Bloomberg News

Former Candidate Pleads Guilty in Phony Facebook Share Scam (1)

June 25, 2013

Former Candidate Pleads Guilty in Phony Facebook Share Scam

An employee passes a logo made from a collection of photographs on a wall inside Facebook Inc.'s new data storage center near the Arctic Circle in Lulea, Sweden, on June 12, 2013. Photographer: Simon Dawson/Bloomberg

Craig Berkman, who once ran for governor of Oregon, pleaded guilty in a scam to sell interests in non-existent shares of Facebook Inc. (FB:US) and other technology companies to investors.

Berkman, 71, told a judge in Manhattan today that he defrauded 120 investors out of $13.2 million to pay personal expenses, creditors in his personal bankruptcy and earlier investors. He pleaded guilty to one count each of securities fraud and wire fraud, each of which carries a maximum of 20 years in prison.

“I deeply regret my actions,” Berkman, who was weeping, told U.S. Magistrate Judge Kevin Nathaniel Fox. “I devastated my family. I apologize to them and to the investors, some of whom were dear friends. I’m very, very sorry.”

Berkman admitted that from 2010 to March 2013 he defrauded investors by selling shares in companies he claimed were set up to hold pre-IPO shares of Facebook. He told investors he also had access to shares of LinkedIn Corp. (LNKD:US), Groupon Inc. (GRPN:US) and Zynga Inc. (ZNGA:US), according to the government.

Berkman was arrested March 19 at his home in Odessa, Florida. He remains in custody, appearing today in tan prison clothing. Fox set Oct. 1 for a sentencing hearing. Berkman agreed to forfeit $13.2 million as part of a plea agreement with prosecutors.

Republican Candidate

Berkman, a Republican, ran for governor of Oregon in 1994. He lost his party’s primary election to former U.S. Congressman Denny Smith, who then lost the general election to Democrat John Kitzhaber.

Prosecutors said Berkman was forced into bankruptcy in 2009 by creditors who won a civil suit claiming he had taken their money in an earlier fraud. Berkman used much of the money raised in his later schemes to fund a $4.75 million settlement reached for the benefit of victims of the earlier fraud, according to the government.

John Mattera, another Florida man, was sentenced June 21 to 11 years in prison after pleading guilty to a separate scam to sell non-existent shares in Facebook and Groupon.

The case is U.S. v. Berkman, 13-mj-00732, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • FB
    (Facebook Inc)
    • $77.91 USD
    • 0.91
    • 1.17%
  • LNKD
    (LinkedIn Corp)
    • $211.17 USD
    • 0.67
    • 0.32%
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