The co-defendant who said he funneled money in a $3.5 billion Ponzi scheme has a history of fraud, mob ties and a spot in witness protection.
The Los Angeles mystery man who helped Tom Petters allegedly launder billions of investors' dollars appears to be a disbarred Boston-area attorney with a shadowy criminal history and stints as a wire-wearing government informant.
Newspaper clippings, court rulings and other public documents leave little doubt that the co-defendant known as Larry Reynolds is actually Larry Reservitz, a swindler and drug trafficker who had associations with the New England mob in the 1980s and eventually was placed in the government's witness protection program.
As Reynolds, he testified that he used his California bank account to funnel investors' money from and to Petters, a high-profile Minnesota entrepreneur who is accused of running a $3.5 billion Ponzi scheme.
Until now, little had been disclosed about Reynolds beyond the fact that he once was involved in a company that sold sneakers in tough Los Angeles neighborhoods and had lavish houses in both southern California and Las Vegas, where he was a well-known poker player who fancied exotic cars. After being arrested last October in connection to the Petters case, Reynolds was described by his California attorney as a 67-year-old man with no prior criminal convictions.
Reynolds said he got about $6 million in fees from Petters for laundering $12 billion in funds between 2002 and 2008. He pleaded guilty in St. Paul to conspiracy to commit money laundering and faces up to 20 years in prison.
Petters' trial on mail and wire fraud and money laundering is scheduled to begin in late October. But his attorneys now want the case against him dropped, suggesting that Petters himself might have been duped by Reynolds in an elaborate con that unfolded under the government's nose.
Government prosecutors did not respond to a request for comment. Attorneys for Petters and Reynolds declined to comment.
Motions were unsealed Friday in heavily redacted form, deleting all biographical information -- even pronouns -- that might give clues about Reynolds or his past. But the documents contained enough details from previously published reports about Reynolds and Reservitz that they leave no doubt the two men are one in the same.
Living on 'oodles of money'
Larry Reservitz was born and raised in the Brockton, a working-class suburb of Boston, according to Michaele Battles, a McLean, Va., lawyer who knew him when he attended law school at Suffolk University in Boston.
"Larry lived pretty high for a student," Battles said. He'd be spending lavishly on dates with her roommate, Battles recalled. "He had a fancy sports car. In fact, Larry lived as if he were a practicing lawyer. He had oodles of money."
Reporter Jim Schuh detailed the life of Larry Reservitz in an in-depth story titled "What's the Scam?" in the weekly Boston Phoenix in June 1986. According to Schuh, Reservitz is the son of a lawyer. He attended a private school in New Hampshire, where he was an honor roll student, football and basketball player, and a member of the drama club. In college, he developed a taste for high-stakes card games.
After passing the bar in 1967, Reservitz joined his father's law firm, Schuh wrote. After his father died a short time later, he took over the firm, Battles said.
According to Schuh's story, Reservitz acknowledged that he rigged phony car crashes to bilk insurance companies. One of his partners in the schemes was a man with ties to the Boston Mafia, the late Elias Kenaan.
When authorities caught on to Reservitz, he and his first wife and child fled the country and eventually moved to an island off Spain, wrote Schuh, who is now a lawyer. At some point he met a woman named Antoinette, who was Scottish, and after living a time in Israel and Frankfurt he landed in Edinburgh, where her family was. It was there that Scotland Yard caught up with Reservitz, and authorities shipped him back to Massachusetts, where he was eventually sentenced to 18 months in the Plymouth County Jail, according to Schuh's article.
He moved on to new crimes, including various check-fraud schemes and, at one point, tried to buy a "truckload" of pot from an undercover Drug Enforcement Administration, according to the article.
Cooperation with the feds
Facing serious time, Reservitz began cooperating with federal authorities in 1984, wearing hidden tape recorders. In 1986 he testified that he was involved in a scheme to cash a bogus check for $2 million out of the account of L. Ron Hubbard, the late founder of the Church of Scientology.
The case made national headlines as the church waged a public battle to locate the culprit who actually wrote the fake check. One media account of the 1986 trial described Reservitz as a "high-rolling gambler ... who participated in the second alleged fraud as an informant for the FBI."
Reservitz eventually served 13 months of an 18-month prison term. Court records indicate Reservitz and his family subsequently entered the Witness Security Program.
Public records show that Reynolds' Social Security number was issued in Nebraska between January 1986 and the end of 1987, and Antoinette's was issued in California in 1985.
In 1986, Larry Reynolds pops up in California as president of a company called Shoe Madness Inc. in San Diego, public records show. He has since been involved in several businesses, including Tokyo One, North American Hotel and Food Service Corp., and Nationwide International Resources Inc., the company involved in the Petters transactions.
Last fall, in a hearing in St. Paul, FBI agent Brian J. Kinney testified that Larry Reynolds had met Petters in 1992, shortly after the April riots in Los Angeles. Kinney testified that Reynolds was employed at Eurostar Inc., a sneaker company, and that Petters approached Reynolds about providing phony invoices.
"He was just to provide invoices in which there was no merchandise provided and no payment as well," Kinney said.
David Phelps • 612-673-7269 Jennifer Bjorhus 612-673-4683