Allan Caplan recalls clearly that August Friday afternoon two years ago. The veteran defense attorney was going to go home early.
"Then someone came into my office and said there's a woman on the phone and she wants to meet. She's involved in a fraud," Caplan said.
That woman was Deanna Coleman, and that fraud was the $3.65 billion Ponzi scheme orchestrated by Tom Petters.
Coleman came to Caplan's downtown Minneapolis office that day. "She began to tell her story, and it was the best story I had ever heard," said Caplan of the 14-year investment fraud. "She realized there would never be enough money available to pay off all of the investors," Caplan added.
"She wanted to know her exposure. She wanted to know her options," he recalled. "I said, 'Your exposure is you might get to spend the rest of your life in prison if convicted.'"
Caplan made his first extensive public comments about Coleman and the Petters case in a panel appearance on white-collar crime sponsored by the Minnesota chapters of the Turnaround Management Association and the Association for Corporate Growth. Panelists included Assistant U.S. Attorney John Marti, who helped prosecute Petters, and former federal prosecutor Hank Shea, who is a business ethicist at the University of St. Thomas.
Coleman, vice president for operations in Petters' company, was remorseful, Caplan said. He got her permission to take her story to federal authorities in an attempt to "cut a deal" to limit potential charges in exchange for her cooperation.
Caplan contacted Assistant U.S. Attorney Joe Dixon and had "a very interesting conversation."
"This case was too big and explosive. The exposure was too great. I told the government that I had a client in a $3 billion fraud and I could deliver it on a silver platter. But I needed a deal upfront," Caplan said.
Caplan and the government reached agreement on a single charge of conspiracy against Coleman that carried a maximum five-year sentence. She has yet to be sentenced.
Then, Coleman went to the U.S. attorney's office on Sept. 8, 2008, and told her story. Shortly afterward, FBI agents equipped Coleman with devices to secretly tape potentially incriminating conversations with Petters.
Federal authorities moved quickly and aggressively after they heard Coleman's version of events and the $3.65 billion Ponzi scheme masterminded by Petters, Marti recalled.
Marti said Dixon called him into his office the next day and briefed him. "I might need your help," Dixon said, according to Marti. "It was hard to wrap your mind around it," Marti said of the 14-year fraud. "It was a fairly fantastic story."
And then, within hours of turning on her undercover wire, Coleman had Petters on tape saying emphatically, "This is one big [expletive] fraud."
"We were thinking we had something here," Marti said to laughter from the audience of several hundred.
For the next 16 days, "it was a race" to get sufficient evidence to execute search warrants without tipping off Petters and others involved in the criminal enterprise. "We didn't know who were wearing the white hats and who were wearing the black hats," Marti said. "We were trying to get the timing right, and it worked."
On Sept. 24, 150 federal agents executed search warrants on sites in Minnesota, Florida and California.
Marti also recalled the hours leading up to Petters' arrest on Oct. 2, 2008.
Authorities were afraid that Petters might flee the country, and that morning he had been spotted heading toward Minneapolis-St. Paul International Airport. Suddenly every federal agent in Minneapolis was on the lookout for Petters, including a team staked out in front of his Wayzata home. But he was nowhere to be found.
"Three hours later someone said, 'Why don't we go up to the door and knock?'" Marti recalled. Agents found Petters in his home and arrested him.
According to Marti, Petters' response to the agents as they entered his house was, "You really didn't need to do this."
Marti said Petters' Ponzi scheme, which had been constructed on his skill as a salesman, was beginning to collapse from lack of new investors when the government began its whirlwind investigation.
"Many of the victims were wise, sophisticated investors," Marti said. "If you thought you couldn't be taken by Tom Petters, you were looking at a fool in the mirror."
Petters was convicted on 20 counts of fraud, conspiracy and money laundering late last year. He was sentenced to 50 years in prison in April. Both the conviction and the sentence are on appeal.
David Phelps • 612-673-7269