Craig Berkman, who ran unsuccessfully for governor in 1994 as a
Republican, told investors he would use their money to buy pre-IPO
shares in Facebook and other companies like LinkedIn Corp, Groupon
Inc and Zynga Inc.
Instead, he used new investor money to pay off earlier investors and
to fund his own expenses, including nearly $6 million to help
satisfy a settlement with a firm that accused him of failing to pay
his debts, U.S. authorities said.
In June, Berkman pleaded guilty in federal court in New York to
securities and wire fraud and agreed to forfeit more than $13
million he raised from more than 120 investors, including longtime
"I am sincerely sorry, and I take full responsibility for the
negative consequences of my behavior," Berkman told U.S. District
Judge Shira Scheindlin at his sentencing on Monday.
The sentence was less than the 97 months suggested by federal
sentencing guidelines but more than the 24 months Berkman's attorney
Berkman, a businessman and the former head of the Oregon Republican
Party, will also be required to make restitution of approximately
$11 million, according to prosecutors.
Facebook's IPO, one of the largest in history, generated several
scams by individuals claiming to have access to the coveted pre-IPO
Berkman's fraud was similar to that of former Florida fund
manager John Mattera, who defrauded investors of $13 million and was
sentenced to 11 years in prison in June.
Berkman lost a primary election in 1994. He also considered a second
bid for governor in 2002, according to The Oregonian newspaper.
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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 Securities and Exchange
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.
Synectic Ventures filed an involuntary bankruptcy petition against
him for debts he failed to pay related to an earlier judgment
against him, the SEC said. Berkman reached a settlement with
Synectic and used some of the money he collected from his Facebook
fraud to pay the claims.
The criminal case is U.S. v. Berkman, U.S. District Court, Southern
District of New York, No. 13-732.
(Reporting by Joseph Ax; editing by Dan Grebler)
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