Even with Daren Palmer sitting in a federal prison, his unfinished mansion haunts his investors.

Grass and weeds, rising to the size of small trees, snarl the property. A security fence encloses the front yard, where piles of pallets and debris lie stacked, scattered or broken.

In late 2011, a court-appointed receiver had to shell out $2,173 to replace windows broken by vandals. A back deck suffered water damage and became moldy before it was replaced last year at a cost of $16,920.

The Idaho Falls mansion is listed for $2.75 million — down from the original price of $4 million. Despite inquiries, there hasn’t been a single offer since it first was listed in August 2009.

But it isn’t just the Alfred Hitchcock “Psycho” vibes that make this a house of horror.

Starting in March, the home began sucking $40,000 a year in insurance premiums out of the pool of money used to reimburse victims of Palmer’s brazen Ponzi scheme.

The previous insurance company, which charged $18,441 a year, canceled coverage because construction ceased.

In September, Palmer was sentenced to eight years in federal prison for orchestrating what investigators have called the largest Idaho-based investment scheme in history. Dating to at least 2002, the scheme took in $75 million and defrauded 68 investors. Palmer pleaded guilty to wire fraud and money laundering. He is incarcerated at the Federal Prison Camp in Duluth, Minn.

Wayne Klein, the court-appointed receiver charged with repaying investors, said the mansion’s expenses are necessary as he works with a real estate agent to sell the house.

“That’s just another expense of the receivership,” Klein said. “The more it costs to provide insurance ... that money can’t and won’t be available to go to the victims.”

The house itself was built with $6.9 million of investors’ money.

With the new insurance coverage, the house will continue to cost investors between $47,000 and $50,000 annually for security, maintenance fees, utility costs and property taxes, Klein estimated.

When the house sells, that money will be repaid to investors who have not settled.

But selling the house is a tricky proposition. In a status update to the courts, Klein wrote in December that if the real estate market does not improve, he “will consider selling the properties at a no-reserve auction” at a loss to convert the house to cash for investors.

“The question I have to decide is: What do I do with it?” Klein said. “Do I keep waiting for the economy to turn around to sell it, or do I just get rid of it?”

Klein believes he could sell the mansion relatively easily for between $2 million and $2.2 million. But rather than dropping the price, Klein instead could pay up to 10 years of insurance and maintenance costs while waiting for a better deal.

“Therefore, we’re holding out for when the economy improves and somebody decides what a really good deal it is,” Klein said. “(Somebody could) buy a $6.9 million house for $2.7 million. If so, $50,000 in (yearly) carrying costs, while a lot, is small compared to dropping the price by $500,000.”

At his sentencing, Palmer was ordered to repay investors $29.8 million, but U.S. District Judge Edward Lodge said he doubted Palmer ever would come up with the money.

A Ponzi scheme uses money collected from the sale of some securities to make payments to earlier investors. Also called a pyramid scheme, it solicits new contributors to provide money to pay earlier investors. Eventually the pyramid collapses when new contributions are no longer enough to keep the scheme afloat.

Thus far, investors have been repaid $2.3 million. The most-recent payment of $300,000 to 23 investors —sent in March — accounted for just 3.75 percent of the outstanding principal deposits still owed to victims, Klein wrote.

An additional, one-time $1 million settlement payment was sent in March 2011 to investors who objected to Klein’s distribution plan.

As of March 31 — the most recent date for which figures are available — the balance of the receivership’s three checking accounts totaled $315,725.

But more money is coming in.

Klein is involved in several ongoing lawsuits and recently reached a settlement agreement that will bring $590,000 in new money into the receivership.

The settlement was reached with American Express on June 8. According to court records, Palmer used $1.2 million of investors’ deposits on personal expenses paid by credit card. Court rulings allowed Klein to go after only purchases made during the four-year period before the lawsuit was filed.

At some point, Klein said, assets will dry up and he will close the receivership, probably before defrauded investors are made whole. Expenses will continue, so walking away at a loss will make the most sense.

Clark Corbin: (208) 542-6761