- Prominent law grad takes plea in $13M securities fraud, civil case against him and lawyer ongoing
Prominent law grad takes plea in $13M securities fraud, civil case against him and lawyer ongoing
Posted Jun 28, 2013 7:25 AM CDT
By Martha Neil
A prominent graduate of an Oregon law school who once headed the state's Republican party and was a candidate for governor has taken a plea in a criminal securities fraud case.
Craig Berkman, 71, sobbed in federal court in Manhattan on Tuesday as he apologized and pleaded guilty to one count each of securities and wire fraud, according to Bloomberg and Reuters. The charges concerned a scheme in which he persuaded 120 investors to hand over $13.2 million by pretending he had access to scarce shares of social media stock in companies including Facebook
Berkman faces a maximum term of 20 years on each count, but is expected to get eight to 10 years when he is sentenced Oct. 1. He will also forfeit $13.2 million under the plea deal and be fined $8.4 million.
A press release from the U.S. Attorney's office for the Southern District of New York says the $13.2 million has already been spent: About $4.8 million of new investor money was used to repay earlier investors; another $6 million covered Berkman's obligations in a prior personal bankruptcy (Berkman misrepresented the source of these funds to the bankruptcy court);and $1.6 million went to legal fees and personal expenses.
As an Oregonian article details, Berkman was a well-known Portland venture capital fund investment manager in the 1990s and ran for governor in 2002. However, investors sued him and won a $28 million judgment that forced him into personal bankruptcy, contending that he used their money to pay off prior debts and fund a lavish lifestyle. In 2005 he moved from Portland to Florida, where he bought a $3.9 million home near Tampa.
Berkman was represented on Tuesday by an assistant federal defender.
A separate civil case brought by the Securities and Exchange Commission against Berkman and John B. Kern, a Charleston, S.C., lawyer who has represented his companies as general counsel, is ongoing, the Post and Courier reports.
Kern said in a written statement provided to the newspaper by his lawyer that he also was misled by Berkman. “Craig Berkman has lied to several good people, including me,” he said.
Another Oregonian article notes that the feds might possibly seek to claw back some of the money from his latest investors that Berkman used to repay earlier ones.
Although lawyers for the plaintiffs said they expected the $28 million verdict they got in 2008 to put Berkman out of the business of soliciting investments, that expectation proved incorrect, the newspaper notes.
"Generally speaking, people want to believe somebody who tells them something they want to hear," said partner Stephen English of Perkins Coie, who represented some of the plaintiffs in that case. "He offered them visions of sugarplums, and that's what they wanted to hear. He is exceptionally smooth and adroit at convincing people of what he believes in."
ABAJournal.com: "Prominent law grad and general counsel face SEC case in claimed $13.2M social media stock fraud"