Analysis:
According to the information presented by the government, Berman made decisions with a clear intention to deceive investors. Although he may have lived most of his life as an honorable person, the evidence suggests that he got into financial trouble. Rather than responding to his troubles in an honorable way, he concocted a scheme to pump up the price of his stock. When government officials questioned him, Berman got himself into further trouble by lying in response to questions the investigators asked.
Legislators passed securities laws to protect public markets. Anyone that attempts to manipulate those markets with false or misleading statements may face felony charges. Those charges can lead to decades in prison.
With regard to making false statements, it’s important to know that a person does not have to respond to questions from a law-enforcement officer. On the other hand, if a person chooses to respond, he should tell the truth. Lying to a federal law enforcement officer is a federal crime, punishable by up to five years in federal prison—for each lie. A person may face criminal charges for lying to a federal officer regardless of whether the person is under oath.
Keith Berman faces a difficult predicament as a result of the indictment for violating securities laws and making a false statement. The statutory penalty for securities fraud is 20 years in prison, and the statutory penalty for making a false statement is five years in prison. There are fines associated with such convictions, too.
Judicial proceedings that follow will include a plea hearing. In most cases like Berman’s, defendants will choose to enter into a plea bargain with hopes of lessening the exposure to punishment. Prosecutors may agree to limit Berman’s exposure to prison, provided that he pleads guilty early and works on a mitigation strategy.
If Berman pleads guilty, he will undergo a presentence investigation with a probation officer. The probation officer will complete a report, calculating a “loss amount” that will influence the sentence length.
Berman will have to decide whether he wants to accept responsibility and plead guilty. He may choose to put the government to the test of proving the case to a jury beyond a reasonable doubt. The decision he makes going forward will have monumental influences on his life. Depending on the plea or the outcome of a verdict, Berman could face decades in federal prison and enormous fines.
With all of the evidence the government cited in the indictment, it would seem that prosecutors have a strong case. Like most defendants, he likely will plead guilty to avoid the downside of being convicted at trial. His best option will be to craft an effective mitigation strategy. That strategy should show the judge that Berman has a full grasp of the crime he committed. His mitigation strategy should show empathy for the victims of his crime, show what he learned from the experience, and help the judge understand what steps he is taking to make things right.
Recommendation:
The criminal indictment charges Berman with engineering a fraudulent scheme that he began at the dawn of the pandemic. Yet the indictment also insinuates his problems began long before he started the fraud. According to paragraph 8 of the indictment, he spent more than $360,000 of corporate funds to use webcams that would allow to participate in live chat sessions with people in foreign countries. Those expenditures likely led him into financial difficulties, putting pressures on him. Crime became a bad response to financial pressures that he created. Then, when confronted with the crime, he made things worse by lying.
Keith Berman’s behavior mirrors the behavior of many people who have been convicted of white-collar crimes. They get into a bad situation. Then, normal people turn to criminal behavior, not understanding the consequences.
We recommend more training to profile the personal stories of people that broke the law during the course of business. When people understand how authorities view crimes like securities fraud, or lying to federal officers, they may be more inclined to make law-abiding decisions.
We like to say that people are innocent until proven guilty. At this stage, a grand jury has charged Keith Berman with serious crimes. We’ll see how the process unfolds.
Risk Mitigation