Craig L. Berkman, 71, entered the plea Tuesday to securities fraud and wire fraud in federal court in Manhattan. He will serve between eight and 10 years in prison.
A separate civil action filed in March by the Securities and Exchange Commission named Berkman as well as John B. Kern, a Charleston attorney who was general counsel to a web of companies Berkman had set up. Kern, who has not been charged criminally, has been accused in that proceeding of misleading investors. The case remains active, a spokeswoman for the SEC said Wednesday.
Kern previously has denied involvement in any fraud, saying he, too, was misled by Berkman. He reiterated the latter point in a written statement he issued through his lawyer late Tuesday.
“Craig Berkman has lied to several good people including me,” Kern said.
At his plea hearing, Berkman admitted that he falsely claimed to investors in December 2010 that he owned shares of Facebook, Groupon and LinkedIn, among other firms.
“I deeply regret my actions,” a crying Berkman told a federal judge. “I have devastated my family. I apologize to them and to all the investors, and I am very, very sorry.”
Berkman, who was Oregon’s state Republican Party chairman from 1989 to 1993, said he told investors their money would be used to buy shares of companies such as Facebook before their initial public offerings even though he knew he was over-representing the number shares he owned.
“I also engaged in fraud and deceit,” the Odessa, Fla., resident said. “I used the money invested with my companies for purposes other than purchasing pre-IPO shares of companies, as I had promised investors.”
The SEC has alleged that Kern helped facilitate the investments in the firms Berkman had set up and then helped conceal the fraud when it began to unravel last year.
Prosecutors say Berkman pocketed much of the $13.2 million he received from more than 120 investors during the scheme, which stretched from 2010 until his March 2013 arrest.
The government says he transferred the investors’ money into his personal account rather than using it to acquire shares of Facebook.
Berkman admitted in a statement he read aloud 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.
“I knew that I was not authorized to use investor funds for these purposes and I did not disclose to the investors that I used their funds for these purposes,” Berkman said.
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.
According to papers filed in March by the Securities and Exchange Commission, Berkman told California investors at a 2010 hotel meeting that he had access to Facebook employees who wanted to sell their shares of Facebook prior to the initial public offering. The SEC said Berkman promised investors he had access to shares worth millions of dollars.
Berkman remains jailed pending a sentencing hearing scheduled for Oct. 1. He also will face restitution of $8.4 million and must forfeit $13.2 million, according to his agreement with the government.
The Post and Courier and the Associated Press contributed to this report.