Tom Petters to be sentenced Thursday in St. Paulby Martin Moylan, Minnesota Public Radio
St. Paul, Minn. — Disgraced business tycoon Tom Petters is scheduled to be sentenced Thursday in St. Paul.
Last December, jurors convicted Petters of running an investment scam that lasted more than a decade and cost investors more than $3.5 billion. Federal prosecutors argue Petters deserves life without parole. His lawyers say 4 years is plenty.
Petters fooled a lot of people over the years, including the editors of Forbes magazine, which ranked Petters Group Worldwide as one of America's largest privately-held companies.
In a 2007 interview with MPR News, Petters said his companies had about $2.5 billion in annual sales, but he wouldn't disclose profits.
"I'll tell you this: I've had my share of losses and I've had my share of wins," he said. "Thank God, to this point my wins have been able to cover my losses."
At that point in his career, Petters had a reputation as a savvy businessman who had saved companies like Fingerhut and Sun Country Airlines and gave millions of dollars to schools and charities.
But it came out at Petters' trial that most of his companies consistently lost money. Except for the one that milked investors for billions of dollars. Investors thought they were financing the purchase of consumer electronics that would be sold at a hefty profit, but the goods didn't exist.
The deals were shams. Petters managed to keep the scam going for years by attracting new investors. Money from new investors paid former investors --and supported Petters' companies and his millionaire lifestyle.
In September 2008, Deanna Coleman, a longtime Petters' employee and former lover, went to the FBI and ratted out her boss. Coleman secretly recorded conversations with Petters, including this one.
"We might as well give up right now if any of us break rank from each other," he said. "Because living the lie is worse than anything. It gives us all fear and anxiety."
Law enforcement authorities raided Petters' home and businesses soon after Coleman tipped them off. At the time, Petters' scam appeared to be the largest Ponzi scheme in history. Only Bernie Madoff pulled off a bigger con, masterminding a $65 billion scam.
Many people had a hard time reconciling the allegations with the Tom Petters they thought they knew.
After Petters was arrested, former Sun Country executive Shaun Nugent recalled Petters as a great guy.
"Tom is an extremely caring individual," Nugent said at the time. "I think he's a benevolent human being."
But federal prosecutors convinced jurors Petters was a big-time liar and crook. They found him guilty on 20 counts of fraud, money laundering and conspiracy.
The U.S. Attorney's Office says Petters ripped off not only big hedge funds but also ministers, retirees, nursing home residents and small investors who lost their life savings.
Federal prosecutors argue Judge Richard Kyle should slap the 52-year-old Petters with the maximum sentence possible for his crimes -- 335 years. Federal sentencing guidelines, which are not binding, also call for a life sentence.
"Tom's Petters' sentence is solely up to his trial judge," said Hank Shea, a former federal prosecutor and now a law professor at the University of St. Thomas.
"The court is required to consider the sentencing guidelines," Shea said. "The judge is also required by law to impose a sentence that will one reflect the seriousness of the offense, promote respect for the law and provide for just punishment."
Shea and others are looking for Judge Kyle to send a message about white-collar crime.
University of Minnesota law professor Richard Frase saud Petters' scam is the kind of case that erodes the public's confidence in business and investing.
"The fact it got so much publicity, combined with fact it's such a big case makes it hard to be lenient," Frase said.
Petters' attorneys still argue he was a legitimate businessman betrayed by subordinates. They've indicated they will appeal his conviction.
As far as sentencing goes, Petters' lawyers are seeking a jail term of about four years. They argue that would be proportionate with the sentences Bernie Madoff and other white-collar criminals have received. Petters' legal counselors also want the judge to cut Petters some slack because they say he has a pituitary tumor that could blind or paralyze him.
They've asked that Petters be jailed at the Federal Medical Center in Rochester, but federal prosecutors suspect Petters is trying to con the court. They complain they've been denied access to Petters' doctor and say the threat to Petters' health may be exaggerated.
Judge Kyle has been receiving statements from Petters' victims. They are not identified in court filings.
One victim lamented Petters gained the trust of many people by portraying himself as a committed follower of God.
"Does this man not have a conscience?" the victim wrote.
Another victim said he knew Petters personally and regrettably trusted him with his life's savings.
"I think it would be horrible if he received anything less than a life sentence," the victim wrote. "He needs to
Kyle has also received some 50 letters from Petters' friends and family. They cast Petters as a generous man who genuinely cares about people, from an employee booted out of her apartment by an abusive boyfriend to a sister Petters helped battle alcoholism.
Petters goes before Judge Kyle at 9 a.m. this morning.
- Morning Edition, 04/08/2010, 6:20 a.m.