A Minnesota monetary advisor was sentenced to 2 1/2 years in jail for defrauding shoppers out of hundreds of thousands, the Division of Justice introduced Thursday.
Along with the 30-month federal jail sentence, a federal choose ordered Kristi Margaret Berge to pay about $2.1 million in restitution. Berge pleaded responsible to wire fraud earlier this 12 months.
Based on the DOJ, Berge was the founder and CEO of Hold Protected Investments, often known as KSI Monetary, which acted as a monetary planning agency. Berge was registered with the SEC underneath KSI Monetary in 2013 earlier than her registration ended on the finish of final 12 months, in accordance with fee data.
Berge additionally co-owned J&Ok Join, which invested in actual property by shopping for, renovating and promoting properties for a revenue, with places of work for all her corporations in Edina, Minn.
However beginning in June 2020 and for practically three years, Berge stole about $2.1 million from a number of shoppers’ accounts by claiming that she’d preserve their cash “in secure and safe funding accounts,” like particular person retirement accounts and 401(okay) plans, in accordance with a felony info doc from earlier this 12 months.
Nevertheless, unbeknownst to her shoppers, Berge repeatedly withdrew shoppers’ funds from their accounts, usually taking between $5,000 and $220,000 out at a time and transferring them to her financial institution accounts.
Berge would then use the cash to buy properties for J&Ok Join and, in some instances, use the shopper funds to pay for a property one in every of her relations used as a residence. She’d typically falsely label these withdrawals as “administration” or “administrative” charges to make it appear to be they have been a part of common enterprise.
The DOJ was not the one occasion pursuing Berge over these accusations. Earlier this 12 months, United Airways filed a lawsuit in Minnesota federal courtroom in opposition to Berge and her enterprise entities, arguing she “improperly” used worker retirement plan belongings for “private achieve.”
The go well with describes how United workers can make investments retirement contributions through a self-directed brokerage account often called a Private Alternative Retirement Account through Charles Schwab and may select to rent an impartial advisor to advise on their funds within the PRCA.
The workers should select an advisor within the Schwab community if the advisor is to cost its charges on to the individuals’ accounts, they usually can solely withdraw belongings to pay advisory charges.
Berge was allegedly a kind of advisors and entered into contracts with a number of individuals, in accordance with United. Nevertheless, some workers’ contacts included agreements with J&Ok Join, through which they agreed to mortgage belongings from their PRCA to the actual property firm.
Particularly, KSI would cost a “administration payment” that may “in actuality, be used to fund a mortgage from the participant to J&Ok.” This meant the charges purporting to be for funding recommendation have been actually going to J&Ok, in accordance with the United go well with.
“Via this association, and by falsely representing the quantities to the Plan as charges, Berge, KSI and J&Ok contained management over Plan belongings to which they weren’t entitled, with the intent to make use of these belongings for their very own achieve,” the United criticism learn.
Based on United, Schwab found the ruse in December 2022, alerting the airline and Berge that they have been conscious the plan belongings went to J&Ok and to not Berge as advisory charges and terminated KSI as an funding advisor on Schwab’s platform.
Based on subsequent courtroom paperwork, Berge was in default “for failure to plead or in any other case defend” herself in opposition to the fees (through which the courtroom dominated in favor of the plaintiff as a result of the defendant failed to reply).
Berge’s attorneys didn’t reply to requests for remark previous to publication, however in accordance with the Minnesota Star Tribune, legal professional Bruce Rivers wrote the courtroom asking for a sentence of six months house confinement, writing that Berge had no prior legal historical past and had by no means “got down to harm anybody.”
“Her enterprise took a flip, and she or he made some critical errors alongside the way in which and has each intention to repay those that have been harmed,” Rivers wrote.
