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
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.