hansen, Mike Ballard, and Mark Craner) back and 2004. Since that time we’ve added two additional partners (Lindsey Dayton and Clavell Anderson). These partners each represent ownership of the company. They are in essence our “shareholders.” It’s also important to note that not all of these partners have a managerial role or even employee relationships within the company today. For example Mike Ballard, Peter Hansen, Sonny Jensen and Mark Craner no longer work as employees of FranklinSquires or any of its subsidiary entities, they simply hold ownership like shareholders of any company.
FranklinSquires was organized as a business development company. The purpose of FranklinSquires was to create other businesses and it has done just that. These businesses are generally called FranklinSquires subsidiary companies.
In addition, over the last several years FranklinSquires has invested in a number of other businesses. These businesses are most often referred to as FranklinSquires portfolio companies. FranklinSquires has varying degrees of managerial influence with its portfolio companies – ranging from no influence whatsoever to a high degree of day to day influence.
I am the founder of FranklinSquires and am the current President & CEO of the company. As such, I represent FranklinSquires and make many decisions on a regular basis as I relate with, advise, manage, and/or direct subsidiary or portfolio entities. I am not however personally an owner in the company. The members/owners of FranklinSquires are not individuals they are instead all private Utah based companies. Each owner is represented by a partner. I am not only an executive in the company but I am also a founding partner representing one of the owning entities.
Now, related to the specifics in your question.
Let me offer some explanation however over some confusion that has entered the marketplace about my relationship with Hunters Capital because of irresponsible statements made by others including media, government employees and Hunters’ attorneys.
Responsibility. Hunters Capital was founded, organized and operates without any direct involvement of me, any of my partners or employees. The only relationship between Hunters Capital and any business that I’m directly involved with is that Hunters Capital is a creditor of Founders Capital, meaning that Founders Capital has borrowed money from Hunters Capital in the past and currently has an outstanding balance with them.
Relationship. I personally know Paul Bouchard who is the primary and perhaps only principal in that company. He was a student of mine, he is a professional colleague of mine in the Utah County business community, and he and his brother in-law leased office space and resources from the FranklinSquires Center (office complex) in Provo, UT for a number of years to run their own mortgage company. Paul and his brother-in-law have also purchased advertising on my radio show. I consider both of these men friends and despite any weaknesses or mistakes they may have made I believe them to be honest, and honorable. However, I have no responsibility whatsoever for their businesses, and other than what I’ve described here, I have had nothing directly to do with their business operations. I have no direct say in their business decisions and they do not generally keep me informed of their internal business operations.
Shipley #2. How did so many rogue investment companies come into existence and claim you as their lead? They all started independent of any influence on your part? You knew nothing of their promises (legal and investment) that were unfounded and unsustainable?
Koerber: It is unfortunate when anyone falsely represents an association with me or my businesses to advance their own business. I speak at seminars. I teach classes. I’m on the radio daily, and in all these venues I talk a lot about how I do business. Many people take the knowledge they learn from me, add it to their own agenda and take their own action.
As far as rogue investment companies – I’m not exactly sure what you mean. I will say that I have taught a class (I think two times in the last couple of years) on how to create a “holding company.” That was just a term I made up to describe setting up a small business, setting aside a certain percentage of financial reserves that can be used for investing and managing that money as a self-reliant small business owner rather than giving it over to a third party. I have been disappointed to see other people use that same phrase “holding company” to describe their companies and then do things that are very much in contradiction to what I teach, what I believe and what I support.
I should also say that there are may of my students who I think have done a very good job of creating their own business and managing it, growing it, learning as they go and blessing the lives of many people in their communities. It’s the bad apples that seem to get most of the attention and make it very difficult for everyone else.
Now, as to how these companies start and what influence I have with them – it is different on a case by case basis. For example I think I have a lot of personal influence on my partners. They each have their own independent businesses. Many of them have created businesses that have loaned money to Founders or to FranklinSquires. I have encouraged these partners to set up their businesses with good legal counsel, to obtain good advice about their operations, and to operate their businesses to the best of their ability to be in harmony with the principles that I teach. To a large extent I believe they’ve followed my advice.
On the other hand, over the years I have seen people who come to me directly or through my seminars or classes and have heard about the extremely “high” returns I have made on my investments and they’ve asked me if they can invest with me. I’ve occasionally seen people get discouraged when I tell them that they cannot invest with me or with Founders Capital and they go off and look for someone else who “talks like I talk” and uses the same words and phrases and promises them the moon. Perhaps the person they eventually find to do business with even associates with me in some capacity. So there are assumptions that play into the equation that I certainly disagree with and have spoken openly and publicly about to warn people against being misled by their own assumptions.
I have been shocked and surprised to learn that even close friends of mine have invested with others under questionable circumstances – evidently thinking (and being seriously mistaken in their assumption) that there was no difference and that investing with someone who’s in “some way” associated with me means that they are essentially investing with me. This is absurd.
Over the last several years I’ve learned of circumstances where some people believe they are “investing with me” because they were apparently being told that the money they were investing would be loaned to Founders Capital. In some instances this was the case – though the assumptions are still misguided, but in other cases this was not the case and the money was directed to other places by people who I have no control over whatsoever.
When I hear about cases like this I do all I can to make sure my position is clear. In the past I have gone on the radio, I have spoken openly and repeatedly at seminars, and I have published press releases on the Internet to ensure anyone who wants to do an examination of the issue can learn that I was not involved in such companies or efforts.
I have even had employees tell me that they invested with someone’s “holding company” because they thought that I was a “partner” with the company they invested with. In such cases, when I ask what they have done to verify that I was in fact a partner with the person or company making that claim – the response has been as if I happened to be the first person to suggest that what had been told to them in order to part them from their money might not be true.
Now, how did all this happen? Well, I think in a very important regard, too often people don’t want to be responsible for their own actions. Its very common for each of us to make excuses, tell stories, and when things go south – we tend to want to get help from someone else like the government or from attorneys because “it’s not our fault.” I have recommended for years that it is NEVER a good investment to give money to someone else unless you have done a substantial amount of due diligence, unless you are willing to be personally responsible for loosing 100% of your principle invested, and unless you understand how the return on the investment is being generated. Even more specifically, my advice has constantly been that you are never investing with a company – you are always investing with people. In my opinion it is only appropriate to invest with those people who you feel like you’re willing to sit down across the table with if something were to go south, and put a plan in place to work together to recover your investment. These are strict standards that are easy for people who want to “look” like they are doing what I teach – to simply ignore. Those who ignore these recommendations do so at their own risk.
Regarding how these “holding companies” seemed to start springing up all over Utah, I also believe the government played a huge role in creating the situation. Let me explain.
First, government regulations require that if I want to have an investor (and I do have some investors) I have to be very careful about how I arrange that relationship, what information is disclosed, what kind of person can invest, etc. Because of this, both Les McGuire and I – in creating Founders – sought to keep ourselves on the right side of the law and rules. You might be interested to know that, despite all of the rumor to the contrary, whenever I have talked with government regulators they regularly confirm that they have yet to discover any evidence that I have broken any law or rule.
However, because of the extreme degree of regulation, it has been common practice for us to turn people down who wanted to invest with us. This created an interesting situation. Others, usually not associated with us, who were willing to be less diligent, perhaps even without any legal counsel whatsoever evidently seemed to think they could just go “do what Rick and Les were doing” and pick up all this money that everyone wants to invest without taking the precautions that seemed prudent to us.
Secondly, I think that people have a tendency to hear what they want to hear when you start talking to them about investments and money. This is part of what I have repeatedly called the “Brain-off Conspiracy.” So, I think there have been a lot of people who liked to talk like they were part of my “cause” but they were really just doing what they could to make money (on both the borrowing and on the lending side of things). When things don’t go well financially, it’s my experience that people who have done this like to attack me and my partners and point to us as the problem. That’s fine, we’re willing to be responsible for our actions and are confident that in the end, the facts will speak for themselves.
In reality the facts are pretty clear and the people who I’ve dealt with directly, with only a few exceptions over the last few years, are still very satisfied and happy with our business and personal relationships. I have weaknesses, of course. My businesses have a lot of growing and maturing to do – that is obvious. However, if and when you stumble across negativity in the marketplace about me and/or my companies in this regard it’s been my experience that you’ll notice it comes from three primary sources.
Source #1 – Most of it is just plain rumor. There is a lot of, “Well I have a friend who said” or “I have a family member who” and the problem with these stories is they are removed from the actual facts and literal chain of events.
Source #2 – Disgruntled Customers. These are people who knew what they were doing when they entered into an agreement with my companies or me, but if things don’t go as planned – they tend to want to tell a different story. Often, there are also those who are not actually FranklinSquires related customers but they want to be seen as “related” so that their victim story seems more credible.
Note: Such is the case with the infamous Robert Piasola who continuously tells people that he “almost lost a million dollars” with FranklinSquires. Notice how important the “almost” is. The reason Mr. Piasola never lost money with FranklinSquires is the same reason he never made money with FranklinSquires – we’ve never done business together.
Source #3 – Government Employees. It is sad to say, but over the past year we have documented a number of situations where government investigators who have made up their mind in advance about what they “think” is going on – tell inquiring members of the public, attorneys, and investors in other companies – things that are supposedly true about FranklinSquires – but that in fact are not true. Then this information gets spread around the Internet, the break rooms at work places, etc. This is unfortunate because it tends to create the perception that because the rumors are so prevalent – they must be true. Just because a lot of people are repeating inaccuracies, does not mean what is being said is true, and its unfortunate that in some cases this kind of behavior really leads people down very damaging paths and hurting very important relationships. Let me give you one startling example of how this has happened.
==> In mid-2007 Founders Capital, LLC delivered a copy of its balance sheet to Utah State regulators in an effort to demonstrate that contrary to rumors being spread by malicious individuals such as Mr. Paisola, our business was legitimate and that there were assets behind the company that exceeded all of the companies liabilities. Our balance sheet showed that Founders was in an equity position and that while there were many assets that were secured by real estate (not a liquid asset portfolio) there were indeed assets exceeding liabilities.
==> In late 2007 an inquiring member of the public, not an investor of mine (none of Founders or FranklinSquires investors have complained to any government agency to my knowledge) called the Utah Department of Commerce to inquire about a separate matter all together. Little did the government regulator know – but this person was a student of mine who had heard my radio show in August of 2007 talking about the corrupt regulators. So, this student recorded the conversation and delivered a copy of the recording to me. Here is a portion of that transcript to demonstrate my point lest it seem like I might be exaggerating.
Regulator: “If [your friends have] invested in FranklinSquires they’re going to lose their money. FranklinSquires is putting the buzz out that the division is going to lock them up, that’s not so. We’ve seen their balance sheets and they’ve got a shortfall of about $60 million dollars so it’s just a matter of time before that collapses. So if you know anyone that’s invested, bye-bye they’ve lost their money… this secrecy concept, and that’s part of the FranklinSquires model, is fraud. Its just, it is.”
==> Being thoroughly flabbergasted at this regulators statement – which was a complete falsehood – and considering that it was being told in an unsuspecting member of the public, I decided to call the regulator myself. I recorded the telephone call and here is a portion of the transcript documenting his answer to me.
Regulator: “Rick, I have not seen your financials. I don’t know that you’re going bankrupt. I don’t know where these people are getting that information… They’re not getting it from me… I’m not in the loop on investigations and so forth…I understand that you are in the process of dealing with either Mike or Wayne but I haven’t seen it…”
==> Still not satisfied, I called this regulator’s boss who had personally seen Founders balance sheet and had agreed to keep the contents of that balance sheet confidential and I also recorded that phone call. Here is a portion of what his boss said in response to my inquiry.
Chief Regulator: “To my knowledge [name extracted] does not have access to any of your financial information.”
==> The conversation goes on, but the point is clear, much of the information in the marketplace is coming from lazy, dishonest and/or corrupt government employees who want the public to believe some of the stories that are circulating because it helps them accomplish their own private goals. Unfortunately, the consequence is that it makes it more difficult for I and my companies to do business, it makes it more likely our business difficulties will be exacerbated and the end result is too often that the egregious behavior by people such as this regulator end up hurting innocent citizens.
Shipley #3. How is it, that with your real estate knowledge, you advanced the idea in your seminars that flipping homes would provide great rates of return in good times (the only time it got tested) and bad (now, when all the groups have stopped interest payments)? In all fairness to what you said or did not say, I never attended any of your seminars – this is what people told me that attended. It seems on some postings, you admit to a failed investment model because of economic circumstance – and yet it appears that you were telling people to not listen to the people out there saying what if real estate slows?
Koerber: I have simply never said that. Thankfully, all of my events are recorded and this is easy to document. What I teach related to real estate is basic principles, not how to “flip” homes. Now, I have developed a real estate investing model that I call “Equity milling” but it is another term that many people first hear from me and then use it to describe activity quite different than what I teach. For example, I have not and do not teach:
==> Equity Stripping – some people now use my term “equity milling” to incorrectly imply they are doing what I teach when they strip equity.
==> Borrowing money against a personal residence to invest in holding funds or any other kind of investment. I teach the opposite. I teach that borrowing money should only be done under a strict stewardship where “debt is avoided” and where the money borrowed can be secured (100% of the principle) if it is invested. It should be noted that I do teach there is a big difference between borrowing against an investment property and borrowing against a personal residence. I would agree that in some, very few instances, it might be appropriate to borrow against a personal residence for investment purposes, but it would have to be done according to the other qualifications I regularly make about insuring principle, understanding value creation, ability to withstand loss, etc.
As far as my admissions of a failed business model, I’m not sure what you are referencing. What I have admitted in the past and what I freely admit is that my real estate businesses have not performed as well as they could have if we (all owners, employees, managers, etc) would have adhered more strictly to the principles I teach. Knowing the principles and effectively living by them are two different things entirely. Often, as is the case with most of us, the expedience of the day interferes with our most noble ambitions and we often fall short of our ideals, not maliciously or negligently, just as a matter of practice.
Businesses grow and mature just like human beings. Young businesses, like mine, often fall short of the ideals of their leaders. The real challenge is not to take a snap shot in time and form permanent judgments, but to evaluate progress over time. Principles govern, and as we adhere more closely to principle through diligence and persistence, we improve. I do not consider my business model a failure. I think quite the opposite is true. But, I can certainly admit that I hope to do better in the future in actually building my businesses more effectively in line with the model I see in my mind. I’m confident that I have improved in my skills as a business man over time, and have much improvement left to accomplish.
Shipley #4. If it is proven that Paul, Wade, and others were taking investor money for personal use – after representing the investment as all going toward investment property, will you still defend them and their actions? Regardless of whether you were behind/with these people or not, will you defend them if they lied to their investors?
Koerber: I will not defend dishonesty. No. But, when friends behave dishonorably it doesn’t mean we should necessarily abandon them, sometimes that is when they could use our help the most. We have to be careful not to enable our friends in such situations, but I do not believe in abandoning friends because they are struggling. I believe friendships and relationships should be a resource that helps each of us correct our errant behavior.
Related to your question specifically, I would be surprised if, as you suggest, “it is proven.” I know these men, and believe they are good men. But let me reiterate, I will not defend any person’s actions that amount to lies to investors. I would be careful however not to believe any allegation just thrown about, it would have to be clearly proven or admitted.
Shipley #5. In your seminar on life insurance on the 27th, would you be willing to give the proceeds to the family of the late Les McGuire, since they are his ideas?
Koerber: No. Your assumption is very incorrect. What I will be teaching is a) not something I learned from Les, b) not his original ideas as you suggest and c) Les acknowledged that much of what I had learned about “human life value” and life insurance was the result of mutual association. I acknowledge Les McGuire as a great influence in my life, and that I would not know and understand much of what I now understand about life, finance, and many other subjects but I do not owe Les or his estate anything from the proceeds of my teaching. To suggest otherwise is ridiculous.
Shipley #6. Did you ever pressure any of the investment groups, affiliated or not officially, to obey state security laws when selling their notes?
Koerber: Yes, of course. It is in my curriculum to obey the law. It is in my curriculum to get good legal counsel. I use my past experience in Wyoming where I was pressured by regulators to agree to things that today I would not agree to – to demonstrate the importance of having a good legal team and to make adequate preparations in advance. Additionally, when it was brought to my attention that someone I knew or had influence with may be doing something that was questionable I confronted them on the matter and reiterated my points just described.
Shipley #7. Why have the investment groups stopped interest payments over the past 6 months, but failed to return principle to the investors? I understand that economic conditions can dictate timing, but why where some of them accepting new monies when it had to be apparent that interest would not be paid? Perhaps this is not a question for you as much as the leaders of these invest groups – but you seem to be close enough to them to know?
Koerber: I don’t know about these “investment groups” you allude to. I can only speak for me and the companies I’ve already described that I’m affiliated with. To the best of my recollection, most of the investors in FranklinSquires and Founders Capital who have ever requested to be repaid their entire principle were paid as agreed.
About the rest of your question, in 2007 things got very difficult with the actions of the regulators. Their behavior was making it very difficult to conduct our business and with the collapse of the secondary mortgage market things only got worse. The reason the secondary mortgage market affects Hill Erickson, Founders, and New Castle is that secondary mortgage money enables people to buy higher end homes with easier qualification and less cash down. When that market dried up, a lot of the real estate that was part of our portfolio or that was in process of our “equity mill” was high-end real estate that is hard to sell in today’s market to capture any significant portion of the value of our investment. Today, my real estate related companies are struggling, and are having huge cash flow difficulties. Many experienced professionals are suggesting that this is the most difficult real estate crisis in modern history. Nevertheless we continue to try to manage our asset inventory, liquidate the real estate holdings we have, and I am confident that though it may take much more time than we originally anticipated every one of our creditors can be made whole if we all keep our heads and stick to civil, reasonable, behavior. It would also help if the regulators would stop spreading misinformation and would stop lying to the public.
Shipley #8. I applaud your candor with respect to the securities issue in Wyoming. I understand what you claim to be the issue there, and what I read as two separate issues, though. You say that due to economic conditions, you were a victim of common practices- just bad timing. I read that you were supporting security selling without a license there – something that you are now being accused of here. Why do your principles put you at odds with the law? Why not just get licensed and act within the laws of the land? Plenty of investment groups get licensed and fail, but do not face legal action.
Koerber: My principles do not put me at odds with the law. Part of the problem is that the law is not clear and regulators can act arbitrarily. So, a business owner has a very difficult time knowing in advance what is against the law in the mind of a regulator. Also, sometimes the regulators are dead wrong about the law – but the cost of resisting the regulators is high.
Now, about me “being a victim of common practices”. I do not see myself as a victim. One of the reasons I talk so freely, so openly, and so regularly about my past and present difficulties is because I am willing to be responsible for the situation. Like all business owners I make mistakes all the time, but they are not usually the mistakes people would imagine. My mistake in Wyoming was based largely upon two problems of mine. First, I was very naïve about what the law actually said. Second, I was very naïve about how bad the regulatory bureaucracy in the United States and even at the State Government level has become.
About the accusation of “selling without a license,” I do not believe that any accusations have been made against me. I am aware of the rumors and speculation, but that is different. It is quite obvious to anyone who looks at the facts that such an allegation about my conduct would be misplaced.
Additionally, regarding why I don’t get a license, I simply have no interest in selling securities for others and I have no desire to sell or issue securities that require either licensing or registration. I am interested in business models that steer clear of this kind of entangling relationship with regulators.
Shipley #9. You claim to have made investors whole in WY. I applaud that, if that was the case. Here in UT, there are many creditors that claim you owe them money. In many cases these are common folk that are financially impacted by what you or one of these investment groups owes them. Does your apparent integrity on the WY issue, force you to put your own family’s possessions for sale to recover other’s losses? Seems that you should really inconvenience yourself personally until people are repaid- seems like that would be the moral high ground, not just paying them as it becomes convenient over years and allow they and their families to be inconvenienced financially.
Koerber: I disagree with the idea behind your questions. On a regular basis my businesses have outstanding balances to thousands of vendors and creditors. My track record of timely payment over the years has been almost impeccable. Therefore, many of the people you reference in your question are simply wrong or mistaken. There are very few people in Utah who are creditors of my businesses or mine who are not being paid as agreed. I owe very few people any money, and my businesses with only a few exceptions these past several months are almost always current on their obligations.
The biggest challenge today is with my real estate companies. For the past year it has become increasingly difficult to cash flow these businesses. We are currently working to liquidate assets to repay our creditors. It is a difficult market, liquidating real estate generally means some buyer getting a loan. All across the country this is a very difficult challenge. However, I’m confident we’ll make this happen, even though it will take time. I regret the difficulty that carries through to our creditors in the present situation. Regarding those individuals and families who are suffering because of the real estate related problems my businesses and I are experiencing – I am empathetic, my family is also suffering. However, I and my core team are not giving up, we are taking responsibility for the present difficulties and I believe in the end these people will be glad it was me not someone else who they were counting on to pay them back. I personally wish I would have done a better job in anticipating the present situation, however, in the end I believe everything will be square.
Now, regarding personal sacrifice and inconveniencing myself – your question is based upon the same naïve ideas in the minds of too many people today. American entrepreneurs and small business owners often go to great lengths to pay their employees and creditors in a way that few understand. It is often said that small business are the backbone of America, but few appreciate what they really means. In my current circumstances I have personally reinvested almost everything I’ve ever made back into these businesses including money previously set aside for my children, for future adoptions, for my own families financial reserves and I have leveraged all the substantial assets that are in my control. I don’t expect sympathy, none is requested. I simply make this point so that something that is all too obvious to the small business owner in America can be made more obvious to the person who thinks that jobs and paychecks seem to spring magically into existence.
There are no more inconvenience being felt by clients and creditors of my businesses than are also being felt by those of us who are working every day to succeed. The upside is that all of us will also benefit at the same time when we do indeed triumph over the present circumstances.
I should add, that America is headed for a very serious economic down turn, and it will likely become very apparent this year. We’ve only just seen the beginning of it in my opinion. I’m trying to make every one of my businesses solvent and all of these creditors whole prior to the major crisis that is yet to come.
Shipley #10. Why the talk about possessions not being important- just people, but then everyone I hear about that is following you feeling like an extravagant home and cars are important to show. On the Franklin Squires website, someone is making the point on the home page of making sure people see the fancy cars. Why? Do you believe that this extravagance reflects poorly on their owners? Does it not reflect gluttony that represents someone else suffering? Don’t these things represent pride and an unwillingness to treat them as a stewardship to benefit their fellow man?
Koerber: People are assets. The material things of this world have no intrinsic value, and the only value ever appropriately described to things such as houses, cars, etc. is the value made possible for other people through the utilization of these things.
There is nothing like what you are referencing on the FranklinSquires home page. However, I would suggest that the beautiful homes and automobiles were created and engineered by other men and women using the talents that God has given them. I do not think that it is evil to design, develop, built, sell or utilize these nice things. What is evil, is to think that value exists in the material things themselves. Craving or coveting material things cankers the soul. But, using such “fancy” things, if done in proper order, can be a great experience in life.
In terms of the “show” I would simply suggest that in the collectivized culture I often reference as the consumer condition, those looking for answers to some of life’s most important questions are often distracted by the material luxurious of life to the point of neglecting the far more important matters of character, relationships and service. To attract the attention of those I want to teach, often the nice car or nice house is precisely the lure that works most effectively. Or to put it another way, if I were a doctor – I would like look for clients among the healthiest men and women but I would spend time among the unhealthy. To attract their attention I would not preach to them about how to live differently, though that might be the longer-term answer to their difficulty, I would attract them by demonstrating my ability to cure their illness at hand. When someone thinks the problem in their life is that they do not have enough money (which is almost never the case) it is most effective to attract them by demonstrating in terms they understand – that money is not a problem.
None of what I’ve said above however, excuses sacrificing principle for the attainment of material luxury. Often, people use arguments such as the one’s I’ve begun to lay out here as rationalizations of their unprincipled conduct. That is unfortunate, but it does not persuade me to therefore wallow in the relics of poverty. Righteousness is no more demonstrated by a fancy house and a sports car than it is by a small house and bicycle. Ironically, those who spurn luxury are often as guilty of living an unprincipled life as those who rationalize covetousness.
Finally, I’ll conclude with one of my favorite axioms. The successful capitalist feeds more hungry and clothes more naked in his success than the man who bestows all his goods upon the poor. From a religious context I suggest reading 1 Corinthians chapter 13 to practice distinguishing real charity from the material world, and a talk entitled the “Use and Abuse of Blessings” by Brigham Young – to understand the proper role of material abundance and luxury in the life of a righteous Christian.
Unlike the ideas underlying your questions, I do not despise prosperity. I do not think the development and advancement of the quality of man’s material life on earth is evil or loathsome. I recognize God as its source and author and seek to live my life in harmony with those eternal laws that bring about prosperity’s blessings. Rich or poor, our attitudes about the material world surrounding us, affect how we make the deeper decisions about how we live each day. I reject entirely the idea that for a man to live by principle he must live in poverty and material depravity to demonstrate his piety. Can a man live in poverty and be a good and honorable man, yes. So to can a man live in material abundance – and thank goodness for him, if he serves more than he is served and creates more value for his community than he consumes, for he elevates all around him.
Shipley #11. Why are you focusing energy on missteps of the department of securities, and not the missteps of these investment groups? I encourage government to audit themselves and find fault within and take care of their problems. How does that change whether or not you or your organizations were doing wrong? How does that change that common people are left holding the bag(debt) of other unscrupulous actions? Should not the energy be spent to try and right some of the damage, as opposed to attacking regulators? Are they not trying to protect consumers from the problems that we see now? Lack of disclosure, lack of scrutiny of systems, lack of transparency, improper security representation, improper return promises, and so on hurt all consumers and seminar and education gurus like yourself alike. People will not trust without some law and order, and then no one takes risk or advances themselves financially. Should we not support the regulators effort, at the same time keeping them accountable for their own misdeeds when applicable?
Koerber: The ideas implicit in your questions are the same ideas that upheld feudal society and serfdom. The idea that government authority has anything to do with integrity and trust in the marketplace is frightening to me and those who love liberty. I agree with good government, defending and protecting our rights. However, abusive regulatory practices are a greater threat to personal freedom and prosperity than the most egregious conduct of any businessman or any con artist. More money has been lost and more families futures hurt by government approved and sanctioned investments than any small business failure or elaborate scam in local communities. I highly recommend you read Alan Greenspan’s 1963 excellent essay entitled “The Assault on Integrity” where he clearly makes the case I’m alluding to. Consider, for example, his statement that:
Regulation – which is based on force and fear – undermines the moral base of business dealings. It becomes cheaper to bribe a building inspector than to meet his standards of constructions. A fly-by-night securities operating can quickly meet all the SEC requirements, gain the inference of respectability, and proceed to fleece the public. In an unregulated economy, the operator would have had to spend a number of years in reputable dealings before he could earn a position of trust sufficient to induce a number of investors to place funds with him. Protection of the consumer by regulation is thus illusory. Rather than isolating the consumer from the dishonest businessman, it is gradually destroying the only reliable protection the consumer has: competition for reputation. While the consumer is thus endangered, the major victim of “protective” regulation is the producer: the businessman.
Consider, my businesses and I have now been the subject of unofficial government investigations by the State of Utah for over three years – and they still regularly admit they have discovered no evidence of my having violated any rule or law and they have taken no action against me formally. However, they spread misinformation in the marketplace, they defame me openly to colleagues and attorneys and they have cost me hundreds of thousands of dollars in attorney and accounting fees that would have otherwise gone to employee salaries, investor returns, or the payment of creditors. Ironically, they still do not have, as far as I have been informed, even one of my investors who has filed a formal complaint.
Now to answer your questions specifically.
Shipley #11A: Why are you focusing energy on missteps of the department of securities, and not the missteps of these investment groups?
Koerber: I am focusing on illegal and unjust behavior on the part of government officials because it is wrong, it is harming me, my investors, and my creditors, and corrupt government is the greatest threat to personal liberty American’s face today – and most of us seem oblivious to it.
I have also focused considerable energy on warning investors about investment groups who are unscrupulous, deceptive, or misinformed. I have published, broadcast and spoken openly about this. I have also offered to cooperate with government officials in the just carrying out of their duties to protect citizens from fraud.
Shipley #11B: How does that change whether or not you or your organizations were doing wrong?
Koerber: My focusing on government abuse does nothing to change what I have or have not done. I am willing to be accountable for and defend my behavior and the activities of my company. I have not asked any government official or agency for any favor – other than to restrict their behavior to the confines of the law.
Shipley #11C: How does that change that common people are left holding the bag (debt) of other unscrupulous actions?
Koerber: All of us are “common people.” Your vague attempt at creating class distinctions is morally repugnant to me. Right is right and wrong is wrong. If someone investment money, and lost it – there are appropriate remedies, but these do not include abusive and illegal actions by the government. Someone who had, for example, $50,000 to invest in a speculative venture should certainly be willing to be accountable for their own decision and hire a lawyer if they were deceived. Going to the government is a poor substitute for arbitration of a dispute unless it is in a court of law. Ironically, it is the regulatory action of the Utah Department of Commerce that has hurt more investors in the present situation.
Shipley #11D: Should not the energy be spent to try and right some of the damage, as opposed to attacking regulators?
Koerber: No.
Shipley #11E: Are they not trying to protect consumers from the problems that we see now?
Koerber: No. They are using these “consumers” as an excuse to exercise power and broaden their domain. For example, if they were protecting consumers they would not act without a complainant. However, this is not the case. In one case, as they have attempted to sway a potential witness, we have a recording where the witness protests saying he “does not want the government’s protection” and that he is “perfectly happy” with his situation and taking care of his financial matters himself. The government regulators present respond by simply laughing at him and insisting they are right to keep protecting him.
Shipley #11F: Should we not support the regulators effort, at the same time keeping them accountable for their own misdeeds when applicable?
Koerber: The regulators efforts, in this case, have been dishonest and illegal and beyond the scope of the authority given to them by lawmakers. This cannot and should not be supported. I do agree however, with helping the government legitimately protect the rights of its citizens. This would require many substantial changes in the Utah Department of Commerce.
Shipley #12. For the average investor, you say that you always have been consistent in saying that they should invest 10% a month toward their future. You say that you support a separate entity and some investing inside of it. You say that people should not gamble with stocks, and avoid volatile market instruments. Please, tell me how the average investor, making 30 to 150k a year, and a loyal student of yours, was supposed to take 10% and ever have the chance to make decent returns without these investment groups that would take smaller denomination investments? How can they afford to set up entities and then invest in anything consistent with your teachings with 10% of their money? How can they afford to buy whole life insurance, as you would suggest on that budget of 10%? If I tell people that hard money lending, buying and selling homes, and direct business investment is the answer- and then in the same seminar that people should do that with 10% of their income, am I not indirectly advising them to take equity from their own home, invest in these invest groups, and buy property for the sake of leveraging it for more than it is worth- all things you now denounce ever supporting? Please tell me and your followers how on 10%, the family making 40k is supposed to invest? If you do not clarify what they should do specifically, are you not supporting what you now denounce?
Koerber: I strongly suggest that if you are really interested in what I teach, that you actually attend some of my training. However, to answer your questions in summary – let me simply say this. Your questions set-up a straw man argument. They are based upon assumptions that a) it takes money to make money and b) being a successful investor involves earning a large amount of money. Both of these assumptions are errant.
When I started following the principles and strategies I teach, in 2003 I had no money and I had a credit score that was below 500. Yet, in a very short time I accomplished amazing results. In your scenario (which is not my example) a family investing $400 a month could accomplish amazing results. The first place to invest the $400 would likely be in education. It is possible to “labor” as an investor to put together opportunities that produce substantial returns without investing a lot of cash. For example, I once purchased a home for $132,000 with no credit and with less than $600 cash. This was a very successful investment that enabled me to move out of a very poor, run down home into a home in the neighborhood of my wife’s family where we were more comfortable, had more opportunity and better enjoyed life.
Finally, a family that is living on less than $4,000 a month should strive first to be self-reliant and second to become economically independent. I would guess that if they followed my teachings this would mean that after becoming self-reliant (living within their means) they would require about $3,200 a month in portfolio income to be financially free. I’ve seen my students accomplish that within a years time using creative real estate techniques without investing any substantial cash and without any speculation that would endanger their self-reliance.
Shipley #13. Let’s talk whole life insurance. Talk to me about the type of policy, and company that sells it, that fulfills all the benefits you state the coverage will fulfill. I have heard Les, and now you speak about life insurance. I agree with some of the precepts that you state (Huebner states) to make the case for life insurance, I just think it irresponsible to tell people that trust you a concept without backing the concept up with a real life example product that fulfills the benefits you state. For some time, I worked in the life insurance industry, and as you can imagine there was no shortage of salesmen selling the same concepts you speak of. Most of them failed to mention the tax risks, illiquidity, and inefficiencies inherent to whole life insurance. Then, they failed to help clients understand that most of the whole life sold is architected to benefit the agent and not to benefit them. This is why the Les story was to discredit the value of choosing a product wisely- his comment was always that most whole life companies are similar- and as long as you find a good one- the results are similar- something that to this day Garrett and others will state. This is untrue and ridiculous. An agent can (usually does not) architect a contract to pay themselves the least amount possible, and benefit the client in the greatest way possible. Some companies are and products are far superior to others. Once again, if you propagate ideas, and then give no direction on specific ways to execute the strategies, are you not indirectly supporting the loudest(in many cases most unscrupulous) parties?
Koerber: None of this is specific to me. I have never taught the class I’m not advertising on life insurance. The first class I will teach on the subject is in a few weeks. I am charging $1,000 for tuition. I am offering anyone a full refund of that tuition when they walk out the door if they are not satisfied. I will not be teaching about specific companies. I do not get paid commissions for selling life insurance. I am not a licensed agent with any company. I am teaching concepts that illustrate fundamental wealth principles. My students will be free to apply them as they see fit. You and I differ in a basic approach. I do not seek to teach students by “telling them what to do.” I seek to teach them true principles and then let them be responsible for their own decisions and own actions in governing their own lives.
Shipley #14: How is Engenuity a related Franklin Squires company, but yet you benefit in no way by selling the ideas of life insurance to people that read and learn and buy from companies you put your name with?
Koerber: You are simply mistaken. I was friends and associates with Les McGuire and Ray Hooper before they died in a tragic plane crash in June of 2006. Les and I partnered on seminars together between 2004 and 2006 and we also founded Founders Capital, LLC and McGuire Group, LLC together. I am also friends and associates with Michael Isom, Garrett Gunderson, and Wade Sleater. These were the partners of Engenuity before the plane crash. Following the crash, I was approached by the remaining partners in Engenuity and offered an invitation to be a partner in the company. After almost a year of meeting, planning and arranging we never solidified an agreement. I have never earned a penny as a partner of Engenuity nor have I ever earned a referral fee or any other type of compensation from Engenuity.
David Shipley is a financial services professional in Utah County, Utah. He has a number of professional certifications including: Certified Life Underwriter, Chartered Financial Consultant, Certified Financial Planner, and Chartered Adviser in Philanthropy. Mr. Shipley is a partner in Acquire, Wealth Advisors at 1145 South 800 East Suite 111 in Orem, Utah. He can be reached at 801-494-8398 or via email at dave@aquireadvisors.com. His companies website is http://www.aquireadvisors.com