Mercer Island mastermind of state’s biggest Ponzi scheme escapes from prison

Frederick Darren Berg had been indicted for fraud in 2012.

By Katie Metzger • December 7, 2017 4:30 pm
Frederick Darren Berg, photographed in November 2016. Photo courtesy of the United States Marshals Service
Frederick Darren Berg, photographed in November 2016. Photo courtesy of the United States Marshals Service

Frederick Darren Berg, the man who orchestrated the biggest Ponzi scheme in Washington state’s history, escaped from a California prison on Dec. 6.

Berg, 55, of Mercer Island, was sentenced to 18 years in prison in 2012 after pleading guilty to defrauding hundreds of investors of more than $100 million through the Meridian Mortgage investment funds he ran for nearly a decade.

Berg used the money from his investors to fund a lavish lifestyle, including million dollar condos in Seattle and San Francisco and a $5.5 million waterfront home on Mercer Island, along with two jets and several yachts, according to Reporter archives. He was featured in an episode of the television series “American Greed” in 2016.

Seven years after his fraud was exposed, Berg is again a wanted man.

A news release from the U.S. Bureau of Prisons (BOP) said Berg was discovered missing around 3:30 p.m. Wednesday from a 130-inmate, minimum-security work camp. The camp is adjacent to the Atwater penitentiary, a maximum-security facility in Central California that holds about 1,200 male inmates.

Berg is listed as “escaped” on the BOP’s inmate locator site.

Berg is the third escapee from the Atwater penitentiary this year, according to the Merced Sun-Star. Eric Pree walked away from a minimum-security camp at the prison on Jan. 29, and Guaymar Cabrera-Hernandez escaped on May 12, but was apprehended the next day.

BOP and U.S. Marshals Service investigators were searching for Berg on Thursday, the Sun-Star reported. Authorities are asking anyone with information on his whereabouts to contact the Marshals Service at 559-487-5600.

Financial scandals have trailed Berg for years, starting when he allegedly embezzled money from his fraternity at the University of Oregon.

Berg was operating a series of funds purportedly for investment in seller financed real estate contracts, hard money loans, real estate and mortgage backed securities, according to Reporter archives, but started taking money from later investors to pay off earlier investors.

Between 2001 and 2009, Berg used more than $100 million from over 800 investors for his own expenses and to keep his investment fraud going, according to records in the case. Meridian brought in over $280 million from investors over 10 years. Hundreds of victims lost their retirement funds and savings.

Berg launched the firm after moving to Seattle in 1987, and his looting of the investment fund forced it into bankruptcy in June 2010. He was arrested in Los Angeles on Oct. 21, 2010, indicted in November 2010 and pleaded guilty in August 2011.

Berg’s case was investigated by the FBI, the Washington State Department of Financial Institutions (DFI) and the Internal Revenue Service Criminal Investigation (IRS-CI), and prosecuted by Assistant United States Attorney Norman Barbosa.

He was found guilty on charges of wire fraud, money laundering and bankruptcy fraud, according to the U.S. Attorney’s Office. Berg was also forced to pay more than $100 million in restitution.

Seattle Mayor Jenny Durkan, then the U.S. Attorney in Seattle, said at the time, “The greed in this case is stunning. This defendant stole and squandered the dreams of hundreds: dreams of retirement, dreams of homeownership, dreams of a college education for their children and grandchildren. While we could not restore those dreams, today he was held accountable for his acts.”