The Tom Petters fraud case

Petters associate ordered to jail

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: January 29, 2009 - 12:39 AM

Michael Catain was locked up after a judge ruled he had spent about $14,000 from a car wash business that was in court receivership.

Michael Catain, the Shorewood businessman who says he helped launder ill-gotten investments generated by Petters Co. Inc., was ordered back to jail Wednesday for taking nearly $14,000 from his Excelsior car wash despite a court-ordered freeze on his assets and the assets of others affiliated with the alleged $3.5 billion Tom Petters fraud.

Magistrate Judge Franklin Noel agreed with federal prosecutors who said Catain had violated the terms of his release pending sentencing and that he should be jailed.

"It appears to me that there is probable cause to believe the defendant has committed a state crime," Noel said, saying that Catain's actions constituted theft.

Catain joins Petters as the second defendant connected to the alleged scheme to be held without bond.

On Wednesday, a third federal judge issued an order denying Petters' bid to be released from jail pending trial on 20 charges of conspiracy, fraud and money laundering.

In a motion filed this week, Petters attorneys Jon Hopeman and Paul Engh wrote that, with the trial just four months away, they needed his release to help his defense.

"Fairness requires Mr. Petters' release to prepare for trial," they said.

Petters had argued that the conditions in the Sherburne County jail, where he's been held since Oct. 3, make it hard for him to work with his attorneys.

But U.S. District Judge Richard Kyle agreed with prosecutors that Petters remains a flight risk. And he concluded that Petters has been given appropriate access to his attorneys.

"Defendant clearly would prefer more posh accommodations -- he disparages the meeting room [at the jail] as a 'cement cubicle' that he likens to a fish bowl," Kyle wrote. "But the defendant's comfort while preparing for trial is not the court's concern; the jail's meeting room is not intended to be a hotel room or a law-office conference room."

Kyle said he must only ensure that a defendant is able to adequately prepare for trial. "On the record currently before it, the court determines that to be the case," he wrote in his seven-page order.

Catain, 52, put his head in his hands Wednesday as Noel told the marshals to take him into custody. He winked at his wife, gave her a kiss and was escorted from the courtroom.

"We are greatly disappointed," said his attorney, Michael Colich.

Catain pleaded guilty Oct. 3 to one count of money-laundering conspiracy. He said that, for a fee, he helped bilk investors by routing money to Petters through a business called Enchanted Family Buying Co. The government alleges that Petters defrauded investors by making it appear that he was buying electronics goods for resale, when in fact none existed.

Catain had been free on a $25,000 unsecured bond pending sentencing. One of the conditions of his release was that he not break any laws.

Colich had argued that Catain had no liquid assets and used the money he took from the car wash to pay personal bills and to buy supplies for the business, which he continued to operate while a court-approved receiver looked for buyers. He said Catain had worked 60- to 80-hour weeks at the car wash trying to make it a valuable asset for the receiver.

"He admits he used some portion of that for bills he owed and expenses related to the car wash. It was not used for luxuries," Colich told Noel.

But assistant U.S. Attorney Timothy Rank said Catain knew that he was not supposed to spend proceeds from the car wash, because they were under the control of a receiver who was appointed shortly after federal agents raided the homes and businesses of several people implicated in the alleged scheme.

Rank noted that Catain also had removed several items, including appliances, from his home at Lake Minnetonka after the receiver was appointed and the house was put up for sale.

"Mr. Catain was given the benefit of the doubt the first time," Rank said. "He chose intentionally to violate the receivership order."

David Phelps • 612-673-7269

  • about this series

  • The Star Tribune's coverage of the federal fraud case against entrepreneur Tom Petters and the struggles of Petters-owned Sun Country Airlines.
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    The Star Tribune's coverage of the federal fraud case against entrepreneur Tom Petters and the struggles of Petters-owned Sun Country Airlines.

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