Federal prosecutors plan to ask a grand jury to drop 11 of the 14 felony charges brought against developer and former Utah Transit Authority board member Terry Diehl, new court papers say.

Diehl’s attorneys learned of the plan in an email sent by Assistant U.S. Attorney Mark Hirata on Monday.

It states that prosecutors will take the case before a grand jury on Wednesday in Salt Lake City’s U.S. District Court, seeking to drop counts two through 12 of the original indictment which accused Diehl of lying about or concealing $1 million in assets as part of 2012 bankruptcy proceedings.

The grand jury doesn't have to grant the government’s request. But if it does, the planned superseding indictment would leave Diehl facing just three tax-related charges — counts of tax evasion, false declarations and filing a false return — when his case goes to trial on Nov 1.

Hirata’s email is included in a Monday afternoon filing from Diehl’s attorneys asking a judge for additional time to draft proposed jury instructions in light of the government’s plans.

Diehl’s Utah attorney, D. Loren Washburn, was out of the country on Monday and unavailable for comment.

Melodie Rydalch, a U.S. attorney’s office spokeswoman, declined to comment on the case Monday evening.



The government’s apparent change of course, however, might be explained by a federal judge’s ruling from last week that limited the scope of the government’s case by barring any evidence on the bankruptcy charges that did not specifically show how the $1 million was used for Diehl’s personal benefit.

Diehl was originally indicted in April on 12 counts; the tax-related counts were added about two weeks ago in a superseding indictment.

He has pleaded not guilty to all of the charges. Each of the tax charges carries a penalty of either three or five years in prison and $100,000 in fines, plus the cost of prosecution.

The charges are all related to a $1 million payday Diehl earned from the sale of land near 12800 South that is adjacent to UTA’s FrontRunner station in Draper.

Prosecutors say the politically connected developer hid the money from the bankruptcy court, first by not reporting it and then by transferring the funds into Skyline Ventures Associates, a company owned by Diehl’s two daughters on paper, but which he allegedly controlled.



Sold to eBay, the land was part of a controversial UTA “transit-oriented development” plan that included a $10 million agency loan to Diehl and his then-business partner Jeff Vitek.

The transaction, originally billed as upfront funding for construction of a parking garage, was the subject of two scathing legislative audits and prompted two investigations, first by the Utah attorney general’s office and later by the Utah FBI office. The latter investigation is ongoing.

The tax-related charges are tied to allegations that Diehl’s actions in hiding the money resulted in false statements and the filing of false tax returns so that he could avoid a tax bill of about $190,000.

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.”

A day before Diehl’s indictment, the U.S. attorney’s office announced an immunity deal with UTA in exchange for the agency’s cooperation with a criminal investigation of current and former UTA board members and various real-estate transactions.