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Correction to This Article
The article about GOP donor Craig Berkman referred to a lawsuit against him by former investors as a civil fraud case. Although the complaint alleged that Berkman "was engaging in fraud, or potentially illegal acts, or other inappropriate transactions," it did not include a separate cause of action for fraud against Berkman. Claims against Berkman included breach of fiduciary duty, negligence, breach of contract, and breach of good faith and fair dealing.
Big GOP Donor Faced Trouble Back Home

By Matthew Mosk
Washington Post Staff Writer
Wednesday, July 23, 2008

On the day Republican Sen. John McCain surged to victory in Florida's presidential primary, a group of supporters gathered at the elegant Tampa Club for a luncheon held by Gov. Charlie Crist and Sen. Mel Martinez.

Mingling with some of the state's business and political elite that January day was a Florida newcomer, an Oregon venture capitalist named Craig Berkman. Unbeknown to the guests, Berkman's life was crashing around him.

For two years, Berkman had been battling his investment partners after admitting that he had lent himself $5 million of their money without telling them. A civil fraud case against him was about to go to trial.

Berkman continued to raise money for McCain. He and his wife have donated $50,000 to Republican candidates and party committees this election cycle, including a $28,500 check to the Republican National Committee's Victory Fund on May 29 to support McCain's bid. Berkman's political generosity has angered his former investors, who prevailed in court but have not seen a penny of the $28 million in civil damages that a jury awarded them.

This week, the McCain campaign said that it has given Berkman's donations to charity and that it will ask the Republican National Committee to do the same.

The failure to earlier identify Berkman as a risk reveals a recurring blind spot for presidential campaigns, which in their zeal to raise cash sometimes overlook evidence about potentially embarrassing donors. McCain spokesman Brian Rogers said that Berkman's problems were overlooked by a "skeleton staff" that "was obviously focused on winning primaries."

"When we learned of the jury verdict earlier this month, the campaign donated Mr. Berkman's contribution to the American Red Cross for Midwest flood relief and recovery," Rogers said in an e-mail.

Still, the jilted investors in Berkman's path said they found it disturbing that political leaders eagerly took donations from a man they knew so little about.

"He used political donations and the doors those opened to build a web like a spider," said Jordan Schnitzer, the head of an Oregon investment firm who says Berkman duped him. "Someone should ask John McCain, 'With all these folks in your campaign, you couldn't put his name into Google?' "

Berkman has maintained that he intended to pay back the money he borrowed, and he chalked up his firm's $75 million in losses to risky investments gone bad. No criminal charges have been brought against him. He did not respond to repeated messages, and his lawyer, Paul B. George, declined to comment.

Berkman's saga began decades ago, when he stumbled in a GOP race for state treasurer after being accused of inflating a résumé. Oregon newspapers recounted how Berkman turned from aspiring politician to entrepreneur. When his ventures paid off, he poured that money back into politics. In 1988, he joined the Republican Party's "Team 100" by making a $100,000 contribution to the Bush-Quayle presidential campaign.

In the mid-1990s, Berkman became Oregon's GOP chairman. After a failed bid in the party's gubernatorial primary, he returned to finding investors for funds that he said would exploit "significant opportunities" in the health-care industry.

In a prospectus for Synectic Ventures, he listed fund advisers that included George Herbert Walker III, a first cousin of former president George H.W. Bush; and retired Gen. Merrill A. McPeak, a former Air Force chief of staff who now advises Democratic presidential candidate Barack Obama.

Walker said from his vacation home in Kennebunkport, Maine, that he "never endorsed Mr. Berkman's investment fund or advised him that he could use my name."

McPeak said he had given permission for the use of his name but later regretted his involvement with Berkman, whom he met at a Vietnam War memorial dedication in the mid-1990s.

"He pushed and pushed, and finally I made a small investment," McPeak said. "He asked me to join the board of one of his companies, but it rapidly failed and has been downhill ever since."

Berkman repeatedly referenced his political connections as a means of luring investors. Earlier this year, under cross-examination, Berkman was asked by a lawyer if he led an investor "to believe that you were a person of significant wealth and connections."

"Didn't you, in fact, invite [investor] Brian Stewart to join the Bush family for a weekend at the Bush ranch in Texas?" the lawyer asked. "Yes," Berkman conceded.

The investor, Patrick L. Sizemore, founder of Strategic Wealth Management in Mercer Island, Wash., said that in 1999 Berkman invited him to fly with him on a private jet for a lunch with George W. Bush, who was running for president.

"He told me I could have my picture taken with the future president," Sizemore said. "That wasn't my style. But it was his. If you knew Craig, he had pictures of himself with everybody on the wall."

Berkman's investors alleged in their lawsuit that his profile was an illusion. When he began his business, the suit says, he had little money and continually borrowed to maintain his lifestyle. The 141-page complaint against Berkman describes complex transactions that it says were an attempt to conceal the misappropriation of money.

The story of the alleged scam crashed into view in January 2006, when the Willamette Week in Portland, Ore., wrote that Berkman admitted "in a sometimes tearful two-and-a-half hour interview" that he lent himself $5 million of investors' money without their knowledge.

"The loans and my failure to disclose them fully and in a timely manner gives the appearance of wrongdoing, and I deeply regret that," Berkman told the newspaper.

By then, the lawsuit had been filed. It did not stop Berkman from releasing a new confidential prospectus for an investment whose purported "advisers" included Mark White, a former Texas governor, and Pete Wilson, a former senator and governor from California. White could not be reached to comment, and Wilson did not return calls.

Berkman also continued to donate to political candidates. In 2007, as the presidential campaign ramped up, he wrote $2,300 checks to former New York mayor Rudolph W. Giuliani and former Arkansas governor Mike Huckabee. Starting in July 2007, he contributed to McCain's campaign. The Willamette Week first reported the donations.

Berkman and his new wife, former New York beauty queen Mary Ann Farrell-Karlsson, already had given McCain the maximum allowed. They gave the maximum allowable to the RNC's Victory Fund for McCain weeks after Berkman told the court that he was more than $12 million in debt.

On June 12, the jury awarded Berkman's investors $28 million in compensatory and punitive damages.

Lawyers for the investors said that they were "shocked" that Berkman continued to make contributions, and that McCain accepted them.

Stephen English, of the Portland law firm Bullivant Houser Bailey, put it this way: "There are good Republicans out there who would be appalled that someone in his position, with the history he had, would be able to rise like the phoenix."

Research editor Lucy Shackelford contributed to this report.

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