Earthlink co-founder to plead guilty to felony charges

Reed Slatkin, a co-founder of Internet service provider Earthlink, has agreed to plead guilty to 15 felony charges.

Reed Slatkin, a co-founder of Internet service provider Earthlink, has agreed to plead guilty to 15 felony charges.

The charges have been filed in connection with what the US attorney's office in Los Angles calls "a massive Ponzi scheme" in which he defrauded about 800 investors of more than $593m (£417m) during a 15-year period.

According to a statement issued by the US attorney's office, Slatkin, 53, also agreed to acknowledge that he's responsible for at least $254m (£179m) in losses.

Thom Mrozek, spokesman for the US attorney's office, explained that the discrepancy in how much money Slatkin accepts responsibility for and how much investigators charge him with stealing is due to the fact that some evidence in the case was seized when the scheme was broken up. The actual amount taken from investors may eventually rise.

"This whole mess has not been sorted out yet," Mrozek said.

"Slatkin admits that he portrayed himself as a successful financial adviser and provided investors with account statements which purported to show that investors were achieving above-market returns on their investments," the statement said. "However, Slatkin generally did not buy securities as he told investors. Instead, Slatkin provided victims with false account statements that showed the fabricated returns."

According to the statement, Slatkin paid investors returns by using money that he raised from other investors.

Slatkin was charged in Los Angeles Federal District Court 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 Securities and Exchange Commission. When federal officials filed those charges, they also entered the agreement in which Slatkin said he would plead guilty.

At this point, Slatkin is still free. But Mrozek said he's expected to turn himself in to authorities at his arraignment, which will be scheduled for some time next month. Because Slatkin has cooperated so far with investigators in the investigation, they believe he will turn himself in at that time.

According to the statement, Slatkin faces up to 105 years in jail and fines of up to $3.75m. Mrozek said Slatkin is more likely to get 12 to 15 years in a federal prison. If he fails to show up for his arraignment, however, that time behind bars could rise significantly.

Mrozek also noted that the plea arrangement covers only charges filed today; Slatkin could face additional charges and additional jail time stemming from federal tax charges that may be filed later.

Charges against other individuals could result from the investigation, but Mrozek declined to comment on that possibility.

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