In one deal he could not close, Wayzata businessman Tom Petters lost his bid Friday to get out of jail on bail after his attorney failed to convince Chief U.S. District Judge Michael Davis that Petters wouldn't go on the lam.
Davis ruled after a three-and-a-half hour detention hearing in St. Paul during which prosecutors brought up new information about Petters' past run-ins with the law. Petters' girlfriend and the mother of two of his children, Tracy Mixon, also testified about their heavy drinking and Petters' use of prescription drugs as he tried to manage an increasingly chaotic life and cope with his son's murder in 2004.
"We both have felt our lives were kind of out of control," Mixon told the judge.
Petters, 51, has been in federal custody since his arrest Oct. 3 for allegedly leading a wide-ranging investment fraud scheme that bilked investors out of some $3 billion over more than a decade. He faces federal charges of mail and wire fraud, money laundering and obstruction of justice. Petters maintains his innocence although four cohorts have pleaded guilty.
And though he faces life in prison if convicted by trial, Petters appeared composed and relaxed in court Friday, winking and waving at family members and mouthing "I love you" to them before he was led from the courtroom.
Thoughts of going on the run
Federal prosecutors won the day after presenting evidence that Petters had talked about fleeing several times in the days leading to his arrest.
Davis listened to a recording of a rambling Oct. 1 phone call between Petters and codefendant Robert White in which Petters reveals thoughts about going on the run.
In a somewhat slurred voice, Petters tells White about getting a fake driver's license off the Internet, asks White how his wife reacted to the idea of going on the run with their children and suggests that White take off in his boat.
"Google Marc Rich," Petters tells him, referring to the commodities trader who fled to Switzerland in 1983 after being charged with tax evasion, racketeering and trading oil illegally with Iran. Rich was later pardoned by then-President Bill Clinton.
Jon Hopeman, Petters' attorney, argued that the bail hearing was boiling down to "one drunken, stupid, somewhat irrational telephone call."
Previous case in Colorado
But the hearing also revealed some fresh details about a 19-year-old case against Petters in Colorado. He had been charged in 1989 in El Paso County with theft, obtaining a signature by deception and forgery. The charges were related to a deal that Petters had allegedly struck to sell 450 refurbished Emerson VCRs, records show. The supposed suppliers told police they didn't know about any such deal. Petters also was accused of using money from some investors to pay off earlier debts, shades of the scheme that he's now charged with masterminding.
A codefendant in the 1989 case told investigators that Petters left Colorado to get money from his ex-wife for his legal defense and to seek drug and alcohol treatment. Prosecutors told Davis that the codefendant said Petters was telling people "he had a cocaine problem" and was going to rehab.
The Hennepin County attorney's office issued fugitive warrants for Petters in 1991 and 1993, prosecutors said. Steven Meshbesher, an attorney who represented Petters in the Colorado case, said Petters was unaware of the warrant and when he found out, he voluntarily returned to Colorado to resolve it.
Petters agreed to pay restitution, and the charges were dropped in 1993. Two years later, a Colorado judge ordered the file sealed. The court found "that the harm to the privacy of the Petitioner [Petters], or the danger of unwanted adverse consequences, outweigh the public interest in retaining criminal justice records" concerning Petters. Hennepin County expunged the fugitive warrants in 1994.
Hopeman, arguing for Petters' release, said he had complied with every request authorities have made of him. Mixon testified that while she and Petters had discussed going to their Florida home "for an extended period of time" before his arrest, he never mentioned fleeing the country.
An attorney for Petters filed a declaration Thursday saying he has worked for the past month to assess his assets. "I have not discovered any cash hordes, concealed assets or hidden accounts," Richard Salmen said in a one-page statement.
Mixon said Petters often mixed alcohol with prescription drugs: Adderall for attention deficit disorder, Klonopin for anxiety and Ambien for help sleeping. A typical evening might start with two to three vodkas with Fresca, wine with dinner, then tequila afterward, she said.
Davis rejected Hopeman's arguments that Petters could be monitored adequately with an electronic ankle bracelet. He ordered Petters held without bail but he said he would consider moving him from the Sherburne County jail to Hennepin or Ramsey county to make it easier for Hopeman to prepare his case.