Federal agents have arrested Frederick Darren Berg, the founder of the failed Meridian Group mortgage investment funds, on new charges of wire fraud and bankruptcy fraud after learning that he apparently tried to hide money from bankruptcy officials and federal prosecutors.
Federal agents have arrested Frederick Darren Berg, the founder of the failed Meridian Group mortgage-investment funds, on new charges of wire fraud and bankruptcy fraud after learning that he apparently tried to hide money from bankruptcy officials and federal prosecutors.
A new three-count complaint was unsealed late Thursday after Berg was arrested in Los Angeles, according to the U.S. Attorney’s Office.
The complaint is in addition to nine charges of money laundering and wire fraud filed against him last week alleging he spent millions of dollars of investors’ money by operating Seattle-based Meridian’s funds as a Ponzi scheme, using assets from new investors to pay returns to others. Berg had waived his right to a grand jury and it appeared he was prepared to plead guilty.
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The new charges allege that Berg had concealed from the FBI, prosecutors and bankruptcy trustees nearly $400,000 from a July real-estate deal.
In all, prosecutors allege Berg defrauded investors out of nearly $100 million between 2001 and 2010. Berg has filed for Chapter 11 bankruptcy, and nine of the Meridian mortgage funds are in a separate bankruptcy.
The FBI says that Berg misled agents when he approached the government earlier this year. According to the new complaint, Berg admitted that he had committed fraud in recent years but that earlier losses were due to market forces.
“Contrary to Mr. Berg’s initial representation regarding the extent and scope of the fraud, our investigation has revealed that, in fact, Mr. Berg’s investment funds never purchased or owned many of the assets he claimed to have purchased with investor funds and he had been making numerous false statements about the investment funds for much longer than he initially admitted,” wrote FBI Special Agent Steven Rausch.
“Mr. Berg has continued to lie to the FBI, the bankruptcy trustees and others over the last three months,” the agent wrote.
Berg, for example, told the bankruptcy court that he had been hired as a consultant shortly after declaring bankruptcy, which he said accounted for a $225,000 wire transfer in August. Rausch, however, says at least one of the companies did not hire him and that the money likely came from another of Berg’s accounts.
Investors — most putting up $1 million or more — poured nearly $350 million into the Meridian funds over the years, according to the latest court documents.
Federal prosecutors allege Berg lied to investors about the Seattle funds’ health, all the while financing a luxurious lifestyle that included yachts, private jets and a Mercer Island mansion.
Berg operated a dozen investment funds under the Meridian funds umbrella; most have been forced into bankruptcy by investors after they quit getting payments.
In his personal bankruptcy, the biggest asset is a luxury bus company that trustees have said benefited from money Berg diverted from the mortgage funds. Separate trustees are investigating his finances in the two cases.
Charges filed last week allege that Berg “misappropriated millions of dollars of investors’ money for his other business interests including the creation and operation of a luxury bus company, the purchase of several multimillion dollar yachts and private jets, the purchase and remodeling of a multimillion-dollar waterfront mansion on Mercer Island, the purchase and lease of luxury automobiles and other personal expenses.”
Berg is expected to appear in U.S. District Court in Los Angeles on Friday.
Mike Carter: 206-464-3706 or firstname.lastname@example.org