Prosecutor: Petters tried to be 'corporate tycoon'

Businessman Tom Petters wanted to "live the life of a corporate tycoon," so he engineered a Ponzi scheme that bilked investors out of billions of dollars, prosecutors said at the start of his fraud trial Wednesday.

While Petters' holdings included well-known and legitimate companies such as Polaroid Corp. and Sun Country Airlines, prosecutors say the heart of his business was a fraud they say reached $3.65 billion.

"This case is about deceit, lies, falsified documents and an illusion of a corporate tycoon at the top of a fake corporate empire," Assistant U.S. Attorney Joe Dixon told jurors who were quickly selected Wednesday in U.S. District Court.

Petters didn't engineer the alleged scheme but was the victim of it, his defense countered, saying others charged in the case turned what had been a legitimate business into an actual Ponzi scheme. Jurors will learn when they see the evidence that Petters is innocent, said attorney Jon Hopeman.

"The government's witnesses are instruments of darkness and they are tellers of foul lies," Hopeman said.

Petters became distracted in the early part of this decade as he built his business empire, Hopeman told jurors. He said Petters was devastated by the slaying of his son in Italy in 2004.

"He never intended to hurt anyone, and he never intended to defraud anyone," Hopeman said.

In his opening statement, Dixon laid out how Petters allegedly engineered the scheme, saying he produced bogus purchase orders to trick investors into investing millions of dollars that he would then say he used to buy electronic goods for resale to large retailers such as Costco and Sam's Club.

"The evidence will show he stole billions and billions of dollars from investors so he could live the life of a corporate tycoon," Dixon said.

Petters has pleaded not guilty, and Hopeman contended that Petters was unaware of what his subordinates were doing - partly because of the stabbing death of his son and all the time Petters spent on charitable work. Testimony is scheduled to begin Thursday.

Dixon told the jury how one of Petters' closest associates, Deanna Coleman, came to prosecutors in September 2008 and exposed how she, Petters and other defendants had kept the Ponzi scheme going for more than a decade. She then returned to work wearing a wire and began secretly recording conversations with Petters. The jury heard excerpts from several of those conversations.

Petters allegedly ran the scheme out of Petters Co. Inc., one component of Petters Group Worldwide LLC. The 52-year old from Wayzata faces 20 counts, including wire fraud, mail fraud, money laundering and conspiracy. He's been jailed for over a year and could be imprisoned for life if convicted.

The trial before U.S. District Judge Richard Kyle is expected to take four to six weeks. Kyle decided to pick four alternate jurors, for a total of 10 women and six men, instead of the usual two in case any jurors become ill with swine flu.

Petters pleaded not guilty Dec. 2, just a week before New York financier Bernard Madoff began confessing to an even larger Ponzi scheme. Authorities say Madoff's scheme cost thousands of investors at least $13 billion. Madoff pleaded guilty and is serving a 150-year sentence.

Hedge funds and other private investment funds are claiming the biggest losses in the Petters case, but the alleged victims also include a chemical dependency program for teens and other charities, as well as pastors who invested their retirement savings.

A court-appointed receiver has recovered $196 million so far, including $17 million from the personal assets of Petters and other defendants, which will be used to partially compensate investors who lost money.