Fraud trial opens for former Oregon GOP chief
Sunday, May 11, 2008 2:26 AM PDT
PORTLAND (AP) — The fraud trial against the former head of the Oregon Republican Party opened with an admission that he used $3.8 million from investors to pay off personal debts and finance his lifestyle.
But the attorney for Craig Berkman said it was the dot-com bust that cost investors millions more, not his personal finances.
‘‘He’ll admit under oath he borrowed money and that was wrong,’’ said Paul George, Berkman’s lawyer.
Berkman, who now lives in Florida, had already publicly said he ‘‘borrowed’’ from his investors while managing their money in venture funds he founded.
Investors didn’t know that Berkman was more than $5 million in debt when the former Oregon Republican Party chairman and candidate for governor founded Synectic Ventures I in 1998, the first of three similarly named funds.
The popularity of the Internet had led to an explosion of new companies pursuing online business opportunities and his backers included some of Oregon’s wealthiest investors: Jordan Schnitzer and a foundation controlled by Schnitzer’s parents, Harold and Arlene; local entrepreneurs Peter Brix and Frank Trombetta; and Eugene cable television magnate Don Tykeson.
The British Columbia Investment Management Corp., which manages pension money for the Canadian province’s public employees, provided about $44 million of the $75 million invested in Berkman’s funds.
‘‘Craig Berkman went for a whale and his whale was bcIMC,’’ said Paul Fortino, the Portland attorney representing the British Columbia fund.
Berkman blamed the dot-com failures that led to a national recession in 2001 for investor losses.
But investors say Berkman made a series of additional fund transfers, ‘‘phantom’’ stock purchases and other maneuvers to take millions more out of the funds and hide it from them.
Steve English, an attorney for investors, said that Berkman siphoned off $2.3 million within nine months.
Berkman also poured investor money into companies with little realistic chance for success, largely because they were paying Berkman a $5,000-a-month salary.
By the time investors grabbed control of the funds and ousted Berkman in 2003, they had lost more than $60 million. They sued Berkman and the accounting firms hired by the funds, including Arthur Andersen.
Another accounting firm, Geffen Mesher, settled quietly with investors about two weeks ago.
Earlier, prominent law firm Ball Janik, which represented Berkman for years, paid $13 million to settle potential claims against it.
