14 September, 2004 LAWFUEL – Best for criminal law, attorney news, law firms, legal research The former chief executive of a Southern California electronics company, who was convicted of “cooking” the company’s books and making false statements to the Securities and Exchange Commission, was sentenced today to six months in federal prison and ordered to pay a fine of $1.25 million and nearly $3.2 million in restitution.
Richard I. Berger, 61, of Rolling Hills Estates, was sentenced by United States District Judge Robert M. Takasugi, who made it clear that he was forced to limit Berger’s prison sentence because of the United States Supreme Court’s recent decision in Blakely v. Washington, 124 S.Ct. 2531 (2004), and the ruling of the 9th U.S. Circuit Court of Appeals in United States v. Ameline, 376 F.3d 967 (2004), which applied Blakely to the federal sentencing guidelines. Based on these decisions, both of which were issued after the completion of Berger’s jury trial, Judge Takasugi held he was constrained from applying significant sentencing guidelines enhancements for factors such as loss, Berger’s role in the offense and his abuse of trust, because those enhancements had not been charged in the original indictment or found to be true by the jury that convicted Berger. Prior to these decisions, when sentencing guidelines enhancements could be imposed based on judicial findings, Berger faced a potential sentence of between 97 and 121 months. The Justice Department has obtained review of two cases applying Blakely to the federal sentencing guidelines in the Supreme Court, which is scheduled to hear arguments on those cases on October 4.
Because neither Blakely nor Ameline affects criminal fines or restitution, Judge Takasugi was able to impose the hefty monetary penalties after making judicial findings that include Berger causing losses of $3,144,832 million to victim banks and at least $2 million to investors.
Berger was found guilty on September 4, 2003 of one count of conspiracy, six counts of loan fraud, one count of falsifying corporate books and records, one count of making false statements to company accountants and three counts of making false statements in SEC filings.
Berger was the president, chief executive officer and chairman of the board of Craig Consumer Electronics. Craig was based in Cerritos and sold consumer electronic products such as car stereos and small personal stereos to retailers such as Best Buy and Circuit City. On May 21, 1996, Craig made an initial public offering of its stock to the investing public and raised approximately $6 million. Craig’s shares were traded on the NASDAQ exchange until just before it filed for bankruptcy in August 1997. Prior to the bankruptcy filing, Craig’s sales totaled approximately $80 million in 1996 and $88 million in 1995.
The evidence presented during an eight-week jury trial showed that Berger, in conjunction with Craig’s chief financial officer, defrauded a consortium of four banks that had made a $40 million inventory and receivables line of credit available to Craig. The consortium included BT Commercial Corporation (an affiliate of Bankers Trust [Delaware], which was purchased by Deutsche Bank in 1999), as well as La Salle National Bank, Nationsbank of Texas and Sanwa Business Credit Corporation. Berger organized a scheme to artificially inflate the amount of money Craig was permitted to borrow from the lending banks. As part of the scheme, Berger and the CFO intentionally distorted Craig’s accounts receivable by representing to the lending banks that certain accounts receivable remained valid when, in fact, the underlying sales had been reversed. Berger also distorted Craig’s inventory figures by improperly classifying defective goods as new or refurbished goods.
Berger was found guilty of making false statements to the SEC in Craig’s registration documents for its initial public offering in 1996, in a 1996 Amended 10K Form, and in a 1997 10Q Form.
A second defendant in the case – Donna Richardson, 45, of Dracut, Massachusetts, who was Craig’s treasurer, secretary, and chief financial officer – pleaded guilty to three counts of bank fraud. A sentencing hearing for Richardson is currently scheduled for October 4.
The case against the Craig executives is the result of an investigation by the Federal Bureau of Investigation.