Some investment guy holed up in Florida claims he can get Facebook, LinkedIn, Groupon and Zynga stock before these companies go public.
All he needs to buy this stuff is your money.
Sound like a deal?
Manhattan's U.S. Attorney Preet Bharara had a 71-year-old Odessa, Fla., man arrested on Tuesday for making this promise as part of a scam. "Craig Berkman seized on the interest in a highly coveted investment opportunity to swindle investors out of millions," Mr. Bharara said in a press release announcing the arrest.
Mr. Berkman was in custody and his attorney didn't return a request for comment. Mr. Berkman also faces parallel civil charges from the Securities and Exchange Commission, which were also announced on Tuesday.
He allegedly told investors he had a fix on these stocks, took their money, and then converted most of it for his own use. Prosecutors estimate the alleged scheme took in about $8 million.
Mr. Berkman was once a venture capitalist in Oregon, creating funds that invested in startup Internet companies such as 800.com, which sold consumer electronics on the Internet. But he's since moved on.
In 2005, he purchased a $3.9 million home near Tampa, Fla., as his investors put together a lawsuit against him alleging fraud. Publicly, his investors complained he was skipping town to live in a state with one of the strongest laws protecting luxury homes from creditors.
During a month-long trial that generated plenty of newspaper articles, Mr. Berkman admitted that he took $5.2 million from investment funds he founded and covered it up for years. The trial resulted in a $28 million judgment against him.
A 2008 editorial in The Oregonian newspaper called him "a liar and a thief." A news article in the same paper raised the obvious question of why he wasn't being criminally prosecuted after he admitted misappropriating funds. It wasn't, after all, his first financial folly. Other news articles over the years had pointed out his previous run-ins with regulators, including a $10,000 fine he paid with Oregon's securities regulator to settle charges he sold unregistered securities--neither admitting nor denying guilt.
Now facing criminal charges, it seems Mr. Berkman has lost his membership in the neither-admitting-nor-denying-guilt class.
In 1988, he gave $100,000 to George H.W. Bush and Dan Quayle and went on to become one of their top fundraisers. He was chairman of Oregon's Republican Party from 1989-1993 and ran unsuccessfully for chairman of the Republican National Committee in 1996. He also ran unsuccessfully for Oregon governor in 1994 and explored making yet another gubernatorial bid in 2001.
He also raised money for the next President Bush, and even as his investors were suing him for fraud in 2005, he was reportedly still raising money for then-GOP presidential hopeful John McCain.
During his time in politics, he openly accused Oregon's Democratic Party of election law violations and financial misdeeds. "I think you had a systematic effort...over a long period of time to launder money back and forth," Mr. Berkman said of Democrats in a 1989 interview with The Oregonian.
When billionaire Ross Perot announced he would run as an independent candidate against Mr. Berkman's friend George H.W. Bush in 1992, Mr. Berkman grabbed headlines by declaring, "Goofy's back in the race."
He also warned Oregon delegates to the Republican National Convention about a candidate named Bill Clinton. "If this guy is elected, your taxes are going to go up, the deficit will increase, he will be reckless in foreign policy and he might get us into another Vietnam."
While stomping for governor in 1994 he declared, "I don't think they want a wuss in the governor's office." And, "As a businessman, I sink or swim based on a reality. It's called results."
So much for results.
Millions of dollars Mr. Berkman raised with his stories about social networking stocks went to pay defense lawyers and victims who won a previous court-ordered settlement, prosecutors allege.
"Berkman blatantly capitalized on the market fervor...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 the SEC's Andrew M. Calamari in a press release.
He's accused of running an alleged scheme to pay for his last alleged scheme. This is how it goes in a regulatory culture where admissions of guilt are rarely demanded.
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