An Oregon financier being sued by investors who lost $60-million in funds he managed is one of Hillsborough County's newest homeowners.
Craig Berkman's legal woes and high-profile politics have been headlines in Oregon, where he ran for governor in 1994 and once chaired the state Republican Party.
More than 50 investors in three Berkman-run venture capital funds sued him for fraud and breach of contract and fiduciary duty in December, claiming he misappropriated about $33-million. Their suit accuses him of taking money for himself and directing money to companies in which he had financial interests. The investors say that with the help of accountants, Berkman manipulated the books to cover up what he'd done.
Berkman admits having borrowed from the funds, but says it was legal and he repaid the debt. "There was no harm caused as a result of that," he said. "The facts just don't substantiate the allegations."
The investors, who took control of the funds from Berkman in 2004, claim their $75-million investment has dwindled to $15-million. The largest single investor is British Columbia's public pension fund. Others include prominent Portland businessmen and Lewis and Clark College, where Berkman went to law school and was a trustee.
Berkman blames bad timing for the losses.
"They were funds that were raised at the beginning of the end of the dot com era," he said. The investors say their money was used to prop up failing companies in which Berkman had an interest and were made without proper approval. While some of the funds' investments were in companies that are no longer in business, Berkman said others have potential for a payoff.
"The jury is still out on whether they will return a positive return to investors," he said. "There are a couple companies in the portfolio that have the potential of being worth north of a billion."
He said other venture capital investments he's made over the years fared much better, allowing him to turn $32-million into $865-million, not including the funds that are the subject of the lawsuit. He said he's investing money for others and will be looking for good prospects in Florida.
"We do a lot of investing in the health-care space," he said. "With Scripps (Research Institute) coming into Florida and a number of medical device companies in the Tampa Bay area, it seemed like this might be a good place to locate."
Berkman and his new wife, Mary Ann Farrell Karlsson, plan to settle in the Odessa area of northwest Hillsborough County. He paid $3.9-million in November for an 8,600-square-foot Mediterranean-style house on a 2.5-acre lot in the gated StillWater subdivision. They plan to move in this weekend.
The lakefront house, dubbed "Villa d' Alme" by the developer, has five bedrooms, eight bathrooms, a six-car garage, separate guest house and a 75-foot pool. It was built in 1999 and featured that year in the "Street of Dreams" real estate showcase.
Steve English, a Portland lawyer who represents the investors, said he is concerned about the move because Florida has such strong homestead protection laws. That could hamper the investors' ability to collect a judgment if they win their court case. Most types of creditors cannot file liens against homestead property, but an exception can be made if it can be shown someone used misappropriated money to buy the property, Clearwater lawyer Alan Gassman said.
Florida has a longstanding reputation as a haven for wealthy people fleeing creditors, although recent changes in the bankruptcy law have made the state less debtor-friendly.
Berkman, 64, said the lawsuit has nothing to do with his move, which he said is based on business and family interests. His wife grew up in Jacksonville and has been living in the Tampa Bay area, he said. She represented New York in the 1985 Miss America pageant.
Berkman said he has no plans to get involved in Florida politics.
"At this point I'm just taking one step at a time here," he said.
Federal elections records show Berkman has contributed $70,000 to political candidates and organizations since 1999, including $5,000 to the Republican Party of Florida in 2002 and $2,000 to U.S. Rep. Katherine Harris in 2004.
When he ran for Oregon governor in 1994, Berkman got 44 percent of the vote in the Republican primary, losing to Denny Smith. Democrat John Kitzhaber won the general election. Berkman was head of Oregon's Republican Party from 1989 to 1993.
Berkman said he plans to keep a second home in Oregon, where he is well known as a fundraiser for charities and a venture capitalist. His venture funds have specialized in investments in companies in Oregon and other Northwest states. Berkman took an active role in many of the companies, such as PuriPonics, which hoped to sell algae for use in cosmetics. However, some of his earlier efforts to raise capital for companies ran afoul of state regulators, who accused him of selling unregistered securities. He paid a $10,000 fine in 1998 without admitting wrongdoing. Investors in the lawsuit said they never were told about the problem.
In addition to suing Berkman, the investors are seeking damages from the accounting firms that audited the funds, including the now-defunct Arthur Andersen.
Information from The Oregonian was used in this report. Helen Huntley can be reached at email@example.com or (727) 893-8230.
CRAIG L. BERKMAN
Venture capitalist, manufacturing executive
Born: Sioux City, Iowa, 1941
Education: BA Wheaton College; MA in public administration, University California, Berkeley; JD, Northwestern School of Law, Lewis and Clark College
Landmarks: Named one of Jaycees 10 Outstanding Young Men of America, 1971
Chairman, Oregon Republican Party 1989-1993; candidate for state treasurer, 1972; candidate for governor, 1994.
Captain U.S. Army, 1967-69
Personal: Married Mary Ann Farrell Karlsson in 2005