NEW YORK (AP) — A 71-year-old Florida investment adviser and onetime Oregon gubernatorial candidate cried as he apologized Monday before being sentenced to six years in prison 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 of Odessa, Fla., was sentenced by U.S. District Judge Shira A. Scheindlin, who called his crime “surely despicable” and “particularly egregious” because it was a sophisticated financial fraud he created to try to pay off the losses of an earlier first fraud.
Still, the Republican party chairman for Oregon from 1989 to 1993 pledged through tears to dedicate the rest of his life after prison to teaming with former contacts in the business world to make enough money to make whole 120 investors who lost money in the scheme between October 2010 and March of this year.
Berkman had made millions of dollars by creating and selling high-tech companies before the dot-com bust and the 2008 financial collapse sent him on a desperate course to regain wealth.
“I panicked, compromising my integrity and principles,” he said.
“I expect to pay 100 percent of the restitution ordered by the court,” he said shortly before Scheindlin ordered him to forfeit $13.2 million and pay a fine of at least $8.4 million.
Of his victims, he said: “It is my hope they will understand the depth of my remorse.”
The judge, though, rejected his defense lawyer’s request that he be sentenced to two years in prison, saying she was “concerned that without significant punishment this behavior would only be repeated.”
Noting he had once made millions, she said: “Apparently, it just wasn’t enough for him.”
Prosecutors had requested she sentence him to between eight and 10 years in prison.
The sentencing follows Berkman’s June plea to securities fraud and wire fraud. He had admitted falsely claiming to investors 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. He told investors their money would be used to buy shares of companies before their initial public offerings.
As she announced the sentence, Scheindlin said Berkman’s story of success turned to failure was “not very compelling.” She said he used some of the money from the second fraud to pay back investors ripped off by his first fraud, but then also spent the money on gifts for his third wife and stepchildren. She noted that two grown daughters from his first marriage want nothing to do with him.
Berkman admitted during his plea that he used close to $6 million to pay creditors in a bankruptcy proceeding even though he had falsely promised that the source of the funds paid was not investor funds that he controlled.
Prosecutors said he used 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.