U.S. News

Accused Ponzi schemer Petters' case goes to jury

ST. PAUL, Minnesota (Reuters) - The government made a final effort to convince jurors on Monday that accused Ponzi schemer Tom Petters orchestrated a $3.65 billion fraud, and is not the victim he claims to be.

Jurors began deliberations Monday afternoon after the government urged them in its closing argument to reject the Minnesota businessman’s contention that subordinates were responsible for a fraud at the now-collapsed Petters Group Worldwide LLC.

“Tom Petters is not a victim,” prosecutor John Marti told jurors. “Tom Petters was committing fraud of a massive, massive scale.”

But a lawyer for Petters urged jurors to acquit his client. “The arc of his life is one of innocence, optimism and generosity,” attorney Paul Engh said in his closing argument. “This is not a Ponzi. This has never been a Ponzi for him.”

The jury in St. Paul, Minnesota federal court began deliberations around 2:30 p.m. CST (2030 GMT) after getting instructions from U.S. District Judge Richard Kyle.

Prosecutors accused Petters of duping hedge funds and other investors by promising big returns from financing purchases and sales of consumer electronics to retailers such as Costco Wholesale Corp and BJ’s Wholesale Club Inc.

In fact, they said, Petters made up much of this business, deceiving the retailers as well.

“Follow the money,” Marti said. “Creating this fake image of a corporate tycoon: he relished it, he did it all with investors’ money.”

Petters’ now-bankrupt empire once included companies such as Polaroid Corp and Sun Country Airlines Inc. It collapsed into bankruptcy last year after Petters was charged with 20 counts of fraud, money laundering and other charges.

The case has transfixed the Minneapolis area for the last year. It gained greater notoriety after Bernard Madoff was arrested last December for engineering an estimated $65 billion Ponzi scheme. Madoff is serving a 150-year prison sentence.

A Ponzi scheme occurs when money from new investors is used to repay earlier investors.

Kyle’s courtroom was filled to overflowing on Monday, as it was last week when Petters testified for two full days and parts of two others.

Jurors have heard testimony from dozens of witnesses, including former subordinates Deanna Coleman and Bob White, as prosecutors tried to show Petters masterminded the Ponzi scheme.

“Tom Petters knew Deanna Coleman and Bob White were committing fraud,” Marti said. “He continually encouraged them to do so. He paid them to do so.”

Central to the government case are recorded conversations of Petters in September 2008, just before the fraud allegations became public, which prosecutors called an admission of his role.

Defense counsel have said the recorded comments reflected Petters’ having come to discover that a fraud was taking place, not that he was orchestrating it.

Engh, in his summation, called Coleman “a flat-out thief” and White “a one-man crime show.”

Coleman has pleaded guilty in the case and testified against Petters as a prosecution witness.

Kyle has said jurors will decide whether to deliberate on Wednesday, just ahead of the Thanksgiving Day holiday, if there is no verdict by then. Otherwise, they will resume deliberations next Monday.

The case is USA v. Petters et al, U.S. District Court, District of Minnesota, No. 08-00364.

Reporting by Art Hughes; Writing by Jonathan Stempel; Editing by Tim Dobbyn