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Associated Press , Published August 12 2013

Convicted Ponzi schemer Petters gets hearing

MINNEAPOLIS — Convicted Ponzi schemer Tom Petters is not going quietly.

Nearly four years after his conviction on 20 felony counts, Petters will appear at a hearing in October in a long-shot attempt to cut his 50-year prison sentence. He claims his attorneys never told him about a plea offer from prosecutors that would have capped his sentence at no more than 30 years.

His separate corporate bankruptcy case, meanwhile, is moving slowly as it approaches its fifth year, the Star Tribune reported Monday (http://bit.ly/14oJIj3 ). Attorneys' fees now exceed $76 million but a payoff for creditors and victims of the $3.65 billion Ponzi scheme is nowhere in sight.

Bankruptcy trustee Doug Kelley said he could potentially collect $1 billion on top of the $310 million in assets he's already recovered if he gets favorable rulings from the bankruptcy judge overseeing the “clawback” lawsuits Kelley filed. Those seek to recover profits from investors who lent money to Petters and were repaid with interest for businesses deals that turned out to be bogus.

“Once those rulings are in place, these cases will start to move quickly,” Kelley told the newspaper.

But Ann Graham, director of the business law institute at the Hamline University School of Law, said Kelley will have to show conclusively that investors knew the deals were flawed.

The upcoming hearing in Petters’ criminal case may be his last shot at reducing his sentence. The 8th U.S. Circuit Court of Appeals and the U.S. Supreme Court have already rejected his attempts to set aside his 2009 conviction and/or cut his prison term.

“It's a Hail Mary pass,” said former federal prosecutor Bill Michael, who now chairs the white-collar crime group for Chicago law firm Mayer Brown.

Petters will play the starring role in an evidentiary hearing scheduled for Oct. 15-16 before U.S. District Judge Richard Kyle. His now-estranged original defense team is also expected to take the stand.

Petters claims his attorneys never presented him with the purported offer from federal prosecutors of a 30-year sentence in exchange for a guilty plea. His former defense lawyers have submitted sworn statements to Kyle that Petters knew about the potential deal but was not interested. Government attorneys say the plea bargain was never a formal offer in the first place.

“Mr. Petters is guilty,” said Steve Meshbesher, the defense attorney retained by the Petters family to push for the reduced sentence. “The issue is, had he received that offer, would he have accepted it? He says the answer is yes.”

Petters is one of 13 defendants who were found guilty or pleaded guilty to charges stemming from a fraud that involved the purported sale and resale of consumer electronic goods that never actually existed. In reality, funds from new investors were used to repay older investors.

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Information from: Star Tribune, http://www.startribune.com


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