Esme's Blog

Defense Rests In Petters Trial

Fri, 20 Nov 2009 16:23:04 GMT

Revelation in the Petters case: defense attorney Jon Hopeman says that Deanna Coleman was wearing a hidden camera and set up hidden cameras when she was secretly recording Tom Petters over a 16-day period last September. Neither the prosecution nor the defense has introduced any of the videotapes.

The defense rested at 9:40 this morning. Petters was on the stand for 40 minutes and again there were fireworks. Petters said he maintains to this day the raids on his business and home in September 2008 were not necessary. Petters said he was on the verge of working to unearth the fraud himself and could have worked out all the problems had he been allowed to continue in business. Petters said, "The raid was unnecessary and I would maintain that to this day."

Petters said Deanna Coleman had told him of the fraud before she made the recordings and Petters said he was on the verge of going to law enforcement himself. Prosecutor Joe Dixon mocked Petters, asking him, "Should we [law enforcement] have waited one more day?"

Defense Attorney Jon Hopeman presented a clip from the secret recordings that bolsters the defense's case. In that clip, recorded on Sept. 9, Petters asks Coleman, "You're saying in 17 years you never had any real transactions from the beginning to the end?"

Coleman goes on to say that in the beginning there were real transactions. Petters says at that point he is convinced that Coleman is mentally ill because he says he knows there have been real deals.

Closing arguments apparently will not happen today, but will occur on Monday. The court is over for the day. The case will definitely go to the jury on Monday.

Prosecutor Dixon Confronts Petters

Thu, 19 Nov 2009 23:55:14 GMT

It was an extraordinary day of confrontation between Tom Petters and prosecutor Joe Dixon. One of the more surprising answers came when Tom Petters was confronted with the written transcripts of two somewhat incriminating quotes from the secretly recorded tapes made by Deanna Coleman.

Here are the two quotes:

"It's not just me that knew it was a crime or you or Bob."

"If worse comes to worse you would not go to jail. I would."

Both quotes are from conversations Petters was having with Coleman. Petters told the jury that he feared he could go to jail for possible SEC violations involving hedge funds and not for the fraud.

Petters was also confronted with another transcript in which he is struggling with how he is going to repay hedge funds. On the tape he says, "This sucks so bad." Questioned by Dixon as to what he meant Petters said, "I don't know what sucked." Dixon fired back, "You were committing fraud -- that's what sucked."

Petters: 'I'm A Sick Man'

Thu, 19 Nov 2009 18:38:43 GMT

Tom Petters is being pummeled on the stand by prosecutor Joe Dixon on some of the inconsistencies in his testimony. This is just one exchange:

Dixon: "Is it possible you lied to Paul Feehan [an executive at CE Capital] to make up an excuse?"
Petters: "Anything is possible."

Petters seemed to bristle most at questions about his affair with Deanna Coleman. Petters denied that the relationship was "intimate," but acknowledged that it was "sexual." He described the beginning of the sexual relationship as "a situation occurred" the trial that followed his son's murder in Italy.

Under questioning, Petters denied having a sexual encounter with Coleman in a Gondola in Italy. And Petters denied that the sexual relationship lasted 18 months. Petters started to protest having to talk about the relationship saying, "I am not going to go there." Dixon fired back, "You are under oath, you have to testify." Petters then asked the judge, "Can I be explicit?" The judge told him to just answer the question.

The prosecution than played yet another one of the secret tapes recorded by Deanna Coleman. In the tape recorded in September 2008, Petters told Coleman he was naked in bed and asked her to "come over and jump in bed with me."

Petters went on to say, "I'm a sick man. F---! I'll tell you what."

Petters On The Stand Day #3

Thu, 19 Nov 2009 16:55:55 GMT

Tom Petters has offered an explanation for some of the more incriminating bits of testimony against him. He said he was not the one who forged his nanny's signature on a letter to Ted Deikel in September of 2008. Petters said his assistant, David Margolis, faxed the letter, leaving the clear implication that it was Margolis who forged the signature. The nanny, Jennifer Wolter, was listed on the letter as a witness.

As for the testimony by financier Irwin Jacobs that Petters had asked him to inflate an invoice, Petters offered the following explanation. He said after he purchased a number of stores from Jacobs, Petters discovered the stores were not as profitable as Jacobs claimed they were. Petters said a Jacobs' employee told him, "you bought a pig in a poke". Petters said he went back to Jacobs and asked him to write an invoice for what the stores were really worth.

Petters testified hours before Deanna Coleman began recording him on September 8, 2008. She confessed that there were massive problems at PCI and that they did not have documents to show auditors who were planning to visit the company. Petters also said that as she made the secret recordings, she would put a post-it in front of him telling him not to talk about certain things.

As for the comments on the tape where Petters said the invoices were fraudulent, Petters offered this explanation. He said the invoices were written up to disguise who the actual purchasers of the merchandise were because of non-disclosure agreements with the buyers. Petters said those types of agreements were traditional industry practice.

The defense also introduced a video of Deanna Coleman from 2007 in which she describes how wonderful and generous Petters is. She says he is like a "brother" to her. The video was made by former KSTP anchor Joe Schmit, who was working for Petters at the time.

Petters said he was diagnosed with ADD after his son's death and he was on Adderall. He acknowledged that on the tapes he sounds "like maniac". He also acknowledged that his use of profanity on the tapes is "terrible."

Prosecutor Joe Dixon has begun his cross examination. White grilled Petters about a false tax return prepared by Bob White that went to a Florida bank so Petters could get an increase on a line of credit. "So Bob White just decided to do this out of the goodness of his heart?"

Another Morning, Another Line

Thu, 19 Nov 2009 14:58:07 GMT

There was a line this morning starting at 7:30 a.m. to get into the courtroom at the Tom Petters trial.

Yesterday ended when the judge, with the jury out of the courtroom, chastised the lawyers for not staying on schedule. Defense attorney Jon Hopeman had told the judge that it would take him about two hours to question Petters. It took all day and he still isn't finished.

The judge clearly has to feel pressure to get this to the jury before Thanksgiving, although it's hard to see how that can happen. Petters' answers to even simple questions are lengthy. Petters loves to elaborate on the deals he was working on up until, as he puts it, "the end."

"The end" is clearly a reference to the raids by federal agents on Sept. 28 of last year. Just three weeks before the raid, Petters traveled to Kazakhstan to negotiate a deal for the Polaroid license for that area with Vladimir Kim, a billionaire listed in Forbes magazine as one of the world's wealthiest people. Also in September, he was in contact with executives at Circuit City trying to make a deal for their distressed inventory.

As he describes the deals, he is animated, speaking in incredible detail. Yet he has lacked detail on matters were testimony has incriminated him.

In 2000, he told executives at GE Capital he would fire those responsible for phony invoices and checks. Yet Petters stumbled when he explained to the jury yesterday that he believed Deanna Coleman when she said she had fired someone for the offense. He said he did not press her and wished that he had questioned her further.

Petters Gives His Version Of Things

Wed, 18 Nov 2009 23:41:48 GMT

Point-by-point Tom Petters is giving his version of some of the testimony against him. He denied paying Michael Catain and Larry Reynolds millions of dollars as a commission to allow him to launder billions of dollars through their bank accounts. Petters said the commissions paid to Catain and Reynolds was for the deals they helped oversee.

In earlier testimony, the prosecution played a tape where Petters asks Deanna Coleman to clean out Bob White's office in advance of auditors coming to the company. White testified his office was a mess because of his constant work "cutting and pasting" phony invoices. Petters testified the real reason he wanted White's office cleaned out is because he feared White would obstruct the audit and he didn't want White interfering with the auditors.

Petters was asked about a secretly recorded conversation that took place after his offices were raided in September 2008. In that conversation, Petters can be heard advising Bob White to leave the country. Petters testified that it was a major mistake and "stupid" of him to tell White to leave. And Petters denied he ever had planned to leave the country himself.

Petters was asked about two sets of tax returns that ended up in a Florida bank in 2004 when he was looking for an increase in his personal credit line. Bob White had testified that Petters asked him to inflate his income on the returns so he could get the increase.

Petters testified he never asked White to do that. Petters testified that when Petters later confronted White, Petters said White told him he had grabbed all Petters K-1 tax documents (an IRS form that reflects additional investment income) and that White had submitted an amended return for him. Petters said it was an explanation that made sense to him.

Petters explanation of these points, and others, were often rambling. And his own attorney would repeatedly ask him to simply answer the question.

'Just Answer The Question'

Wed, 18 Nov 2009 19:12:08 GMT

Tom Petters is giving rambling answers that have both his own attorney, Jon Hopeman, and Judge Richard Kyle admonishing him to just "answer the question."

Petters has been at his best describing the deals that made him famous including the acquisitions of Fingerhut and Polaroid. He has struggled with questions about how he dealt with being confronted by GE Capital in 2000 that his companies had provided him with fraudulent invoices and checks. Petters replied his "memory is cloudy."

Petters mumbled something about his own arrest and then talked about getting reassurances from Deanna Coleman that the person responsible for the phony documents had been fired.

"I always believed Deanna," he said.

Petters In Tears On Stand

Wed, 18 Nov 2009 17:37:56 GMT

Tom Petters is in tears as he recounts the 2004 murder of his son in Italy. He said, "I tried to stay in the game," but said he had a hard time working after his son's death. He said before the murder he had very little to do with PCI (the sham company at the heart of the fraud with which he is charged) and after 2004 he said he had "nothing" to do with it. Defense Attorney Jon Hopeman is struggling to rein Petters in, as he is giving somewhat rambling answers. Petters is making eye contact with jurors throughout his testimony.

Explosions Imminent

Wed, 18 Nov 2009 14:54:22 GMT

Ninety minutes before court begins in the Tom Petters trial, the courtroom is already full.

Petters will be on the stand through the day today and likely well into tomorrow. The cross examination is likely to be explosive. Prosecutors have exhibited an extremely combative and aggressive style with other witnesses. In an effort that seemed to be stretching, prosecutors accused defense witnesses Steve Ratliff George Danko and Patty Hamm of cheating on their taxes. All received huge bonuses from Petters Company Inc.

Hamm ,who was the Human Resources V.P. for Petters Group Worldwide, testified that her salary was in excess of $400,000 and in 2007 she received an $800,000 Christmas bonus. The bonus check was written on the account of Petters Company Inc., the company that prosecutors say was a sham.

Hamm, Ratliff and Danko all reported their bonuses as "consulting fees" on the recommendation of their accountants. All insisted on the stand they had done nothing wrong and handed over their taxes to accountants who prepared them.

None of them have been charged with any form of tax evasion, which made the prosecutors' extremely aggressive handling of them seem a little over the top. If prosecutors were that rough with them, what will they be like with Tom Petters?

Petters On The Stand

Wed, 18 Nov 2009 00:42:17 GMT

When a defense accounting expert finished testifying at 3:45 p.m., defense attorneys Paul Engh and Jon Hopeman went back and sat down with Tom Petters. They both asked Petters a question, he nodded yes and Hopeman rose to call him to the stand.

Hopeman wisely cut right to the heart of the matter acknowledging people have been hurt. Petters said, "I have a lot of regrets." And he then apologized to his employees, investors, his mentors and his family. He went on to say he had participated in a fraud but "not knowingly." Hopeman asked, "Are you guilty?" and Petters answered, "No, I am not." He then launched into his background. A photo of him in front of the first business he started at the age of 16 in St. Cloud was introduced. Hopeman also showed the jury family pictures, of he and his fiancé Tracy Mixon and their two young sons who are ages 2 and 4. The jury also saw pictures of his older children, Jennifer and John. John was murdered in 2004 in Italy and a number of witnesses have said Petters' behavior changed dramatically after the murder. Petters was only on the stand for about 40 minutes. He could be on the stand for days. No doubt prosecutors will confront him with his own words from those secret tapes recorded by Deanna Coleman.