business

This largest fraud trial in the history of Minnesota -- and one of the largest in the United States -- wrapped up testimony Friday with defendant Tom Petters laying the blame for the mammoth Ponzi scheme squarely on the shoulders of the woman who reported his alleged crimes to authorities.

Petters is charged with running a fraud scheme that bilked $3.65 billion over more than a decade, making it one of the largest Ponzi schemes in history, though it pales by comparison with the scheme orchestrated by Bernard Madoff, a New York investment adviser serving a 150-year prison term for running a Ponzi scheme in which he was accused of swindling tens of billions of dollars.

Petters told Assistant U.S. Attorney Joe Dixon that the government raid on his Minnetonka headquarters and Wayzata home in September 2008 was unnecessary. Had federal agents waited, Petters said, he would have found out who was responsible for the fraud and "we would have opened our doors" to authorities.

Said Dixon: "You're saying that the raid was unnecessary and you were misunderstood?"

"To this day I'd say that," Petters replied.

Answering questions from defense attorney Jon Hopeman, Petters said that when he found out Deanna Coleman, an executive with Petters Co. Inc. (PCI), was operating a fraud, "I thought either she was mentally ill, or something was severely wrong. ... I was dumbfounded. I knew at that moment we had a very, very, very large problem."

Coleman told federal authorities Petters used PCI to run a Ponzi scheme for more than a decade to fund his other companies and extravagant lifestyle. She pleaded guilty to conspiracy in the case and hopes her cooperation will garner leniency when she is sentenced.

Petters placed the blame for the fraud squarely on Coleman, a woman who worked her way up from receptionist to an executive role, with a tryst with Petters along the way.

"She set me up to be responsible for a fraud she couldn't handle," Petters said.

He said he went to his company attorneys immediately after learning of the alleged fraud to get a handle on it.

The defense rested its case when Petters stepped down at 9:40 a.m. The government rested 23 minutes later.

Over 16 days of testimony, jurors heard from 54 witnesses: 12 called by the defense and 42 called by the government. U.S. District Judge Richard Kyle sent the jury home for the weekend. Petters returns to the Sherburne County Jail for the weekend, where he's been held since October 2008.

Closing arguments, jury instructions and deliberations begin Monday. Petters faces up to life in prison if convicted of the charges against him, which include conspiracy, fraud and money laundering.

David Phelps • 612-673-7269