Court affirms 50-year sentence for Ponzi schemer Petters

Reuters News
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Posted: Dec 09, 2011 5:28 PM
Court affirms 50-year sentence for Ponzi schemer Petters

By Terry Baynes

(Reuters) - A Minnesota businessman sentenced to 50 years in prison for running a $3.7 billion Ponzi scheme lost his bid to overturn his conviction on Friday.

Thomas Petters argued that the trial court violated his constitutional rights by preventing him from conducting a full questioning of key prosecution witness Larry Reynolds, a convicted felon and disbarred lawyer in the witness protection program who helped perpetrate the fraud.

The trial court sealed Reynolds' witness protection file and prevented Petters from presenting it at trial to show Reynolds' involvement in other criminal schemes.

The U.S. Court of Appeals for the 8th Circuit rejected Petters' argument, finding that he had adequate opportunity to confront Reynolds and present a complete defense. Petters' lawyers were able to refer to Reynolds by name, reveal his prior criminal history and cross-examine him based on information in his sealed witness protection file, the court found.

"Defense counsel was able to vigorously attack Reynolds' credibility in the cross-examination by establishing that he had participated in multiple other fraud schemes," Judge Bobby Shepherd wrote on behalf of the three-judge panel.

Petters' lawyer, Jon Hopeman, said he would ask the U.S. Supreme Court to review the case. He said the trial court did not allow his client to show the jury the full extent to which Reynolds "corrupted Mr. Petters' businesses and lied to the jury during the trial," thereby violating his right to a complete defense.

Prosecutors accused Petters of using one of his companies to bilk investors who thought he was using their money to buy consumer electronics for resale to retailers, including Costco Wholesale Corp and Sam's Club. Reynolds aided the fraud by supplying fake purchase orders and reassuring investors, prosecutors said.

A federal jury convicted Petters in December 2009 on 20 counts, including wire fraud, mail fraud and money laundering, and sentenced him to 50 years in prison.

In addition to claiming the lower court violated his confrontation rights, Petters said the trial judge's exclusion of Reynolds' witness protection file deprived him of the right to a public trial. But the appeals court ruled that sealing the file was not equivalent to closing the trial to the public.

The case is USA v. Thomas Joseph Petters, U.S. Court of Appeals for the 8th Circuit, No. 10-1843.

(Reporting by Terry Baynes; Editing by Gary Hill)