A Minnesota financial adviser was sentenced to 2 1/2 years in prison for defrauding clients out of millions, the Justice Department announced Thursday.
In addition to the 30-month federal prison sentence, a federal judge ordered Kristi Margaret Berge to pay approximately $2.1 million in restitution. Berge pleaded guilty to fraud earlier this year.
According to the DOJ, Berge was the founder and CEO of Keep Safe Investments, also known as KSI Financial, which operated as a financial planning firm. Berge had registered with the SEC under KSI Financial in 2013 before its registration expired late last year. according to the commission's data.
Berge also owned J&K Connect, which invested in real estate by buying, renovating and selling properties for profit, with offices for all of its companies in Edina, Minn.
But starting in June 2020 and over nearly three years, Berge stole about $2.1 million from several clients' accounts by pretending she would keep their money “in safe and secure investment accounts,” such as the individual accounts of pension and 401(k) plans. according to a crime information document from earlier this year.
However, unbeknownst to her clients, Berge repeatedly withdrew the clients' funds from their accounts, typically taking between $5,000 and $220,000 at a time and transferring them to her own bank accounts.
Berge would then use the money to purchase properties for J&K Connect and, in some cases, use client funds to pay for a property that one of her family members used as a residence. She sometimes falsely labeled these withdrawals as “management” or “administrative” fees to make it seem like they were part of regular business.
The DOJ was not the only party to pursue Berge on these charges. Earlier this year, United Airlines filed a lawsuit in Minnesota federal court against Berge and her business entities, arguing that she “improperly” used employee retirement plan assets for “personal gain.” .
The lawsuit describes how United employees can invest retirement contributions through a self-directed brokerage account known as a Personal Choice Retirement Account through Charles Schwab and can choose to hire an independent adviser to advise on the funds theirs in the PRCA.
Employees must select an advisor in the Schwab network if the advisor will charge its fees directly to participant accounts, and they can withdraw assets only to pay advisory fees.
Berge was allegedly one of those advisers and had contracts with several participants, according to United. However, some employee contacts involved arrangements with J&K Connect in which they agreed to lend assets from their AKKP to the real estate company.
Specifically, KSI would charge a “management fee” that would “in effect be used to fund a loan from the participant to J&K”. This meant that fees that were supposed to be for investment advice would actually go to J&K, according to United's lawsuit.
“Through this arrangement, and by falsely representing amounts in the Plan as fees, Berge, KSI and J&K assumed control over Plan assets to which they were not entitled, with the intent to use those assets for the benefit of their,” United's complaint. read.
According to United, Schwab discovered the fraud in December 2022, alerting the airline and Berge that they were aware that plan assets went to J&K and not Berge as advisory fees, and terminated KSI as an investment advisor on Schwab's platform.
According to later court documents, Berge was in default “for failure to plead or defend himself” against the charges (in which the court ruled in favor of the plaintiff because the defendant did not respond).
Berge's attorneys did not respond to requests for comment before publication, but according to the Minnesota Star Tribuneattorney Bruce Rivers wrote to the court asking for a sentence of six months of home confinement, writing that Berge had no prior criminal history and had “never set out to hurt anyone.”
“Her business took a turn and she made some serious mistakes along the way and has every intention of making amends to those who were harmed,” Rivers wrote.