A former Oregon gubernatorial candidate pleaded guilty on Tuesday to defrauding investors by claiming that he could use their money to buy shares of Facebook (NASDAQ:FB) before the company’s initial public offering.
Craig Berkman, a Republican who ran for governor in 1994, admitted he told investors he had access to Facebook, LinkedIn (NYSE:LNKD), Groupon (NASDAQ:GRPN), and Zynga (NASDAQ:ZNGA) shares before they were released on the public market, reports Reuters.
“I deeply regret my actions,” a weeping Berkman said at the hearing on Tuesday. “I’ve devastated my family.” He apologized to his investors, saying some of them were “dear, dear friends.”
Rather than investing in the companies before their IPO, Berkman used investor money to pay off other investors — also called a Ponzi scheme — in addition to paying off personal expenses, including a $6 million fee in a personal bankruptcy case.
Berkman pleaded guilty to one charge of securities fraud and one charge of wire fraud. Each count carries a maximum sentence of twenty years, but Berkman is expected to have that significantly reduced as part of his plea deal. His plea deal also includes a forfeiture of $13.2 million that will be distributed among 120 investors.
Berkman’s plea ends what the U.S. Securities and Exchange Commission called a “recidivist history.”
In 2001, the Oregon Division of Finance and Securities issued a cease-and-desist order to Berkman — along with a $50,000 fine — for offering and selling convertible promissory notes without a license. Then, in 2008, Berkman was found liable in a private action for breach of fiduciary duty, misrepresentation to investors, and conversion of investor funds for his involvement in a firm called Synectic Ventures.
Berkman’s long history of shoddy dealing will come to a close at his sentencing, set for October 1.