Allegedly! Admittedly, we're a little behind on this one but you know how it is. Anyway, your Ponzi scheme du jour comes by way of the great Northwest, where Frederick Darren Berg, who seems to have some sort of charter bus fetish, is being prosecuted for orchestrating the largest Ponzi scheme in Washington.
When he was at the University of Oregon in the 80s, Berg allegedly helped himself to his fraternity's cash to fund a "charter bus venture" and then pleaded guilty to a check-kiting scheme with another bus company a few years later. After those nickel and dime failures, Fred was done messing and decided to really do this:
The 48-year-old founder and chief executive officer of Meridian Group is accused of defrauding hundreds of more than $100 million invested in his Seattle company's mortgage funds between 2003 and 2010.
Prosecutors allege Berg spent tens of millions on a ritzy lifestyle, including a posh Mercer Island mansion, two yachts and two jets.
But investigators say Berg diverted a bigger chunk, estimated at $45 million, to create a luxury bus line that served tour groups and sports teams, including the Seahawks and the Oregon Ducks.
And we all know what happened to mortgage funds, don't we? Okay, then. So your next question probably is, "how did the auditors miss this one?" Well!
Berg used some simple stratagems to mislead auditors at Moss Adams, a large Seattle-based firm, which produced audits for a trio of Meridian funds for three years.
The standard procedure is to send out confirmation letters to a random sample of mortgage borrowers and compare what they say they've paid with what the lender's records say.
But Moss Adams didn't notice most of the confirmations it sent out were going to post-office boxes and coming back with the same handwriting, said [bankruptcy trustee Mark] Calvert.
Berg had rented more than 20 P.O. boxes and had the mail forwarded to another address in Seattle. He was replying to the auditors' queries himself, according to the indictment.
[Cringe] Oops. To be fair, auditors can't be expected to be hand-writing experts...can they? Mr. Calvert seems to think so and told the Seattle Times that he plans on suing Moss Adams and Deloitte for their roles. Oh, right! How do they fit in? To wit:
Berg also hired Deloitte Financial Advisory Services to do a "valuation report" on funds V through VII, meant just for Meridian management. Meridian, however, used it to reassure investors, touting Deloitte's conclusion "the sample mortgage pool appears to be of higher quality and better performance" than comparable loan portfolios.
But Calvert said Deloitte's supposedly random sampling "was not completed as outlined" in its agreement with Meridian. He declined to be more specific.
Moss Adams and Deloitte would not comment on their work for Meridian.