Katharine Grayson, Staff Writer
Minneapolis / St. Paul Business Journal | Tuesday, November 17, 2009, 6:46pm
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Tom Petters testified on Wednesday afternoon that he was largely removed from Petters Co. Inc.’s operations, trusting executives Deanna Coleman and Bob White to run the business while he focused on other ventures and charitable giving.
Petters Co. Inc. (PCI) is at the center of prosecutors’ charges that Petters orchestrated a multbillion-dollar Ponzi scheme, promising to use investor funds to buy and resell goods but instead using the money for other purposes. His defense team claims that Coleman and White, both key government witnesses, perpetrated the fraud and Petters didn’t know about it.
Tom Petters’ Wednesday testimony carried over from Tuesday, when he apologized to defrauded victims, but said he’s innocent. When asked by defense attorney Jon Hopeman if he was guilty, Petters answered, “No, I’m not.” On whether he had regrets, Petters said, “I ran too fast. I trusted some people far too much.” He also apologized to investors – including those “never met” – as well as family members, past mentors and employees.
Petters said he paid “very little, if any” attention to PCI after his son, John Petters, was murdered in Italy in 2004. Petters teared up when his attorney, Jon Hopeman, asked him to explain how John Petters was killed and his feelings afterwards.
“I didn’t know if I could keep going in business,” Petters testified, saying he turned his attention toward charitable giving, pledging between $25 million and $30 million in donations to various organizations. He also said he focused on other business ventures.
Petters said he relied heavily on Coleman when it came to PCI’s operations, trusting her to handle paper work and manage deals. Petters testified that he continued to trust her even after GE Capital officials told him that they’d received fake checks to PCI as proof of a deal to sell merchandise.
“I always, always, always believed Deanna,” Petters said. He also said he never received a letter Coleman wrote in which stated she was afraid of going to jail. Prosecutors presented the letter as evidence earlier in the trial.
Petters also said he stayed away from the details of deals, relying on lawyers and accountants to ensure everything was in order.
When Petters bought Polaroid in 2007, he said he signed his signature more than 300 times on documents that he didn’t read. He also described his company’s structure as at times confusing. “There were way too many Petters entities, as you can see,” he said.
Petters emphasized that he disliked the diverting business and wanted to sell PCI for more than 10 years. He said deals often were fraught with problems ranging from goods turning out to be in poorer condition than promised, to bounced checks.
“Everything in me hated it,” Petters said.
Petters said he had offers from buyers. “People wanted to buy the golden goose,” he said. Petters testified that White urged him not to sell PCI.
Petters also denied prosecutors’ statements that, but for PCI, all his other business ventures were unprofitable. He said Polaroid was profitable for one year. Ubid also posted a profit the first year after he acquired the online-auction company, Petters testified. He also said Fingerhut was profitable.
Later in the day, Petters also cast blame on business associates, including Larry Reynolds, a key government witness who has pleaded guilty to money laundering in the case. Petters testified that he trusted Reynolds to locate real deals, and assumed he was doing so. Reynolds told Petters that retailers were paying late on deals, but the reasons Reynolds gave were “all good ones,” Petters said.
Petters also said Reynolds orchestrated a deal involving Playstation game consoles, which prosecutors used as evidence of fraud.
He also addressed a taped call in which Petters suggested that White flee the country. Prosecutors in the case used the call to request that Petters be jailed until trial, calling him a flight risk. Petters said that he did not intend to flee, but wanted White to leave because White would impede the investigation.