They assert that a report to the judge confirms the need for custody not only for the fraud suspect but an associate as well.
Federal prosecutors voiced strong opposition Friday to a request from jailed Minnesota businessman Tom Petters to be released from custody so that he can more easily help his attorneys prepare for his June trial on conspiracy, fraud and money laundering charges.
Prosecutors also moved Friday to take Petters' associate Michael Catain into custody pending sentencing, saying he had violated the terms of his release. Catain has been free on bond since Oct. 8, when he pleaded guilty to a charge of money laundering conspiracy for his role in the alleged $3.5 billion fraud scheme that has kept Petters, the alleged mastermind, behind bars for nearly four months.
In a report filed Thursday with U.S. District Judge Ann Montgomery, it was revealed that Catain, 52, of Shorewood, had skimmed nearly $14,000 in receipts from a car wash he owned in Excelsior. After the receiver, Doug Kelley, objected, Catain returned $4,167. Government prosecutors said Catain violated the terms of his release.
Catain is aware that he acted "inappropriately," his attorney, Michael Colich said. "We'll explain in court why this happened and ask that Mr. Catain not be detained," Colich said.
Prosecutors also used the receiver's report to Montgomery as part of the basis for their continuing opposition to the release of Petters. The report says that Petters improperly transferred corporate money into a bank account controlled by a relative and has used it for personal and family purposes in violation of a court order that froze his assets and those of others involved in the alleged Ponzi scheme.
Petters' lead attorney, John Hopeman, noted that the transfer occurred before any restraining order existed. "We do not find the disbursements offensive. The money went to support two innocent children, ages one and three, whose mother is without support, and whose house the receiver is sadly selling out from under her," Hopeman said Friday in a statement.
The receiver's report said Petters directed $8,500 to Tracy Mixon, his girlfriend and the mother of two of his children, circumventing a court order denying such payments. The most recent payment, of $3,500, took place Jan. 13.
Petters, 51, of Wayzata, has pleaded not guilty and said he would fight the 20 felony charges he's facing.
Petters was placed in custody on the grounds that he was a flight risk. His attorneys filed a motion earlier this week seeking his release, in part because of awkward and inconvenient working conditions at the Sherburne County jail where he is housed.
A hearing on the Catain motion is set for Wednesday. No hearings have been scheduled yet for the Petters request.
The government took no action against Petters associate Deanna Coleman, 42, of Plymouth, also cited in the receiver's report for failing to turn over all assets to him.
Authorities have said they first learned of the alleged fraud scheme from Coleman. She pleaded guilty Oct. 8 to a single conspiracy charge and remains free on bond.
David Phelps • 612-673-7269