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Originally published July 27, 2010 at 8:11 PM | Page modified July 29, 2010 at 5:01 PM

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Meridian Mortgage founder seeks personal Chapter 11 bankruptcy protection

Seattle businessman Darren Berg, who raised upward of $145 million for several Meridian Mortgage investment funds that are now in bankruptcy court, himself sought refuge in Chapter 11 Tuesday.

Seattle Times deputy business editor

Seattle businessman Darren Berg, who raised upward of $145 million for several Meridian Mortgage investment funds that are now in bankruptcy court, himself sought refuge in Chapter 11 Tuesday.

The move came after lawyers for one group of investors, armed with a court order and accompanied by sheriff's deputies, began seizing personal possessions at Berg's Mercer Island home and downtown Seattle condo.

Berg's Chapter 11 filing, made under the name Frederick D. Berg, estimated his assets at more than $10 million and his liabilities at $1 million to $10 million.

Also Tuesday, the court-appointed trustee assigned last week to oversee four Meridian funds said five more "are in the process of being placed in bankruptcy."

"There will be a total of nine — the others are being put in as we speak," said Mark Calvert, managing member at Cascade Capital Group.

Berg owns Seattle-based Meridian Group, which manages the mortgage funds and also encompasses a bus company known as MTR and other businesses. Lawsuits filed in state and federal courts in recent weeks allege that he failed to make interest payments to Meridian fund investors from whom he raised at least $145 million, and that he obtained additional millions by promising to make investments that weren't made.

Investors filed involuntary Chapter 11 proceedings against four of the funds July 8.

Tuesday's dramatic events began after Randy Aliment, the attorney for several people who are suing over $4 million Berg said he would invest for them, obtained a court order authorizing the pre-trial seizure of Berg's property to protect his clients' claim.

"We moved on those assets this morning at his Mercer Island residence, his Second Avenue Seattle condominium, and the Fourth Avenue office" of Meridian Group, Aliment said. "You're talking TV sets, you're talking furniture, jet skis, automobiles, artwork."

"As far as I'm concerned we were successful in getting his attention," Aliment said, adding that now Berg's personal financial affairs can be properly scrutinized under bankruptcy court oversight.

The assets seized Tuesday will have to be included in the personal bankruptcy case, Aliment said.

Berg and his attorney did not respond to messages seeking comment late Tuesday.

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Calvert said his priority as trustee is to obtain control of the Meridian investment funds' assets and maximize recovery for the many creditors of those funds.

He said that before filing the personal Chapter 11 bankruptcy, Berg was "being cooperative" and had agreed to turn over some of his business assets, including "five or six bus companies" that he owns, to the creditors of the Meridian funds.

"About 25 out of 26 attorneys" involved with the case were ready to go along with his approach, said Calvert, but the personal bankruptcy triggered by Tuesday's property confiscations adds another element to the growing pile of litigation.

The nine Meridian funds that he expects to wind up under his oversight attracted a total of $175 to $185 million from investors, Calvert estimated.

Rami Grunbaum: rgrunbaum@seattletimes.com or 206-464-8541.

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