Seattle Ponzi schemer Darren Berg knew how to live large. He owned an opulent, waterfront mansion on Mercer Island, complete with docks where he moored his boats.
One of his boats was a 53-foot yacht. The mansion cost Berg $5.5 million. He spent an additional $5 million to remodel it. On top of this, Berg owned a downtown Seattle condo, for which he paid $2 million. And a $1.25 million house in La Quinta, California. And a $1.4 million condo in San Francisco. And a luxury bus to travel in style between his properties.
Berg also bought two Lear jets, which cost him over $5 million.
All in all, Berg spent tens of millions of dollars to maintain an exorbitant lifestyle and flailing businesses.
Problem is, none of this was his money.
In federal court, Berg admitted to perpetrating a fraudulent scheme and stealing the life savings of his more than 500 investors. Total losses are estimated to exceed $123 million, according to court records.
Court documents show that in 2001 Berg started an investment firm called Meridian Group. A college drop-out, Berg already had a criminal history: in 1987 he had been caught in a check kiting scheme. He had also been accused of embezzling money from the U. Oregon fraternity to which he belonged.
With Meridian, Berg seemed to have struck gold. He projected the image of success, and his lifestyle proved he was indeed doing fantastic. Berg claimed to be in the real estate mortgage business. He told others he was financing all kinds of mortgage deals and flipping real estate properties.
In fact, it was all smoke and mirrors. Berg’s business was a Ponzi scheme, where he raised funds from investors under false pretenses and used it to pay earlier investors, prop his shaky businesses, and finance his exorbitant lifestyle.
Berg assured his investors their money was safe. He promised profitable returns. His own success, as illustrated by the assets he owned, only supported his statements.
His scheme came to a halt in 2010, when Meridian ran out of steam and filed for bankruptcy. Soon thereafter it became clear that Berg’s financial empire was a sham. His investors were left wondering where their money went.
Even after his scheme collapsed and the fraud became apparent, Berg attempted to lay blame on others for his swindle, according to court records. Berg contacted friends, family, and the media and claimed he would tell the truth in a book he was writing, about supposed wrongdoing by the bankruptcy trustee appointed by the court to oversee the orderly liquidation of Meridian. In what he claimed to be his book’s prologue, Berg blamed others for his fraud, and showed next to no remorse, show court documents.
Berg’s Meridian fraud is said to be the largest Ponzi scheme ever in Washington State. Berg recently plead guilty to fraud and money laundering. Under the plea agreement he reached with the prosecutors, Berg is to be sentenced to 18 years in prison, although the federal court may impose a longer sentence at a hearing today. For some of his investors, the loss of their life savings is a life sentence to poverty.
Pictures source: U.S. Department of Justice.