Wearing an orange jailhouse jumpsuit and with his hands cuffed, Steven Powell, 61, entered the pleas in Pierce County Superior Court. The judge set bail at $200,000.
Powell's not-guilty plea comes after his arrest Thursday night for investigation of 14 counts of voyeurism and one count of child pornography.
Although the charges against Steven Powell are not connected with his daughter-in-law's disappearance, the evidence was seized during a recent police search of the home he shares with his son, Josh Powell, who is Susan Powell's husband.
Powell's arrest immediately set off another court battle, with Susan Powell's father asking another judge on Friday for custody of her two sons.
The boys, ages 4 and 6, had been living at their grandfather's home with their father, Josh Powell, the only publicly named person of interest in her 2009 disappearance. No charges have been filed against him.
The judge at Steven Powell's arraignment ordered him not to have contact with his grandsons. A lawyer for the state attorney general said earlier that the boys had been placed in foster care since the arrest.
After the hearing, Denise Cox, Susan Powell's older sister, said she was worried that Steven Powell would easily post bail. She said she believes that both son and father were involved in the disappearance.
"I'm just hoping for the day that hopefully Josh will join him," she said. "It's been a long wait and it gets harder every day," she said, as she cried spoke in front of a throng of reporters and television news cameras.
A court commissioner said Friday that he will not decide on the custody of the sons until after the state's child welfare agency finishes its investigation. The boys' father, Josh Powell, argued against granting of custody to his missing wife's parents.
Another hearing is scheduled for Wednesday.
"We're very concerned for the welfare of our grandchildren. We're doing everything we can," said Chuck Cox, Susan Powell's father, after the custody hearing.
Steven Powell has worked as an account executive with the Department of Corrections since 2006. However, a DOC spokesperson confirmed on Friday that he'd been given a termination notice in the wake of recent allegations.
The arrest - and the child custody motion - are the latest twists in a case that has perplexed Utah police, who wrapped up a 12-day search of desert near where Josh Powell says he went camping the night his wife vanished.
Steven Powell's arrest came Thursday after several computers, digital media, recordings and photographs seized from his bedroom were found to contain "thousands of images of females being videotaped without their knowledge, including Susan Powell," according to court documents.
Some of the victims have been identified as children who used to live near Steven Powell.
"We found many pictures of young girls as young as, we believe, 7 years old in explicit positions," Pierce County sheriff's spokesman Ed Troyer said, adding that the photos appeared to have been taken through a window from outside the home with a telephoto lens.
"They're pictures he shouldn't have taken - pictures of girls in showers, on toilets, in the bath. He's basically a peeping Tom with high-end camera equipment."
Rebecca Stover of the Pierce County Prosecutor's Office later said in a statement that some of the images and videos were organized into subfolders, including “Taking bath-1,” “Taking bath-2,” and “Open window in back house.”
In these subfolders there are images of two girls who were as young as 7 and 10 years old at the time of the recording. The girls are unclothed and taking a bath, using the toilet, and getting dressed or undressed, Stover said.
In many of the images the photographer zooms in on the girls’ breasts, buttocks, and genital areas, Stover said.
Investigation with the Pierce County Sheriff’s Department determined that the victims lived next door to Steven Powell from June 2006 to August 2007. Steven Powell’s bedroom window faces the side of the victims’ residence and the line of sight matches the camera angle seen in the videos, Stover said.
Detectives seized 8mm video tapes, VHS tapes and CDs that also contained images of women and girls taken in public, according to the statement of probable cause. "In a majority of the images the photographer focuses on the intimate parts of females," the document said.
Susan Powell, a native of Puyallup who later moved to Utah, was 28 when she was reported missing after she failed to show up for her stockbroker job in December 2009.
Her husband, Josh Powell, said he last saw his wife before he left with their two boys to go on a midnight camping trip in freezing temperatures on the Pony Express Trail, about 80 miles west of Salt Lake City.
Josh Powell moved back to Puyallup with his young sons after Susan disappeared.