* Raised $13.2 million in pre-IPO scam
* Faces up to 20 years in prison on each of two counts
* Mirrors scam by Florida fund manager
By Bernard Vaughan
NEW YORK, June 25 Former Oregon gubernatorial
candidate Craig Berkman pleaded guilty on Tuesday to defrauding
investors by persuading them he could use their money to buy
shares of Facebook Inc before the company's May 2012
initial public offering.
Berkman, a Republican who ran for governor in 1994, admitted
he told investors he had access to scarce pre-IPO shares of
Facebook as well as LinkedIn Corp, Groupon Inc
and Zynga Inc.
Instead, Berkman used investors' money to make payments to
earlier investors - a classic Ponzi scheme - and to pay personal
expenses, including $6 million in a personal bankruptcy case,
Assistant U.S. Attorney John O'Donnell said at a hearing in
federal court in New York.
Berkman pleaded guilty to one charge of securities fraud and
one charge of wire fraud. Each carries a maximum sentence of 20
years in prison.
"I deeply regret my actions," a weeping Berkman, wearing
beige jail scrubs, said at the hearing on Tuesday. "I've
devastated my family." He apologized to his investors, saying
some of them were "dear, dear friends."
"I'm very, very sorry," he said.
U.S. Magistrate Judge Kevin Nathaniel Fox set sentencing for
As part of a plea deal, Berkman agreed to forfeit $13.2
million he raised from more than 120 investors.
Berkman had long been active in Oregon politics and served
for a time as the head of the state's Republican Party. He lost
in the Republican primary for governor in 1994. He explored a
bid for governor in 2002, according to the newspaper The
Berkman was arrested in March at his home in Odessa,
Berkman's scam was similar to one perpetrated by former
Florida fund manager John Mattera, who defrauded investors of
$13 million by telling them he could invest their money in
pre-IPO shares of Facebook and Groupon. Mattera was sentenced to
11 years in prison on June 21.
Berkman's guilty plea culminates what the U.S. Securities
and Exchange Commission had called a "recidivist history."
In 2001, the Oregon Division of Finance and Securities
issued a cease-and-desist order and a $50,000 fine against
Berkman for offering and selling convertible promissory notes
without a brokerage license, according to the SEC.
In 2008, an Oregon jury found Berkman liable in a private
action for breach of fiduciary duty, conversion of investor
funds, and misrepresentation to investors, related to his
involvement with a firm called Synectic Ventures.
The criminal case is U.S. v. Berkman, U.S. District Court,
Southern District of New York, No. 13-mg-00732.