EarthLink founder to plead guilty to fraud

http://news.com.com/2100-1033-869136.html
EarthLink founder to plead guilty to fraud

By Reuters
March 26, 2002, 4:50 PM PT

EarthLink co-founder Reed Slatkin, accused of defrauding investors out of nearly $600 million, has agreed to plead guilty to 15 federal charges, prosecutors said Tuesday. Slatkin, who was charged with 15 felony charges for allegedly orchestrating a massive Ponzi scheme in which he solicited more than $593 million from some 800 investors--including members of the Church of Scientology, where he is a minister--has reached a deal with prosecutors to plead guilty to all of the charges, a U.S. Attorney's representative said.

Slatkin, 53, was charged with five counts of mail fraud, three counts of wire fraud, six counts of money laundering and one count of conspiracy to obstruct justice during an investigation being conducted by the U.S. Securities and Exchange Commission.

U.S. Attorney's spokesman Thom Mrozek said that Slatkin admitted in the written plea agreement that he portrayed himself as a successful financial adviser and provided investors with account statements which purported to show that his investors were achieving above-market returns.

However, Slatkin generally did not buy securities as he told investors, Mrozek said. Instead, he provided victims with false account statements that showed the fabricated returns.

Mrozek said Slatkin used the bulk of investor funds to operate a Ponzi scheme in which he operated a fraud by paying investors returns that were largely made up of funds raised from other investors.