NEW YORK (AP) — A Florida investment adviser pleaded guilty Tuesday in a $13 million securities fraud scheme that prosecutors say capitalized on enthusiasm for shares of Facebook and other Internet companies about to go public.
Craig L. Berkman, 71, of Odessa, Fla., entered the plea to securities fraud and wire fraud in U.S. District Court in Manhattan, agreeing to serve between eight and 10 years in prison, according to the terms of a written agreement between Berkman and prosecutors. Otherwise, he would have faced up to 40 years in prison.
Berkman, a one-time Oregon GOP gubernatorial candidate, admitted that he falsely claimed to investors in December 2010 that he owned shares of Menlo Park, Calif.-based Facebook Inc., Chicago-based Groupon Inc. and Mountain View, Calif.-based LinkedIn Inc., among other companies.
Prosecutors say he pocketed much of the $13.2 million he received from more than 120 investors during the scheme, which stretched from 2010 until his March 2013 arrest. The government says he transferred the investors’ money into his personal account rather than using it to acquire shares of Facebook.
They said he used about $6 million to pay off creditors in his personal bankruptcy, another $4.8 million to pay off earlier investors and spent another $1.6 million on legal fees, travel and other personal expenses, including cash withdrawals.
“Through various misrepresentations, Craig Berkman enticed investors with highly coveted investment opportunities, and then swindled them out of millions of dollars, using much of it for his personal benefit,” U.S. Attorney Preet Bharara said in a release after the plea before a federal magistrate judge.
At a sentencing scheduled for Oct. 1, Berkman also will face restitution of $8.4 million and must forfeit $13.2 million, according to his agreement with the government.
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