The U.S. Securities and Exchange Commission is probing possibly fraudulent sales of Facebook stock in advance of the company's, CNET has learned.
SEC investigators have issued subpoenas demanding the financial records of Paul Tabet, a manager at a venture capital fund called Ventures Trust II LLC, and his wife.
The commission is investigating whether Tabet and fellow fund manager Craig Berkman -- once a leading financier in Portland who fled to Florida to escape creditors -- raised more than $3 million to purchase Facebook shares, and if so, where the money went.
"Staff has obtained evidence that a forged letter on law firm letterhead stating that Ventures Trust owned a direct interest in almost 500,000 pre-IPO shares of Facebook was apparently used to solicit Ventures Trust investors," SEC attorneys told a federal judge. "Staff has evidence indicating that the forged letter was attached to an e-mail sent by Paul Tabet to at least one potential investor."
A representative for Facebook declined to answer questions, and neither Tabet nor Berkman could immediately be reached for comment. SEC spokesman John Nester, saying he couldn't comment on any particular probe, told CNET: "If, upon completion of an investigation, the enforcement division believes the securities laws were violated, the division will make a recommendation to the commission for the commission to authorize charges."
The revelation of the SEC investigation is the latest twist in the bizarre tale of Berkman, an ex-investment banker who acknowledged that he "loaned" himself funds from his clients' accounts. He was also a major donor to the Republican Party and a onetime GOP gubernatorial candidate in Oregon.
A 2010 SEC filing for Ventures Trust lists its address as a 8,606-square foot lakeside house with six bedrooms and nine bathrooms that was purchased for $4 million in 2005. Property records show it's owned by Berkman, who declared bankruptcy and owes creditors (PDF) at least $10 million; Florida residents enjoy a generous homestead exemption.
The state of Florida lists an active corporate registration for a Ventures Trust management company, but the VenturesTrustFunds.com domain name included in a 2011 filing (PDF) with the state is defunct.
A 2009 article published by The Oregonian reported that:
To date, Berkman has not paid a dime. He submitted a personal financial statement to the court showing that he is broke, with millions of dollars in debts far exceeding his assets... In all, investors lost much of the $75 million they poured into the Berkman funds, though they later recovered millions in legal settlements with accounting and law firms that did work for Berkman.
In a written response to the SEC's request for his financial records, Tabet called the subpoena "overly broad," "oppressive," and a "warrantless search and seizure."
The SEC says that evidence it has collected so far shows that Paul Tabet withdrew more than $1 million from Ventures Trust bank accounts and that $23,000 was transferred to the bank account of Jenifer Tabet.
Last updated at 9:20 a.m. PT