Agents arrested him Friday, partly in response to taped conversations showing he had plans to leave the country, documents say. He is held without bail on fraud charges.
Twin Cities businessman Tom Petters was arrested and made his first appearance in a Minneapolis federal court Friday facing charges of mail and wire fraud, money laundering and obstruction of justice.
According to federal authorities, his arrest may have come just in time.
Assistant U.S. Attorney John Marti asked the court to hold Petters without bail pending trial, describing him in court papers as "a serious risk" to flee from charges prosecutors said could lead to life in prison.
In a secretly recorded conversation, Marti wrote, Petters said he had not intended to be in the country by the time of the presidential debates.
Federal investigators raided Petters' home and company headquarters in Minnetonka on Sept. 24. The first presidential debate took place Sept. 26.
Petters' myriad business interests include Polaroid, Sun Country Airlines and Fingerhut. Prosecutors charged him Friday with engineering a massive fraud scheme that involved more than 20 investors and investment groups and took in "well in excess of $1 billion, and possibly substantially more."
U.S. Magistrate Judge Franklin Noel rejected arguments by Petters' attorney, Jon Hopeman, that he should be released. Noel said Petters would remain in custody pending a detention hearing scheduled for 2 p.m. Tuesday.
"Mr. Petters maintains his innocence and he intends to fight to get out of custody on Tuesday," Hopeman said in an interview Friday night.
Two others charged
Two of Petters' business associates also were charged in the case Friday. They are Michael Catain, 52, of Shorewood, Minn., and Larry Reynolds, 65, of Las Vegas, Nev.
Reynolds, arrested in Los Angeles, was charged in the same complaint as Petters. Catain, who has been a Twin Cities music producer, was charged separately in Minneapolis in a "felony information," which usually indicates a plea agreement is in the works.
A former Petters Co. Inc. officer and consultant from Excelsior was charged Tuesday in federal court in Minneapolis with mail fraud and illegal monetary transactions. Robert Dean White, 67, was also charged in a "felony information."
Hopeman told the judge that Petters had been planning to go to Florida when federal agents arrested him at his Wayzata home around 10 a.m. Friday.
On the day that federal agents raided his home and Minnetonka business headquarters, Petters was at the Bellagio Hotel in Las Vegas, where he "admitted culpability" to FBI agents, according to a prosecution motion filed in federal court Friday. The government says Petters repeatedly admitted his role in the fraud scheme in recordings made with a cooperating witness in the case.
On Wednesday, the affidavit says, Petters "contacted a subject in this case, and encouraged that person to leave the United States to a country from where he could not be extradited." It says Petters also indicated that he regretted turning over his passport to federal authorities.
Petters surrendered his passport at the request of the U.S. Attorney's Office on Monday, the same day he resigned as CEO of Petters Group Worldwide.
Marti said in court papers that Petters had encouraged a potential witness against him "to obtain false identification through Internet websites, and intimated that he [Petters] had false identification."
Hopeman insists that Petters is not a risk to flee because of his longtime ties to Minnesota. He has two children and a home here, Hopeman told Noel.
"He's not a career offender," Hopeman said.
Marti pushed for Petters to be held, saying the team of prosecutors needs time to prepare recordings gathered during the investigation. They intend to introduce them at the detention hearing, he said.
Complaint outlines fraud
According to the criminal complaint:
From Jan. 1, 2000, through Oct. 2, 2008, Petters and Reynolds created and executed a scheme to defraud and obtain money and property "by means of material false statements and representations." The scheme involved Petters and his associates creating fictitious documents and then providing these documents to current and potential investors in Petters Co. Inc.
The documents showed that PCI bought and sold merchandise at a profit, but the government asserts that purchase and sales orders used in the alleged scheme were fakes, and no merchandise existed.
Reynolds was secretly recorded last month saying the fraud could exceed $2 billion, according to an affidavit filed to obtain search warrants.
Noel asked Petters, 51, if he understood the charges against him. Petters paused and said, "Um, I think so."
After the judge explained that Petters is accused of defrauding many people, Petters replied: "I do understand, your honor."
Prosecutors charged Petters in a criminal complaint rather than by grand jury indictment, a quicker process that may have been prompted by his alleged contacts with witnesses in the case. Petters has the right to request an indictment, or he could waive it.
"He was taken into custody without incident" by agents for the FBI, Internal Revenue Service and U.S. Postal Inspection Service, said E.K. Wilson, an FBI spokesman.