Petters Associate Details Alleged Ponzi Scheme

Nov 11 2009 | 9:10am ET

Things do not seem to be going very well for accused hedge fund fraudster Thomas Petters.

The Minnesota businessman and hedge fund manager, who is accused of running a $3.5 billion Ponzi scheme, has suffered through several days of damaging testimony at his fraud trial in St. Paul, Minn. Worse yet, his lawyers argue, the judge has barred them from adequately presenting their case.

On Monday, Paul Engh, Petters’ lawyer, demanded a retrial after U.S. District Judge Richard Kyle repeatedly upheld prosecutors’ objections to Engh’s cross-examination of Larry Reynolds, who under direct examination had described in detail Petters’ alleged fraud.

“He lied to the jury about his crimes,” Engh claimed of the man he called his most important witness. “The jury has to hear the truth.”

One thing they won’t be hearing is the judge declaring a mistrial. Kyle immediately denied Engh’s motion.

What they did hear was Reynolds’ testimony on all the fraud he and Petters allegedly engaged in. The convicted felon and witness protection program member said he and Petters began conspiring together more than 10 years ago. Reynolds, who has already pleaded guilty to money-laundering in the case, said he helped lie to auditors and Petters’ investors, drawing up phony documents for the alleged Ponzi scheme and helping Petters launder money.

Last week, the prosecution’s star witness testified: Deanna Coleman, the former vice president of operations at Petters, who agreed to wear a wire after admitting the scheme to authorities last year. In one taped conversation with Petters CFO Bob White, Coleman said that “Tom knows” the purchase orders alleged used in the Ponzi scheme were fake, “he just doesn’t want [to] think about it.”

The jury has also heard from Petters’ top accountant, James Wehmhoff, who called the company’s books a mess, and from a hedge fund manager at Interlachen Capital Management, which claims it lost $60 million in the scam.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Expert Says Scale Of Baillon Classic Car Find Rare

Dec 29 2014 | 3:40am ET

Forget about hedge funds, buying rare, classic cars could be called the ultimate...

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.