EarthLink Financier Pleads Guilty to Fraud Charges

Tue Apr 30 07:28:38 UTC 2002

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20020430/wr_nm/crime_slatkin_dc_1&printer=1

LOS ANGELES (Reuters) - Reed Slatkin, the investment advisor who provided 
start-up
   funds for Internet service provider EarthLink Inc. , pleaded guilty on 
Monday to 15 charges
   of fraud and conspiracy for bilking almost 800 clients out of nearly 
$600 million.

    Slatkin, 53, entered his plea before U.S. District Judge Margaret 
Morrow under the terms of a plea deal announced by the
   U.S. Attorney's Office on Mar. 27.

   A former bishop in the Church of Scientology who was excommunicated from 
the church earlier this year, Slatkin faces a
   maximum of 105 years in prison stemming from five counts of mail fraud, 
three counts of wire fraud, six counts of money
   laundering and one count of conspiracy.

   "Your Honor, it is an acceptable representation of my conduct," Slatkin 
told Judge Morrow after prosecutors described to
   the court how he had used investments from new clients to pay returns to 
old clients, in what is commonly known as a Ponzi
   scheme.

   The plea agreement took nine months to hammer out, but it is not clear 
whether Slatkin can pay the $254.6 million in
   restitution he agreed to pay since he has filed for bankruptcy 
protection from creditors.

   Slatkin, who surrendered to authorities on April 25, was led by U.S. 
marshals into the courtroom wearing the
   standard-issue green jacket, blue pants and manacles around his waist 
and wrists.

   "This is part of the process that we've committed to where he is 
accepting responsibility for his conduct and helping
   creditors regain their assets," Slatkin's attorney, Brian Sun, told 
Reuters.

   Slatkin began talking to the U.S. Attorney's Office last June about a 
plea deal, two months after resigning from EarthLink's
   board and one month after filing for Chapter 11 bankruptcy protection 
and having his assets frozen.

   Slatkin admitted in the written plea agreement that he had portrayed 
himself as a successful financial adviser and provided
   investors with faked account statements which purported to show that 
they were achieving above-market returns.

   In 1993, when it could take hours to log on to the Internet, 23-year-old 
Sky Dayton decided to found an Internet service
   provider focused on customer service.

   He persuaded Slatkin and Kevin O'Donnell to invest $100,000 and 
EarthLink, now one of the nation's largest ISPs, was
   launched in Glendale, California, in 1994. 