Fallen hedge fund manager Michael Berger pleaded guilty yesterday to a massive securities fraud in which he tried to cover up losses of more than $400 million.
Berger, 29, admitted in Manhattan federal court that he sent out rosy status reports on his investments while his fund shrank away to almost nothing.
Beginning in 1996, Berger managed an offshore fund that shorted Internet and technology stocks.
Instead, they exploded in value, and Berger’s $515 million fund was cut down to less than $30 million by the end of last year.
The case also sparked a flurry of accusations against Berger’s clearing broker, Bear Stearns.
Berger claims he can prove Bear Stearns was aware of his misdeeds – while the company has fiercely denied it had any idea.
Several investors have filed suits against Bear Stearns, including one that claims the company warned certain preferred customers about problems at Berger’s Manhattan Investment Fund – allowing them to get out before it went bankrupt.
Berger sounded contrite in his plea before Judge Victor Marrero. “The markets turned against me,” he said with a slight Austrian accent. “I was not able and capable to admit those losses.”
Berger admitted to telling underlings to prepare false reports claiming the fund was thriving.
“I closed my eyes,” he said. “I felt that the end would justify the means.”
“I severely regret those actions and I apologize,” he told the judge, before adding that his words “cannot fully embrace the magnitude and how I feel about all of these actions.”
He now faces a maximum of 10 years in prison and a fine of $1.25 million at his March sentencing.