Crime

ST. PAUL (AP) ― A judge is considering whether to release Tom Petters, the founder of Petters Group Worldwide, who is charged with fraud in an alleged multimillion-dollar investment scheme that prosecutors say spanned 14 years and is perhaps the largest fraud case ever seen in Minnesota.

U.S. Magistrate Judge Jeffrey Keyes heard testimony during a nearly three-hour hearing Tuesday. Keyes said he would take the case under advisement and issue a ruling Wednesday.

Petters, 51, was arrested Friday on federal charges of mail fraud, wire fraud, money laundering and obstruction of justice. Authorities say the scheme exceeded $100 million in fraudulent funds, and one witness has indicated the fraud could exceed $3 billion.

Assistant U.S. Attorney John Marti argued Petters should remain in custody because he is a flight risk.

"Mr. Petters is a con man," Marti said, "an over $3 billion con man." Marti added that if convicted on all of the charges, Petters faces life in prison.

"That creates a huge motive to flee," Marti said.

Defense attorney Jon Hopeman disagreed, arguing that Petters should be confined to his home in Wayzata and placed on an electronic monitoring bracelet. Hopeman also suggested that Petters check in with authorities three times a day, give up his cell phone, have no text-messaging, no Internet use and undergo a physical evaluation about his use of medications and undergo an alcohol evaluation.

Hopeman said, "If he runs, they'll catch him."

Judge Keyes asked Marti about home detention and Marti said: "All those conditions do is tell us when he's left -- and he gets a head start."

Hopeman said Petters is not a flight risk because he has strong ties and family in Minnesota, including two young sons -- ages 3 and 1 -- at his Wayzata home, his parents, brothers and sisters.

Petters also has a 24-year-old daughter, Jennifer Petters, who lives in Florida.

Jennifer Petters testified Tuesday that she believes her father has no plans to leave the country.

When Hopeman asked "Can you see your dad disappearing?", Jennifer Petters replied, "Absolutely not."

Jennifer Petters confirmed that Petters' two young sons live at home with him and a nanny and said the boys' mother is a patient at Hazelden, a drug and alcohol treatment center.

"He's extremely devoted to his family," Jennifer Petters said. "Always puts (them) first. Always. Always. Always."

Earlier in witness testimony, Marti played a recorded phone call between Petters and Robert White, who is also charged in the case. In that phone call, the two discussed ways of leaving the country.

At one point, Petters suggested that White leave the country by sailing his boat to the Caribbean.

According to authorities, Petters and some associates tricked investors by creating false purchase orders for merchandise from small vendors and more false documents indicating that merchandise had been sold to bigger retailers. The purchase orders were fictitious and no merchandise was bought or sold, authorities contend.

FBI Special Agent Brian Kinney testified that the investigation began Sept. 8 when a witness came forward with information about the scheme. Marti showed excerpts of a phone call between Petters and the witness, in which Petters said that one investor didn't know the documents were fake. Also in that Sept. 8 phone call, Petters said, "The only thing that makes me think there is some divine intervention ... there is no possibility we could have got away with this for so long."

Kinney testified that FBI agents interviewed Petters in Las Vegas while his home and offices were being searched in Minnesota. At that time, Kinney said, Petters told the FBI he was perpetrating fraud.

When asked about the Oct. 1 phone recording between her father and White, Jennifer Petters said her dad sounded "loopy," noting that he's been stressed out and possibly "self-medicating" on prescription anxiety medications and sleeping pills.

Hopeman described the recording as absurd, saying it was the stuff of pipe dreams. He said if Petters wanted to leave, he was free to go anywhere from when he learned of the investigation on Sept. 24, until he voluntarily handed over his passport days later.

Petters Group Worldwide had $2.3 billion in revenue in 2007. The company has investments in dozens of companies. Its holdings include Polaroid and Sun Country Airlines, which filed for Chapter 11 bankruptcy on Monday after it couldn't turn to its parent company for a short-term loan because of the federal investigation.

Petters entered the courtroom in handcuffs Tuesday, but they were removed during the hearing. Wearing a white and blue button-down shirt, he sat calmly at the defense table, sometimes pointing to a transcript of the phone recording between himself and White. At one point, he smiled at his daughter and other family members in the courtroom.

During a break in the hearing, Jennifer Petters blew her dad a kiss.

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Items federal agents seized at Tom Petters' Wayzata home in the fall of 2008 included $13,000 in cash, numerous credit cards, a .22 caliber revolver and 11 high-end watches, including four Rolexes.

 

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