Short sale of home owned by notorious Ponzi schemer is good deal for seller and buyer

Published March 1 2016
Updated March 1 2016

An estate in Odessa owned by a notorious Ponzi schemer and former Republican bigwig might well have been the short sale deal of the decade.

Not only did buyers get the 8,000 square foot lake front home for the bargain price of $1.1 million, the sellers didn't have to pay the nearly $4 million they still owed two lenders.

"It really was a very good deal for my clients to be able to able to walk away without any deficiency (judgment),'' lawyer David Walkowiak said this week. "They couldn't be happier.''

Walkowiak represented Craig and Mary Ann Berkman in foreclosure proceedings on their two-acre estate in the luxury Stillwater subdivision in northwest Hillsborough County. The sale was yet another unusual chapter in the saga of a man that Forbes included in its 2009 "Venture Rogues Gallery.''

Berkman, a former head of Oregon's Republican Party and candidate for Oregon governor, was found guilty in a 2005 civil trial of swindling investors in three venture capital funds he created to invest in start-up companies. Instead of using the money as purported, he funneled much of it to earlier investors as part of what one critic called an "elaborate Ponzi scheme.''

Ordered to pay $28 million, Berkman instead moved to Florida, whose strong homestead protection laws can make it hard to collect judgments. He remarried, bought the Odessa estate for $3.9 million and began pursuing a fresh group of investors.

Among them was Al Austin, the late Tampa developer and top Republican fundraiser. Berkman persuaded Austin to invest in a medical device for which Berkman said he controlled the rights. In 2013, Austin told the Tampa Bay Times that he successfully demanded his money back after realizing that the man he first found friendly and likeable "was not what he represented himself to be.''

Not so lucky were other bay area investors who sank money into a partnership that supposedly could get them access to cheap shares of Facebook before the social media company went public in 2012.

In 2013, Berkman was arrested at his Odessa estate and charged with securities and wire fraud, accused of peddling Facebook shares he didn't control. Prosecutors said he pocketed much of the $8 million he received from more than 50 investors.

About $5.4 million had gone to partially pay back his Oregon investors, who had forced him into a Chapter 7 bankruptcy. He used another $1.6 million or so for personal expenses including travel, dining and a $10,000 contribution (later returned) to the Republican Party of Florida.

"Berkman blatantly capitalized on the market fervor preceding highly anticipated (initial public offerings) of Facebook and other social media companies to fleece investors whose cash flow he treated like an ATM,'' Andrew M. Calamari, a regional director of the Securities and Exchange Commission, said at the time.

The bankruptcy case, fraught with claims and counterclaims, continued to drag on. Late last year, a bankruptcy judge granted a motion for Berkman and his wife, Mary Ann, to sell the six-bedroom, nine-bath Odessa home with guest house, boat house and Junior Olympic-size pool.

The Berkmans, who had been in foreclosure since 2009, owed $4.3 million on a first mortgage with BAC Home Loans and $700,000 on a second mortgage with another company — a total of $5 million. Yet the house was listed at just $1 million, remarkably low in a gated subdivision where smaller homes on smaller lots can go for far more.

"My clients are very private people who didn't want to show it much, they just wanted to get it sold as long as they got the deficiency waiver,'' said Walkowiak, the attorney. "To my clients it was the equivalent of selling it for over $5 million because they were able to get both the first and second mortgages (eliminated).''

He said BAC approved a short sale partly because it had been accused of fraud in its foreclosure case against the Berkmans. Although the bank denied the allegations, it agreed not to sue the couple for the difference between what the house brought and the amount they still owed. And because the Berkmans had no equity in the property, the holder of the second mortgage stood no chance of collecting any money.

As soon as the estate hit the market, "I had more calls than I could handle,'' Walkowiak said. Within two days, there was a full-price offer, though that buyer backed out after learning that the house needed a new roof and perhaps hundreds of thousands of dollars in repairs.

"You have a house that was not really maintained for over half a decade,'' Walkowiak said. "A house like that needs TLC."

Another offer quickly emerged, for $1.1 million. Walkowiak said the buyers are a couple, Kevin and Amy Shepherd, who flip homes but decided to keep the Odessa property. They could not be reached for comment.

Somewhat unusually, the purchase price included all of the furniture. Asked abut the style — Traditional? Contemporary? — Walkowiak replied: "Expensive.''

"There was nothing in there that was not in impeccable taste,'' he said. "My clients are considerably downsizing so what are they going to do with all this stuff?"

Walkowiak said he didn't know where Mary Ann Berkman currently lives, but her husband is definitely in smaller quarters. Sentenced to 72 months, he occupies a cell in a federal prison in Miami. Now 74, he's due to get out in 2018.

Information from Times files was used in this report. Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate

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