A Seattle man whose massive Ponzi scheme earned him the nickname of Seattle's "Mini-Madoff" pled guilty to several charges late Tuesday. Frederick Darren Berg, 49, pled guilty to one count of wire fraud, one count of bankruptcy fraud, and one count of money laundering. Berg had been facing twelve charges and was currently scheduled to stand trial in October. Under the terms of the plea agreements, prosecutors have agreed to ask for a prison sentence of 18 years, which United States District Judge Richard A. Jones must ultimately approve. Such agreements, while typically approved, are not guaranteed. A Utah judge recently rejected a Utah Ponzi schemer's plea agreement, concluding after hearing from victims that the proposed sentence was too light.
According to the charging documents, from 2001 until his arrest in August 2010, Berg founded the Meridian Mortgage group of investment funds in Mercer Island, Washington, on the outskirts of Seatte. Approximately 1,000 investors ultimately sunk over $350 million into the Meridian family of funds, which purported to invest in real estate contracts, mortgage-backed securities, and hard money loans. Berg took elaborate steps to conceal the fraud, including the creation of false records for many of the contracts or loans, which often included fake appraisals and title reports. Berg also opened dozens of PO boxes in the names of illusionary borrowers in order to deceive an independent auditor. Instead, Berg used investor funds to make payments to earlier investors in the funds, as well as misappropriate funds for personal and business expenses that included the creation and operation of a luxury bus company, the purchase of multi-million dollar yachts and private jets, and personal automobiles.
Berg was arrested in October 2010 while purportedly assisting bankruptcy trustees of the Meridian Group when it was discovered that Berg was attempting to wire $400,000 from his estate into a previously-undisclosed account in Belize. He has remained in jail since, with Judge Jones recently denying his request to stay at his sister's house in the months leading up to trial, based on Berg's flight risk.
Berg is scheduled to be sentenced November 4, 2011. Along with the sentence agreed to by Berg and prosecutors, Judge Jones could also order criminal monetary penalties and restitution to defrauded investors.
A copy of Berg's indictment is here.