* Berkman allegedly misled investors pre-Facebook IPO
* Berkman charged with four criminal fraud counts
* SEC files related civil charges
By Bernard Vaughan
NEW YORK, March 19 A former Oregon gubernatorial
candidate was arrested on Tuesday for his alleged role in
defrauding investors who had hoped to buy shares of Facebook Inc
before its initial public offering in May 2012, federal
Craig Berkman, 71, falsely told investors he had access to
scarce pre-IPO shares of Facebook and other social media
companies such as LinkedIn Corp, Groupon Inc
and Zynga Inc, they said in a statement on Tuesday.
But instead of buying shares for investors as promised,
Berkman made "Ponzi-like" payments to earlier investors and
funded personal expenses, including costs in a bankruptcy case,
according to the U.S. Securities and Exchange Commission, which
filed a parallel civil case.
The defendant received at least $8 million from various
schemes, according to U.S. Attorney Preet Bharara in Manhattan.
The SEC case includes additional allegations.
"Berkman blatantly capitalized on the market fervor
preceding highly anticipated IPOs of Facebook and other social
media companies to fleece investors whose cash flow he treated
like an ATM to fund his own living expenses and pay
court-ordered claims to victims of his past misdeeds," said
Andrew Calamari, director of the SEC's New York office.
Berkman was arrested at his home in Odessa, Florida, and was
expected to appear in a Tampa, Florida federal court on Tuesday.
The defendant was charged with two counts of securities
fraud and two counts of wire fraud. Each count carries a maximum
of 20 years in prison.
The SEC brought a separate case against John Kern of
Charleston, South Carolina, whom it said took part in the fraud
as legal counsel to some of Berkman's companies.
Marc Blackman, a lawyer for Berkman, was not immediately
available for comment.
It was not immediately clear whether Kern has hired a lawyer
for his defense. Kern was not immediately available for comment.
The criminal case is U.S. v. Berkman, U.S. District Court,
Southern District of New York, No. 13-mg-00732.