US Wants Maximum Jail-Time For Petters
Wednesday, March 10, 2010

Prosecutors for the United States government are urging US District Judge Richard Kyle to give convicted investment fraudster, Thomas Petters, the maximum jail sentence possible - 335 years - for perpetrating a USD3.65bn fraud scheme.

On December 2, 2009, after a month-long trial and five days of deliberation, a federal jury convicted Petters of orchestrating a multi-billion dollar Ponzi scheme. Specifically, Petters, who was indicted in December 2008, was found guilty of ten counts of wire fraud, three counts of mail fraud, one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering, and five counts of money laundering.

In a sentencing memorandum filed by prosecutors with the US District Court in St Paul, Minnesota, Judge Kyle is advised to dish out the maximum sentence possible to Petters because "the defendant’s fraud is staggering and unprecedented in size and impact on victims and the community."

This would be twice the sentence handed down to Bernard L. Madoff last year, who received 150 years for running the world's largest ever ponzi scheme, estimated at USD50bn. While Petters crime seems insignificant by comparison, USD3.65bn is no small sum, and the Madoff affair has surely distorted perceptions of 'major fraud' in investors' minds. Perhaps the danger that ponzi schemes and other frauds totalling 'just' a few billion dollars has influenced prosecutors in their quest to see Petters punished harshly by the judge.

Lawyers acting for Petter have suggested that the judge show leniency towards the defendant, however, highlighting health problems including a tumor and the potential onset of blindness.

According to the indictment and trial evidence, Petters, aided and abetted by others, defrauded and obtained billions of dollars and property by inducing investors to provide Petters Company, Inc., (PCI) funds to buy merchandise to be resold to retailers at a profit. Instead, the defendant and his co-conspirators diverted the funds for other purposes, such as making lulling payments to investors, paying off those who assisted in the fraud scheme, funding businesses owned or controlled by the defendant, and financing Thomas Petters’s extravagant lifestyle.

The investigation into PCI began on September 8, 2008, when co-conspirator Deanna Coleman and her attorney reported to law enforcement officers that she had been aiding Petters in a multi-billion-dollar Ponzi scheme for ten years. Coleman reported that she, Petters, and co-conspirator Robert White fabricated documents to entice investors into lending Petters money purportedly to purchase electronics to be sold to big-box retailers, such as Costco and Sam’s Club. The money, though, was not used for that purpose.

In subsequent recorded conversations, Petters was heard admitting that purchase orders were “fake” and claiming “divine intervention” was the only way to explain how he and co-conspirators had “gotten away with this for so long.”

To induce investors further, Petters often signed promissory notes and provided his personal guarantee for the funds received. Those who invested, however, were not paid through profits from actual transactions. Rather, they were paid with money obtained from new investors and, at times, from their own money.