Securities Law

Prominent law grad and general counsel face SEC case in claimed $13.2M social media stock fraud

A prominent businessman and law graduate who once headed Oregon’s Republican party and was a candidate for state governor has been criminally charged in a securities fraud case.

Craig Berkman, 71, who now lives in Florida, was arrested Tuesday at his Odessa home in a case filed by the U.S. Attorney’s office in Manhattan. He is accused of defrauding investors in various alleged schemes in which he received $8 million that funded “Ponzi-like” payments to investors and personal expenses including bankruptcy costs, reports Reuters.

He was charged with two counts of securities fraud and two counts of wire fraud. Upon conviction, each carries a maximum prison term of 20 years.

The Securities and Exchange Commission filed a separate administrative case (PDF) against Berkman and attorney John B. Kern, 49, of Charleston, S.C., contending that Kern aided and abetted the fraud while serving as legal counsel to some Berkman companies, by making “certain material misstatements to investors that he knew or recklessly disregarded were false and misleading,” according to Forbes.

The magazine says the alleged schemes in which the two men were involved fraudulently raised at least $13.2 million from 120 investors, between 2010 and 2012, through memberships sold in limited liability companies controlled by Berkman. Although he purported to be using investors’ funds to purchase stock in social media companies, including Facebook, prior to initial public offerings, the SEC filing alleges that the money went to satisfy a bankruptcy judgment ($5.43 million), to pay investors in various schemes ($4.8 million) and for Berkman’s personal expenses including dining and travel ($1.6 million).

A Willamette Week profile published in 2006 notes that Berkman is a Lewis and Clark Law School graduate, and a representative of the school confirmed to the ABA Journal that he earned a law degree there, graduating in 1974.

Reuters could not reach Berkman, his lawyer, Marc Blackman, or Kern for comment and said it isn’t clear if Kern has a lawyer.

The Portland Business Journal also has a story. A SEC press release provides additional details.

Updated on March 26 to include information from Lewis and Clark Law School representative about Berkman’s degree.

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