Complicated fraud case goes to jury

  • Article by: DAN BROWNING , Star Tribune
  • Updated: June 7, 2012 - 7:15 PM

Nearly three years after the collapse of the second-largest Ponzi scheme in Minnesota history, jurors in a Minneapolis federal court will begin deliberations Friday on whether three key figures were duped by convicted fraudster Trevor Cook as they claim, or whether they helped him to bilk $194 million from more than 700 investors.

The three defendants in the case left no doubt that can barely stand one another. But federal prosecutors say they worked hand-in-glove, each for their own reasons, to gain the trust of mostly elderly investors around the country. That trust was gained through blatant misrepresentations, exaggerations and outright lies, Assistant U.S. Attorney Tracy Perzel said Thursday in her closing arguments.

Although it's a complicated case that involved 90 witnesses and more than 800 exhibits, Perzel said, "at it's most basic level, this is a case about lying to people to get their money."

The victims included men, women, young and old, she said. They ranged from white collar workers to corporate executives. But they all had one thing in common, Perzel said. They trusted the defendants "because of the lies that they were told."

Defense attorneys argued that their clients, like the victim-investors, were true believers in the foreign currency investment program that Cook used as his principal vehicle for the scheme. They said it started out in 2005 as a legitimate investment strategy, then morphed into a scam that collapsed in July 2009 when some Ohioans filed suit in Minneapolis seeking to recover their $10 million investment.

The lawsuit shocked investors, who'd been sold the investment with promises of full liquidity, no risk to principal and steady, double-digit returns.

Cook pleaded guilty in 2010 and is serving a 25-year term in federal prison. The defendants on trial are Jason "Bo" Beckman, 42, of Plymouth; Gerald Durand, 61, of Faribault; and Patrick Kiley, 73, of Minneapolis. Each defendant faces various counts of wire and mail fraud, money laundering and conspiracy. Beckman and Durand also face several tax charges. Durand faces an additional count of concealing cash transactions.

Beckman is a former Anoka High School hockey standout who claimed to be one of the top money managers in the United States. Beckman stuck by Cook long after he learned of problems with the currency program, Perzel argued, because Beckman was trying to buy a $5 million stake in the Minnesota Wild hockey team and he didn't want anything to spoil his application.

She recalled that when Beckman testified, he claimed to have "pulled back the curtain" on the Ponzi scheme when he hired lawyers and accountants in 2008 to evaluate the currency program in relation to his Wild bid.

"The problem is, Mr. Beckman was behind the curtain with Trevor Cook," Perzel said.

She noted that three different lawyers advised Beckman to return the investors' money immediately and to cut all ties with Cook. One testified that he had told Beckman that Cook was running a Ponzi scheme.

"Why does Beckman stay?" Perzel asked rhetorically. "It's the NHL. Mr. Beckman does not have the assets of the type that he can present to the NHL without staying with Mr. Cook."

Perzel said Beckman testified falsely in 2009 to get out from under an asset freeze that was imposed in response to the Ohioans' lawsuit. He went on to buy a mansion in Texas, several expensive cars and "a $180,000 luxury box at the Minnesota Wild." All of this took place despite knowing that the money came from other investors in the Ponzi scheme, she said.

Beckman's attorney, Douglas Altman, told jurors they had to figure out what Beckman knew, and when he knew it. "Here's the problem," he said. "We all know the ending. We all know it was a catastrophe."

Altman said the real villain in the case is not the defendants and not even Cook. He said it's Christopher Pettengill -- "the stool pigeon, the fink, the rat" -- who has pleaded guilty in the case and testified for the government hoping for a break on his sentence.

Pettengill opened numerous bank accounts and set up the entities that facilitated the scheme, Altman said. "He could have stopped Cook in his tracks."

Perzel said that Durand was broke and hadn't earned any money for several years when he joined forces with Cook in 2004. His motivation was cash, she said.

Durand knew that Cook was a drunk and a scoundrel, Perzel said, noting that they had worked together years earlier at a Bloomington coin dealer. Durand solicited clients on a radio informercial that was broadcast on AM radio in the Twin Cities and on a Christian shortwave network. He also pitched the program at seminars and in person.

Durand told prospects that he had vast financial experience when in fact, he'd gone through serial business failures, Perzel said. Durand claimed that no brokers got hired without his say so, and claimed they were thoroughly trained. But Perzel noted that he recruited one broker from a local strip club and hired him "after smoking a joint with him."

Although Durand knew of serious problems in Cook's operation, Perzel said, he accepted a hefty pay-off to keep quiet.

"Jerry Durand is guilty," his attorney, Brian Toder said. "But what he's guilty of is the trust he had in Trevor Cook and Chris Pettengill."

Durand was fired by Cook on June 7, 2008, after raising serious concerns internally about the investment program, Toder said. "And it was after that, that the really bad stuff happened," he said.

Toder told the jurors that they must determine whether Durand intended to defraud anyone. "We know something really bad happened, but this is not a forum for revenge," he said.

Toder acknowledged that Durand played a minor role behind the scenes for a while even after Cook fired him. But he did so because he believed that he still had an ownership interest in Oxford Global Advisors, one of the entities used to facilitate the fraud. Toder said the money Cook paid him was not hush money, as the government says, but severance.

Perzel said Kiley was unlike the other pitchmen. He lived a simple, frugal life in a large Burnsvile home provided by Cook, where he prepared radio broadcasts that were used to solicit clients, she said. "He had a silver tongue," Perzel said, and brought in far more money than anyone else in the case.

But like the others, she said, "He had a completely made-up personna." He boasted on the radio and on his web site that he had vast financial experience when in fact, he was a longtime huckster who often was one step away from homelessness. Kiley discovered that Cook's claims about the currency program were bogus early on, when one investor lost several hundred thousand dollars. "Mr. Kiley doesn't skip a beat," Perzel said. He kept promoting the program with the same bogus literature.

Kiley's attorney, H. Nasif Mahmoud, acknowledged that the claims on Kiley's web site and on form letters he signed were full of hype. "Mr. Kiley is not on trial for just misrepresentations," he said. "The prosecution must prove that these misrepresentations were hooked to knowledge of the fraud."

Mahmoud argued that the only evidence that does so is the testimony of Pettengill, who's prison sentence depends on his cooperation with the government.

"They want Kiley's head because he was on the radio selling this program!" Mahmoud argued. "The only thing they have proven to you is that he was goofy, eccentric, didn't spend much money ... and worked long hours."

Perzel returned for a blow-by-blow rebuttal of the defense arguments.

Now, it's up to the jury to decided whom to believe.

Dan Browning • 612-673-4493

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