Petters Blames Top Associates for Alleged Fraud

Minnesota businessman Tom Petters put the blame squarely on several of his trusted friends Wednesday for the $3.65 billion fraud carried out at Petters Co. Inc.

FILE - This undated photo provided by the Sherburne County, Minn., Jail via KSTP-TV shows Minnesota...

FILE - This undated photo provided by the Sherburne County, Minn., Jail via KSTP-TV shows Minnesota businessman Tom Petters. The defense is telling its side in the fraud trial of the Minnesota businessman. One of the first defense witnesses Monday, Nov. 16, 2009 was a cousin of the defendant. Karl Petters used to work at Petters Co. Inc., the company prosecutors say was at the heart of a $3.65 billion Ponzi scheme. (AP Photo/Sherburne County Jail via KSTP-TV, File)

(AP)

Testifying for the second day in his fraud trial, Petters said two PCI vice presidents, Deanna Coleman and Bob White, did nearly all the work of running PCI, which was part of his Petters Group Worldwide holdings.

Petters denied asking Coleman or White to prepare fake financial documents such as purchase orders and bank statements, and said he would have fired them if he had known they did.

He also pointed the finger at another friend who did business with PCI, Larry Reynolds. He said he had no idea Reynolds was a disbarred lawyer and convicted felon who was hiding in the witness protection program until his lawyers broke the news to him earlier this year.

But Petters spent the bulk of his time on the stand discussing his involvement in legitimate deals, including real merchandise liquidations through PCI in the 1990s. This decade, he recalled, he put up the money to save catalog and online retailer Fingerhut; licensed the Polaroid brand and put it on DVD players, TVs and cameras before he bought Polaroid altogether; and he bought Sun Country Airlines to keep it flying.

Petters, 52, of Wayzata, grew emotional while talking about the stabbing death of his son, John Petters, in Italy in 2004, which he depicted as a turning point in his life.

While he started PCI in the 1990s, Petters said he was spending "very little" time on it in the years right before his son's murder. And he said he spent virtually none of his time on PCI after that, as he dealt with his grief by throwing himself into charitable work and his newer acquisitions, such as Polaroid.

Prosecutors say PCI was at the heart of a Ponzi scheme that used false documents to induce hedge funds and other investors to make short-term loans that PCI would purport to use to buy electronics goods from various sources to resell at a profit to discount clubs such as Costco and Sam's Club. In most cases the goods never existed and the money went instead to pay off other investors, support Petters' lifestyle or subsidize the other companies he owned, the prosecution contends.