Petters assistant recalls decision to go to feds

The prosecution's star witness in the fraud trial of Minnesota businessman Tom Petters wept as she explained her decision to go to federal investigators.

Deanna Coleman testified that by the middle of 2008, she no longer believed Petters' promises to find them a way out of what prosecutors say was a Ponzi scheme, and pressure from investors was building.

Coleman said when she and her lawyer went to authorities last fall, she had a list showing Petters Co. Inc. owed investors more than $3.5 billion. The investors included some prominent Twin Cities businesspeople, including Ted Deikel, to whom they owed $10 million.

Coleman also acknowledged that she and Petters had an intimate relationship in 2005 and 2006. She cried as she recalled Petters promising in those years to get them out of the scheme -- promises she says he never kept.

Coleman, 43, of Plymouth, was vice president of operations at Petters Co. Inc. Under questioning by prosecutors earlier Tuesday, she discussed dozens of bonus checks Petters paid to top employees in 2006 and 2007.

They were worth millions of dollars and were drawn on the account of PCI, which prosecutors say was at the heart of the Ponzi scheme.

Coleman testified the checks were funded by investors who thought their money was going toward merchandise sales.

Petters, 52, of Wayzata, is charged with 20 fraud-related counts. His attorney says he's innocent and that Coleman and others carried out the scheme without Petters' knowledge.

Petters' attorney is expected to cross-examine Coleman this afternoon.