- LOS ANGELES (Reuters)
- Reed Slatkin, the investment advisor who provided start-up funds for
Internet service provider EarthLink Inc. , pleaded guilty on Monday to
15 charges of fraud and conspiracy for bilking almost 800 clients out of
nearly $600 million.
-
- Slatkin, 53, entered his plea before U.S. District Judge
Margaret Morrow under the terms of a plea deal announced by the U.S. Attorney's
Office on Mar. 27.
-
- A former bishop in the Church of Scientology who was
excommunicated from the church earlier this year, Slatkin faces a maximum
of 105 years in prison stemming from five counts of mail fraud, three counts
of wire fraud, six counts of money laundering and one count of conspiracy.
-
- "Your Honor, it is an acceptable representation
of my conduct," Slatkin told Judge Morrow after prosecutors described
to the court how he had used investments from new clients to pay returns
to old clients, in what is commonly known as a Ponzi scheme.
-
- The plea agreement took nine months to hammer out, but
it is not clear whether Slatkin can pay the $254.6 million in restitution
he agreed to pay since he has filed for bankruptcy protection from creditors.
-
- Slatkin, who surrendered to authorities on April 25,
was led by U.S. marshals into the courtroom wearing the standard-issue
green jacket, blue pants and manacles around his waist and wrists.
-
- "This is part of the process that we've committed
to where he is accepting responsibility for his conduct and helping creditors
regain their assets," Slatkin's attorney, Brian Sun, told Reuters.
-
- Slatkin began talking to the U.S. Attorney's Office last
June about a plea deal, two months after resigning from EarthLink's board
and one month after filing for Chapter 11 bankruptcy protection and having
his assets frozen.
-
- Slatkin admitted in the written plea agreement that he
had portrayed himself as a successful financial adviser and provided investors
with faked account statements which purported to show that they were achieving
above-market returns.
-
- In 1993, when it could take hours to log on to the Internet,
23-year-old Sky Dayton decided to found an Internet service provider focused
on customer service.
-
- He persuaded Slatkin and Kevin O'Donnell to invest $100,000
and EarthLink, now one of the nation's largest ISPs, was launched in Glendale,
California, in 1994.
|