After spending spree, a reckoning for man behind state's biggest Ponzi scheme
SEATTLE -- Pushing a Ponzi scheme, Darren Berg made millions and lived well.
Mercer Island mansion. Yacht. Plane.
Yes. Yes. And double yes.
Berg's malfeasance - the 49-year-old duped investors out of tens of millions of dollars in the largest Ponzi scheme in Washington state history - will likely cost him 18 years of his life. That's the sentence federal prosecutors and his attorneys have agreed to, and the term U.S. District Court Judge Richard Jones is expected to impose Thursday morning.
The price paid by Berg's more than 500 victims is tougher to quantify.
On paper, Berg's victims lost at least $120 million during the decade-long fraud. In practice, it meant retirements delayed, homes lost and faith shaken.
"Many of Mr. Berg's victims will be forced to make significant changes to their lifestyle … such as foregoing retirement, taking additional jobs to support their children's education and selling their homes," Assistant U.S. Attorney Norman Barbosa told the court. "Others are likely to be forced into bankruptcy and may also lose their homes because of the financial devastation Mr. Berg's fraud has caused."
Schemes like the one Berg admitted to running have been snaring American investors for at least a century. Berg's victims joined the thousands of others caught up in similar schemes operated by Bernie Madoff, Charles Ponzi - the 1920s crook for whom the scam is named - and the countless confidence men in between.
Speaking Wednesday, Kenneth Hines, the IRS special agent-in-charge for the Pacific Northwest, described the toll investment scams take on their victims.
Hines, who investigated similar cases elsewhere in the country, said scam artists prey on personal relationships - friendships, religious or professional associations, sometimes family ties - to gain the trust of their victims. And, unfortunately, they're often able to succeed.
"I've seen lawyers, doctors, accountants, law enforcement, people of every educational level sucked into investment schemes," said Hines, who declined to discuss Berg's case prior to Thursday's sentencing hearing.
"They've done nothing wrong," he continued. "They got suckered into a Ponzi scheme by somebody who does this for a living. They've been conned, and the reason (a conman) does it is because they're good at it."
Hines said there is no simple trick to detecting a whether an investment is a sham.
The strongest warning sign, though, is the promise of unrealistically high returns. Would-be investors would do well to review the backgrounds and qualifications of those they might invest with, and consider talking it out with an outside accountant or trusted advisor. Hines also suggested that investors should demand to see the real property or stock certificates they believe they're investing in.
Of course, prosecutors note Berg bilked investment professionals, millionaires and "ordinary" people looking to wisely invest their retirement. Most of them are unlikely to see a most of their money again.
An 'extremely risky investment'
Berg started in white collar crime in 1987, when he launched - and was caught in - a check-kiting scheme. Berg was also alleged to have embezzled thousands of dollars from a University of Oregon fraternity.
He dropped out of college around the same time. Berg, despite his criminal history and educational failure, was able to cobble together a career in business that ultimately saw him launch a legitimate mortgage investment firm. Trading on that reputation, Berg started swindling investors in 2001.
Berg launched the investment firm - later known as Meridian Group - with three friends after moving to Seattle in 1987. Berg's looting of the investment fund forced it into bankruptcy in June 2010.
Mercer Island mansion. Yacht. Plane.
Yes. Yes. And double yes.
Berg's malfeasance - the 49-year-old duped investors out of tens of millions of dollars in the largest Ponzi scheme in Washington state history - will likely cost him 18 years of his life. That's the sentence federal prosecutors and his attorneys have agreed to, and the term U.S. District Court Judge Richard Jones is expected to impose Thursday morning.
The price paid by Berg's more than 500 victims is tougher to quantify.
On paper, Berg's victims lost at least $120 million during the decade-long fraud. In practice, it meant retirements delayed, homes lost and faith shaken.
"Many of Mr. Berg's victims will be forced to make significant changes to their lifestyle … such as foregoing retirement, taking additional jobs to support their children's education and selling their homes," Assistant U.S. Attorney Norman Barbosa told the court. "Others are likely to be forced into bankruptcy and may also lose their homes because of the financial devastation Mr. Berg's fraud has caused."
Schemes like the one Berg admitted to running have been snaring American investors for at least a century. Berg's victims joined the thousands of others caught up in similar schemes operated by Bernie Madoff, Charles Ponzi - the 1920s crook for whom the scam is named - and the countless confidence men in between.
Speaking Wednesday, Kenneth Hines, the IRS special agent-in-charge for the Pacific Northwest, described the toll investment scams take on their victims.
Hines, who investigated similar cases elsewhere in the country, said scam artists prey on personal relationships - friendships, religious or professional associations, sometimes family ties - to gain the trust of their victims. And, unfortunately, they're often able to succeed.
"I've seen lawyers, doctors, accountants, law enforcement, people of every educational level sucked into investment schemes," said Hines, who declined to discuss Berg's case prior to Thursday's sentencing hearing.
"They've done nothing wrong," he continued. "They got suckered into a Ponzi scheme by somebody who does this for a living. They've been conned, and the reason (a conman) does it is because they're good at it."
Hines said there is no simple trick to detecting a whether an investment is a sham.
The strongest warning sign, though, is the promise of unrealistically high returns. Would-be investors would do well to review the backgrounds and qualifications of those they might invest with, and consider talking it out with an outside accountant or trusted advisor. Hines also suggested that investors should demand to see the real property or stock certificates they believe they're investing in.
Of course, prosecutors note Berg bilked investment professionals, millionaires and "ordinary" people looking to wisely invest their retirement. Most of them are unlikely to see a most of their money again.
An 'extremely risky investment'
Berg started in white collar crime in 1987, when he launched - and was caught in - a check-kiting scheme. Berg was also alleged to have embezzled thousands of dollars from a University of Oregon fraternity.
He dropped out of college around the same time. Berg, despite his criminal history and educational failure, was able to cobble together a career in business that ultimately saw him launch a legitimate mortgage investment firm. Trading on that reputation, Berg started swindling investors in 2001.
Berg launched the investment firm - later known as Meridian Group - with three friends after moving to Seattle in 1987. Berg's looting of the investment fund forced it into bankruptcy in June 2010.
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