Embattled Utah developer Terry Diehl has entered pleas of not guilty to federal felony charges of tax evasion and filing a false return for allegedly hiding $1 million of income so he could avoid a tax bill.
Diehl entered his plea Thursday in Salt Lake City’s U.S. District Court.
The charges were brought in a superseding indictment handed up by a grand jury Oct. 5, and increases to 14 the total number of counts Diehl now faces in federal court.
The original dozen counts, filed in April, allege Diehl lied about or concealed his assets — including more than $1 million he received from a real-estate transaction — as part of a 2012 bankruptcy proceeding.
A politically-connected former Utah Transit Authority board member, Diehl has also pleaded not guilty to the original charges.
A trial is set to begin Nov. 1 and attorneys for both the government and Diehl said they plan to proceed to trial, even though the new charges were added only a week ago.
Also Thursday, the government revised the amount of the alleged tax bill Diehl allegedly owed down from $300,000 to $190,000.
After the hearing, Assistant U.S. Attorney Mark Hirata said he could not comment on the government’s reasons. Diehl’s attorney, Loren Washburn, said he doesn’t know the reason, but assumes the number has been revised based on recalculations that have been done as the case moves to trial.
Diehl has repeatedly declined comment on the indictments, but did deny any wrongdoing in a text sent to The Salt Lake Tribune in April.
“I obviously disagree with the government regarding the details involved with my bankruptcy,” he wrote the day the first indictment was announced. “I look forward to proving my innocence and having my day in court.”
Federal prosecutors contend the $1 million Diehl allegedly hid was money earned from the 2011 sale of property near 12800 South in Draper. The land is adjacent to the UTA’s FrontRunner station and was sold to eBay.
The parcel was part of a controversial UTA “transit oriented development” project that saw the agency loan $10 million to Diehl and his then-business partner Jeff Vitek. The pair used the money to purchase the land around the FrontRunner station site.
The transaction, originally billed as a payment for construction of a parking garage, was also the subject of two scathing legislative audits and prompted an investigation by the Utah attorney general’s office.
The investigation was later passed to the Utah FBI office and is ongoing.
In April — a day before Diehl was indicted — the U.S. attorney’s office announced it had inked an immunity deal with UTA in exchange for its cooperation with a criminal investigation of current and former UTA board members and various real-estate transactions.
On the new tax charges, prosecutors allege Diehl sought to avoid paying more than $190,000 in taxes by routing $1 million of income from his Wasatch Pacific business into a company — Skyline Ventures Group — that was owned by his daughters — at least on paper, according to the indictment.
The funds were initially classified as “proceeds from the sale of assets.” When transferred to Skyline Ventures, however, the money was first reclassified as “management fees,” although on a 2012 tax filing it was listed as “capital contribution” to the company.
In a separate hearing on Thursday, U.S. District Judge Clark Waddoups denied a request from Diehl’s attorney to hold a bench trial — so the case would be decided by a judge, instead of a jury.
Diehl’s attorneys had argued the case is too complex for a jury and that pretrial publicity in Salt Lake City newspapers have harmed his ability to get a fair trial.
Waddoups agreed the case is complex, but expressed confidence that an unbiased jury can be seated. He also noted that appeals courts have repeatedly expressed a preference for jury trials.
Waddoups also narrowed the scope of the evidence government attorneys can introduce at trial as it relates to alleged prior “bad acts” or conduct by Diehl.
That includes large debts owed to two Las Vegas casinos that have not yet been paid. The casinos agreed to a payoff plan, Hirata said, but they might not have had they known about the $1 million Diehl took in and directed to SVA.
Similarly, the government said credit-card expenses Diehl paid off with SVA funds were not disclosed to the bankruptcy court, and were therefore improper.
Both instances illustrate the way Diehl sought to defraud his creditors and are relevant to his intent, Hirata said.
“Disclosure is the price of bankruptcy,” he said.
Waddoups disagreed, saying the arguments were too “speculative” and it would be “Monday morning quarterbacking” to assume the casinos would have acted differently had they known about the $1 million. He also limited any credit-card evidence to anything that could be specifically identified as personal, not business expenses.
Washburn, Diehl’s attorney, told Waddoups that the bankruptcy court was aware that money was going to SVA and said the development company was started so that Diehl could earn the money to pay his debts.
SVA was owned by Diehl’s daughters in part for estate-planning purposes and was intended to be a “fresh start” because Diehl’s own company was tied up in the bankruptcy, he said.
Washburn contends Diehl is in fact ahead of schedule in paying what he owes and that a final resolution of the bankruptcy case — a $1.25 million payment — isn’t due until May of 2018.