business

Eighteen months after his world based on false promises came crashing down, Tom Petters will learn Thursday how many more years he'll remain behind bars.

Odds that he'll ever walk as a free man again are long.

The expected lengthy sentence will come from U.S. District Judge Richard Kyle in a packed courtroom as prosecutors, law enforcement authorities, reporters and members of the Petters family look on.

Kyle is a seasoned judge who presided over Petters' jury trial late last fall when the Wayzata businessman was found guilty on 20 counts of fraud, conspiracy and money laundering in the course of operating a $3.65 billion Ponzi scheme.

The U.S. government wants to make an example out of Petters for future white-collar criminals and has requested a sentence of 335 years, based on federal sentencing guidelines that include extra time because of the size of the fraud and the number of victims.

Attorneys for Petters, using Ponzi scheme master Bernard Madoff as the standard-bearer, contend Petters should get a sentence of as little as four-plus years since his $3.65 billion fraud was considerably less than Madoff's $65 billion operation that netted the New Yorker a prison sentence of 150 years.

Legal experts expect a long sentence but question the government's request to keep Petters in jail until the 24th century.

"It's ridiculous to put those kinds of numbers out there," said veteran Minneapolis defense attorney Ron Meshbesher. "How many messages [to future criminals] can you send through one guy? A lot of people got hurt and a stiff sentence is in order, but 40 years is a pretty good message, too."

Ted Sampsell-Jones, a criminal law professor at William Mitchell College of Law, said Petters likely will get a harsher sentence than those handed to other white-collar criminals who ran companies such as Enron and Tyco and cost investors and employees billions of dollars through their financial misconduct.

"Enron was a legitimate business, so was Tyco. But in this case, fraud ran throughout the operation," Sampsell-Jones said. "I don't think he is likely to get quite as much time as the government requests, but I still think the most likely result, by far, is that Petters will spend the rest of his life behind bars."

Petters was convicted of operating a broad-ranging Ponzi scheme for more than a decade. He and his associates lured investors by promising to purchase consumer electronic goods at a discount for resale to big box retailers at a profit. Early investors were paid off from the proceeds of later investors.

According to federal prosecutors, Petters also used the funds to operate his other businesses, including discount retailer Petters Group Worldwide, catalog retailer Fingerhut, Sun Country Airlines and Polaroid.

The scheme collapsed in September 2008 when longtime associate Deanna Coleman went to the government and blew the whistle on the criminal operation. Surreptitious tape recordings made by Coleman after she became a government informant became part of the mound of evidence used against Petters at his trial.

Lawyer and legal commentator Ron Rosenbaum said the fact that Petters took the witness stand and attempted to place the blame on others for the fraud probably won't sit well with Kyle, the judge handling the case.

"I don't think Judge Kyle is going to cut any slack for Mr. Petters," Rosenbaum said. "A judge won't hold it against someone who pleads not guilty but he will hold it against a guy who takes the stand and lies. I don't think Mr. Petters will ever again see the light of day."

One surprise issue that arose after the trial was the health of Petters, an outwardly robust-looking man of 52.

In a March sentencing memo, attorneys for Petters revealed that he has a tumor on his pituitary gland and argued that a reduced sentence is warranted for health reasons. The attorneys said the tumor "is not growing at the moment but cannot be ignored" and said it could cause blindness or paralysis.

Dr. Stephen Haines, head of neurosurgery at the University of Minnesota Medical School, said such tumors usually are benign but need to be checked. "They range in size and seriousness from very small tumors that do not cause trouble to very large ones that invade tissues around the region" of the pituitary gland, including eyes.

"Surgery is not always required," Haines said. "Some are just watched."

Petters' attorneys requested that he be placed in a medical facility in Rochester that is part of the federal prison system. All prisoner assignments are made by the Bureau of Prisons after sentencing.

Petters is the first of seven defendants implicated in the $3.65 billion fraud and a related tax fraud case to be sentenced. He is expected to file an appeal to the Eighth U.S. Circuit Court of Appeals.

The defendants who worked directly for Petters -- Coleman, Robert White, Michael Catain, Larry Reynolds and James Wehmhoff -- each entered guilty pleas early on in the investigation and testified during the trial against Petters on behalf of the government. Chicago hedge fund manager Gregory Bell and his accountant Harold Katz pleaded guilty to charges of propping up the Ponzi scheme near the end. They have not been scheduled for sentencing yet.

David Phelps • 612-673-7269