A Minnesota financial advisor was sentenced to 2 1/2 years in prison for defrauding clients out of millions, the Department of Justice announced Thursday.
In addition to the 30-month federal prison sentence, a federal judge ordered Kristi Margaret Berge to pay about $2.1 million in restitution. Berge pleaded guilty to wire fraud earlier this year.
According to the DOJ, Berge was the founder and CEO of Keep Safe Investments, also known as KSI Financial, which acted as a financial planning firm. Berge was registered with the SEC under KSI Financial in 2013 before her registration ended at the end of last year, according to commission records.
Berge also co-owned J&K Connect, which invested in real estate by buying, renovating and selling properties for a profit, with offices for all her companies in Edina, Minn.
But starting in June 2020 and for nearly three years, Berge stole about $2.1 million from several clients’ accounts by claiming that she’d maintain their money “in safe and secure investment accounts,” like individual retirement accounts and 401(k) plans, according to a felony information document from earlier this year.
However, unbeknownst to her clients, Berge repeatedly withdrew clients’ funds from their accounts, typically taking between $5,000 and $220,000 out at a time and transferring them to her bank accounts.
Berge would then use the money to purchase properties for J&K Connect and, in some cases, use the client funds to pay for a property one of her family members used as a residence. She’d sometimes falsely label 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 pursuing Berge over these accusations. Earlier this year, United Airlines filed a lawsuit in Minnesota federal court against Berge and her business entities, arguing she “improperly” used employee retirement plan assets for “personal gain.”
The suit describes how United employees can invest retirement contributions via a self-directed brokerage account known as a Personal Choice Retirement Account via Charles Schwab and can choose to hire an independent advisor to advise on their funds in the PRCA.
The employees must choose an advisor in the Schwab network if the advisor is to charge its fees directly to the participants’ accounts, and they can only withdraw assets to pay advisory fees.
Berge was allegedly one of those advisors and entered into contracts with several participants, according to United. However, some employees’ contacts included agreements with J&K Connect, in which they agreed to loan assets from their PRCA to the real estate company.
Specifically, KSI would charge a “management fee” that would “in reality, be used to fund a loan from the participant to J&K.” This meant the fees purporting to be for investment advice were really going to J&K, according to the United suit.
“Through this arrangement, and by falsely representing the amounts to the Plan as fees, Berge, KSI and J&K contained control over Plan assets to which they were not entitled, with the intent to use those assets for their own gain,” the United complaint read.
According to United, Schwab discovered the ruse in December 2022, alerting the airline and Berge that they were aware the plan assets went to J&K and not to Berge as advisory fees and terminated KSI as an investment advisor on Schwab’s platform.
According to subsequent court documents, Berge was in default “for failure to plead or otherwise defend” herself against the charges (in which the court ruled in favor of the plaintiff because the defendant failed to respond).
Berge’s attorneys did not respond to requests for comment prior to publication, but according to the Minnesota Star Tribune, attorney Bruce Rivers wrote the court asking for a sentence of six months 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 to repay those who were harmed,” Rivers wrote.