Minnesota businessman Tom Petters sentenced to 50 years in prison in $3.7B fraud caseBy Steve Karnowski, AP
Thursday, April 8, 2010
Minn.’s Petters gets 50 years in $3.7 fraud case
ST. PAUL, Minn. — A federal judge sentenced fallen Minnesota tycoon Tom Petters to 50 years in prison on Thursday for orchestrating a $3.7 billion Ponzi scheme that counted hedge funds, pastors, missionaries and retirees among its victims.
“Every day, I’m filled with pain and anguish for all the lives that have been destroyed and touched by this episode,” Petters said at his sentencing hearing. He apologized to family, friends, co-workers and others who were hurt but did not concede guilt.
U.S. District Judge Richard Kyle said he didn’t believe Petters, the one-time owner of Polaroid and Sun Country Airlines, was unaware of the fraud within his operations at Petters Group Worldwide, as he has claimed.
“Mr. Petters was captain of the ship,” Kyle told a packed courtroom that included Petters’ relatives as well as some victims.
A jury convicted Petters in December on 20 counts of wire fraud, mail fraud, money laundering and conspiracy.
The defense said four years behind bars would be sufficient punishment. Kyle said the long sentence was necessary.
Granting one defense request, however, the judge said he would recommend to the Bureau of Prisons that Petters be allowed to serve his time in Minnesota, which would allow him to be closer to his family, including his two young sons. The decision will be up to the agency.
Prosecutors had argued that Petters deserved the statutory maximum of 335 years. But B. Todd Jones, the U.S. attorney for Minnesota, told reporters after the hearing that 50 years was “fair and just” and is still tantamount to a life sentence for the 52-year-old.
Even with time off for good behavior and credit for the 18 months he’s already spent in jail, Petters would still have to spend 41 years in prison, Jones said, meaning he would be 93 before he could go free.
“Tom Petters was a fraud,” Jones said. “Tom Petters built his life on deceit and lies, and today the check came due.”
After the sentencing, Petters’ attorneys released a statement that read: “We are saddened by the verdict and sentence. There is no victory for anyone when a vibrant young man is placed into a prison cell for the balance of his days and nights.”
Attorney Jon Hopeman said the defense team would have no further comment. The defense has maintained Petters is innocent and in court Thursday reaffirmed its plan to appeal.
The lead prosecutor, Assistant U.S. Attorney Joe Dixon, told the judge the large number of victims — expected to exceed 500 — was reason enough for a stiff sentence. He said Petters used the scheme to take $400 million in investors’ money to support his lifestyle and prop up his companies.
“This is the largest fraud in Minnesota history,” Dixon said. “Its impact, its devastation cannot be overstated.”
But defense attorney Paul Engh argued against a long sentence simply for the sake of making a point.
“The fact of the matter is high-time sentences accomplish nothing,” Engh told the judge, arguing that even notorious crimes soon fade in the public’s mind, giving long sentences have little deterrent effect.
Engh described his client as “flawed but benevolent” and cited a ream of letters written on Petters’ behalf.
Petters testified at trial that he had thought Petters Co. Inc., an arm of his now bankrupt Petters Group Worldwide, was doing real deals involving real merchandise.
According to testimony and documents presented at trial, PCI used fake purchase orders and bogus bank records to persuade investors to finance what they were told would be purchases of electronics such as big-screen televisions that PCI would resell to discount retailer such as Sam’s Club and Costco. In reality, the prosecution contended, the merchandise never existed and the sales never took place.
Petters’ attorneys blamed other business associates — who all pleaded guilty in hopes of leniency when they’re sentenced later — and said his biggest mistake was trusting them.
Since Petters was convicted, he has cooperating with the court-appointed attorney attempting to recover losses in the scheme. Doug Kelley, who is leading that effort, said Petters could prove instrumental in retrieving up to $500 million, some of it held by hedge fund investors who made big profits from their investments in PCI before it collapsed in 2008.
“We have a lot of financial records, but this is such a vast empire that his help will help,” Kelley said. “We’re going to keep using him.”
Tags: Fraud And False Statements, Minnesota, North America, St. Paul, United States