Darren Berg addressed the courtroom audience in a five-minute monologue that was both contrite and defensive, occasionally smiling and occasionally choking up as he acknowledged "the horrific mess that I've made."
Frederick Darren Berg was sentenced Thursday to 18 years in prison for defrauding hundreds of investors of more than $100 million through the Meridian Mortgage investment funds he ran for nearly a decade.
U.S. District Court Judge Richard A. Jones imposed the prison term recommended in Berg’s August plea agreement after reciting to him details from some of the victim statements submitted by Meridian investors.
“I’m not sure how you live with yourself, with the damage that you caused,” Jones told Berg.
The judge noted that the lead defendant in a $90 million Ponzi scheme, previously considered Washington state’s largest fraud, received a 20-year sentence. But he said the slightly shorter term for Berg was appropriate since he’d mostly cooperated with prosecutors and bankruptcy trustees unraveling his fraud.
- Designed in Seattle, this $1 cup could save millions of babies
- Trump, Clinton win Washington state primary
- Power restored after major, hour-long outage in downtown Seattle
- Reed brother led detectives to bodies believed to be Arlington couple
- Boeing plans hundreds of layoffs in local IT unit
Most Read Stories
Berg, 49, addressed the courtroom audience of investors and his family in a five-minute monologue that was both contrite and defensive, occasionally smiling and occasionally choking up as he acknowledged “the horrific mess that I’ve made.”
“Not only do I owe you $100 million, or $120 million — a staggering sum, not only do I owe you an apology, I’ve also felt I owe you an explanation,” he said.
He then quickly ran through some spreadsheets and a chart that challenged the government’s version of when his Meridian Mortgage investments funds, created to purchase seller-financed real estate contracts, turned into a Ponzi scheme that simply paid old investors with new investors’ money.
“Did I run a 10-year Ponzi scheme and defraud you for 10 years, or did I run a legitimate business and then defraud you?” he asked, declaring that it was the latter.
Prosecutors say Meridian operated fraudulently as early as 2002, its financial problems compounded by unauthorized withdrawals to fund Berg’s lavish lifestyle and more than $45 million sunk into creating a large luxury-bus company.
Berg insisted to the end that Meridian only became a Ponzi scheme in 2008, although his attorneys have acknowledged the improper withdrawals came earlier.
One of the two Meridian investors who spoke in court, Richard Padrick, said he was robbed of the retirement money he’d saved up over 50 years working in the Navy and as a civil engineer.
“Every financial choice I make every day for the rest of my life is affected,” he said, urging Judge Jones to impose a 50-year sentence. “Mr. Berg has given me a life sentence.”
Assistant U.S. Attorney Norman Barbosa acknowledged Berg had assisted prosecutors, most notably agreeing to “lay out his fraud in detail” during a four-hour taped interview preceding his October 2010 arrest.
But Berg also tried to conceal some assets, the prosecution charged. He pleaded guilty to one count each of wire fraud, money laundering, and bankruptcy fraud.
Despite Berg’s cooperation, “This is way, way worse that your typical Ponzi scheme,” Barbosa told the court. “Few investment schemes have this level of sophistication.”
In just the last two years before Meridian collapsed in the summer of 2010, the prosecutor said, Berg raised $16 million from investors with promises that his investment techniques were immune to the real estate market’s downward spiral.
While lauding his business skills, Barbosa said Berg even now is “continuing to minimize his behavior.” The prosecution’s sentencing memorandum cited a Berg email to his family and The Seattle Times, containing what he described as the first part of a book claiming that others — primarily the bankruptcy trustee for his investment funds — made Meridian’s financial collapse worse “to “feather their own nest or further their own agenda.”
That preoccupation, Barbosa told the court, shows “he needs to be in prison for a very long time.”
A separate hearing is scheduled for April 6 concerning restitution for Berg’s victims.
The final tally “is likely to involve over 500 victims and approximately $130 million in total restitution,” the prosecution said in court papers.
However, it added, “These victims stand little chance of recovering the vast majority of the money they entrusted to Mr. Berg.”
Rami Grunbaum: email@example.com