By Todd Melby
ST. PAUL, Minn., Oct 29 (Reuters) - Tom Petters concocted fake checks and purchase orders as part of a Ponzi scheme to deceive retailers into believing that he was transacting more business with them than he actually was, the U.S. government said at his trial on Thursday.
With Petters looking on at the first full day of testimony into his alleged $3.65 billion fraud, prosecutors questioned several witnesses, introducing what they called evidence of bogus transactions involving Costco Wholesale Corp and General Electric Co's GE Capital unit.
GE Capital executives testified how the lender extended a $50 million line of credit to one of Petters' companies, before confronting the Minnesota businessman about documentation for some Costco transactions. One said Petters became irritated when asked to repay $45 million that had been drawn down.
'Tom Petters called me and read me the riot act,' said GE Capital risk executive Paul Feehan. 'He gave me a butt-kicking. He was adamant that I stay the hell away from Costco.'
Other evidence was introduced that after some transactions were challenged, Petters wrote a letter to Costco on Oct. 24, 2000, saying, 'The purchase orders listed below I realize were never issued to Petters Co.'
In their cross-examinations, meanwhile, defense lawyers began to try to shift blame for the Ponzi scheme away from Petters and in particular toward Deanna Coleman, a former associate who became the whistleblower in the case.
Petters' now-bankrupt empire once included companies such as Polaroid and Sun Country Airlines.
It crashed a year ago in a 20-count federal indictment accusing him of fraud, money laundering and other charges for the alleged Ponzi scheme, one of the largest known at the time. He pleaded innocent.
Prosecutors have accused Petters of promising investors big returns through financing his company's purchase and sale of electronics goods to retailers such as Costco, BJ's Wholesale Club Inc and Wal-Mart Stores Inc's Sam's Club.
Petters would use new funds to repay earlier investors and company expenses and to fund a lavish lifestyle including expensive cars and homes, prosecutors have said. He also deceived investors by showing them faked records, they said.
Another witness, Costco buyer Scott Haggbloom, recalled meeting Petters at a Las Vegas consumer electronics show, and coming away thinking that Petters was an 'excellent salesman.'
Petters was jailed last October.
His case gained prominence after last December's arrest of Bernard Madoff for a Ponzi scheme that burned investors around the world.
The trial is expected to last four to six weeks.
Coleman, a former vice president for Petters, in September 2008 confessed to helping to run the Ponzi scheme for more than a decade. She pleaded guilty to conspiracy. Six others have also pleaded guilty and are cooperating with prosecutors.
The case is USA v. Petters et al, U.S. District Court, District of Minnesota, No. 08-00364.
(Reporting by Todd Melby; Additional reporting by Jonathan Stempel; Writing by Jonathan Stempel) Keywords: PETTERS/PONZI (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
ST. PAUL, Minn., Oct 29 (Reuters) - Tom Petters concocted fake checks and purchase orders as part of a Ponzi scheme to deceive retailers into believing that he was transacting more business with them than he actually was, the U.S. government said at his trial on Thursday.
With Petters looking on at the first full day of testimony into his alleged $3.65 billion fraud, prosecutors questioned several witnesses, introducing what they called evidence of bogus transactions involving Costco Wholesale Corp and General Electric Co's GE Capital unit.
GE Capital executives testified how the lender extended a $50 million line of credit to one of Petters' companies, before confronting the Minnesota businessman about documentation for some Costco transactions. One said Petters became irritated when asked to repay $45 million that had been drawn down.
'Tom Petters called me and read me the riot act,' said GE Capital risk executive Paul Feehan. 'He gave me a butt-kicking. He was adamant that I stay the hell away from Costco.'
Other evidence was introduced that after some transactions were challenged, Petters wrote a letter to Costco on Oct. 24, 2000, saying, 'The purchase orders listed below I realize were never issued to Petters Co.'
In their cross-examinations, meanwhile, defense lawyers began to try to shift blame for the Ponzi scheme away from Petters and in particular toward Deanna Coleman, a former associate who became the whistleblower in the case.
Petters' now-bankrupt empire once included companies such as Polaroid and Sun Country Airlines.
It crashed a year ago in a 20-count federal indictment accusing him of fraud, money laundering and other charges for the alleged Ponzi scheme, one of the largest known at the time. He pleaded innocent.
Prosecutors have accused Petters of promising investors big returns through financing his company's purchase and sale of electronics goods to retailers such as Costco, BJ's Wholesale Club Inc and Wal-Mart Stores Inc's Sam's Club.
Petters would use new funds to repay earlier investors and company expenses and to fund a lavish lifestyle including expensive cars and homes, prosecutors have said. He also deceived investors by showing them faked records, they said.
Another witness, Costco buyer Scott Haggbloom, recalled meeting Petters at a Las Vegas consumer electronics show, and coming away thinking that Petters was an 'excellent salesman.'
Petters was jailed last October.
His case gained prominence after last December's arrest of Bernard Madoff for a Ponzi scheme that burned investors around the world.
The trial is expected to last four to six weeks.
Coleman, a former vice president for Petters, in September 2008 confessed to helping to run the Ponzi scheme for more than a decade. She pleaded guilty to conspiracy. Six others have also pleaded guilty and are cooperating with prosecutors.
The case is USA v. Petters et al, U.S. District Court, District of Minnesota, No. 08-00364.
(Reporting by Todd Melby; Additional reporting by Jonathan Stempel; Writing by Jonathan Stempel) Keywords: PETTERS/PONZI (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.