Ex-Candidate Gets Six Years in Phony Facebook Share Scam

A former candidate for governor of Oregon was sentenced to six years in prison for selling interests in non-existent shares of Facebook Inc. and other technology companies to investors.

Craig Berkman, 72, was sentenced today by U.S. District Judge Shira Scheindlin in Manhattan. In June, Berkman admitted he had defrauded 120 investors of $13.2 million to pay personal expenses, creditors in his personal bankruptcy and earlier investors. He pleaded guilty to one count each of securities fraud and wire fraud, each of which carries a maximum of 20 years in prison.

“This was a second fraudulent scheme following closely on the failure of his first scheme,” Scheindlin said, rejecting a plea from Berkman’s lawyer to sentence him to two years.

Berkman admitted that from 2010 to March 2013 he defrauded investors by selling shares in companies he claimed were set up to hold pre-IPO shares of Facebook. He told investors he also had access to shares of LinkedIn Corp., Groupon Inc. and Zynga Inc., according to the government.

Berkman was arrested March 19 at his home in Odessa, Florida. He agreed to forfeit $13.2 million as part of a plea agreement with prosecutors.

Lost Primary

Berkman, a Republican, ran for governor of Oregon in 1994. He lost his party’s primary election to former U.S. Congressman Denny Smith, who then lost the general election to Democrat John Kitzhaber.

Prosecutors said Berkman was forced into bankruptcy in 2009 by creditors who won a civil suit claiming he had taken their money in an earlier fraud. Berkman used much of the money raised in his later schemes to fund a $4.75 million settlement reached for the benefit of victims of the earlier fraud, according to the government.

John Mattera, another Florida man, was sentenced June 21 to 11 years in prison after pleading guilty to a separate scam to sell non-existent shares in Facebook and Groupon.

The case is U.S. v. Berkman, 13-mj-00732, U.S. District Court, Southern District of New York (Manhattan).

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