The United States Attorney's Office

FORMER C.E.O. OF ELECTRONICS FIRM SENTENCED TO 97 MONTHS IN FEDERAL PRISON AND ORDERED TO PAY OVER $3 MILLION IN  RESTITUTION FOR DEFRAUDING LENDING BANKS AND INVESTORS

The former chief executive of a Southern California electronics company who was convicted of defrauding lending banks, falsifying books and records, lying to accountants and filing false financial statements with the Securities and Exchange Commission was re-sentenced today to 97 months in federal prison.

Richard I. Berger, 61, of Rolling Hills Estates, who ran Craig Consumer Electronics, was sentenced this morning by United States District Judge Robert M. Takasugi. Berger was previously sentenced in 2004 to six months in prison, but based on changes to United States sentencing laws, the case was remanded for re-sentencing.

At today’s sentencing, Judge Takasugi found that Berger caused roughly $3.1 million in losses to Craig’s lending banks and another $2.1 million in losses to Craig’s investors. Additionally, Judge Takasugi applied enhancements that increased Berger’s sentence because he was a leader of the criminal scheme and because he violated an SEC consent decree.

After finding that four banks suffered losses of $3,144,832, Judge Takasugi ordered Berger to pay that amount in restitution.

Berger was found guilty on September 4, 2003 of one count of conspiracy, six counts of loan fraud, one count of falsifying corporate books and records, one count of making false statements to company accountants and three counts of making false statements in SEC filings. When the 9th Circuit Court of Appeals remanded the case for re-sentencing last year, it affirmed Berger’s conviction.

Berger was the president, chief executive officer and chairman of the board of Craig Consumer Electronics. Craig was based in Cerritos and sold consumer electronic products such as car stereos and small personal stereos to retailers such as Best Buy and Circuit City. On May 21, 1996, Craig made an initial public offering of its stock to the investing public and raised approximately $7.8 million. Craig’s shares were traded on the NASDAQ exchange until just before it filed for bankruptcy in August 1997. Prior to the bankruptcy filing, Craig’s sales totaled approximately $80 million in 1996 and $88 million in 1995.

The evidence presented during a nine-week jury trial showed that Berger, in conjunction with Craig’s chief financial officer, defrauded a consortium of four banks that had made a $40 million inventory and receivables line of credit available to Craig. The consortium included BT Commercial Corporation (an affiliate of Bankers Trust [Delaware], which was purchased by Deutsche Bank in 1999), as well as La Salle National Bank, Nationsbank of Texas and Sanwa Business Credit Corporation. Berger organized a scheme to artificially inflate the amount of money Craig was permitted to borrow from the lending banks. As part of the scheme, Berger and the CFO intentionally distorted Craig’s accounts receivable by representing to the lending banks that certain accounts receivable remained valid when, in fact, that was not the case. Berger also distorted Craig’s inventory figures by improperly classifying defective goods as new or refurbished goods. 

Berger was found guilty of making false statements to the SEC in Craig’s registration documents for its initial public offering in 1996, in a 1996 Amended 10K Form, and in a 1997 10Q Form.

The case against the Craig executives is the result of an investigation by the Federal Bureau of Investigation.

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