Petters' appeal claims case was 'dirty'

Attorneys for Tom Petters on Friday appealed his conviction for running a massive Ponzi scheme, arguing that dishonest witnesses and hostile publicity made it impossible for him to get a fair trial.

The appeal asserts that Petters was denied the ability to detail the deep criminal past of a onetime business partner who testified against him. It describes Petters as the victim of massive pretrial publicity and says he was hindered in attempts to show that he was unaware of the details of the $3.65 billion fraud.

It also addresses the 50-year sentence imposed by U.S. District Judge Richard Kyle, calling it unreasonable because "evidence against the accused was tainted so."

"The case against Tom Petters was 'dirty' at best," Petters' legal team wrote in a 100-page brief and memorandum. "Needed was a cleansing bath of constitutional protections -- the right to present a defense, the right to cross examine 'dirty' witnesses, and the right to a public trial."

Petters, whose onetime business empire included such well-known names as Polaroid and Sun Country Airlines, was convicted in December on fraud and money laundering charges.

The scheme involved taking money from investors to purchase consumer electronic goods that, unbeknownst to the investors, didn't exist. Instead, new investor money went to pay off old investors.

Petters' appeal to the Eighth Circuit U.S. Court of Appeals was expected. Defense attorney Jon Hopeman said as much the day that Petters was convicted in federal court in St. Paul on Dec. 2.

As part of the appeal, the Petters team asked for 30 minutes for oral arguments on the merits of their position before the court. A reply from the U.S. attorney's office will be filed later.

The thrust of Petters' appeal centers on the background of Larry Reynolds, a Los Angeles businessman who helped Petters launder billions of dollars in investor funds but also had a significant criminal history that landed him a spot in the government's witness protection program.

"His true background makes the PCI [Petters Company, Inc.] fraud seem almost mundane by comparison," the appeal states.

Attorneys for Petters contend they were denied efforts to fully disclose Reynolds' criminal background and his participation in the witness program.

"Reynolds' perjuries before the jury stood unexamined and unrebutted," the appeal said.

The appeal also centered on a "media frenzy" that accompanied the case from its beginnings in September 2008 until the trial 15 months later.

"The media seemed to revel in his downfall," the appeal said, noting Kyle denied the defense request for a change of venue.

"During [jury questioning] a number of jurors said, in open court and in the presence of each other, they could not be impartial, one going so far as to say, 'I suspect he is guilty,'" the appeal said.

Lawyers for Petters also contended that the jury was not given the opportunity to consider an alternative defense theory: that Petters was too busy with other business matters to fathom the fraud purportedly going on behind his back. The lawyers contend that he relied on the advice and oversight of in-house and outside attorneys for his business decisions.

"He had too much on his plate -- too much for 10 of him," the appeal said. "He stopped paying meaningful attention to PCI. He thought his hand-picked business team was finding and financing real deals. The death of his son [John] darkened the blind spot."

Sharp words are also included in the appeal for colleagues who became government witnesses in the case after pleading guilty to lesser crimes.

"His former business associates -- his former friends -- who were running PCI day-to-day admitted key roles in the massive fraud and then cut deals with the government for leniency," the appeal said.

Of Deanna Coleman, Petters longtime lieutenant who blew the case open when she revealed its scope to federal investigators, the appeal said, "She lied, and lied, and lied still some more."

The appeal was filed by Hopeman, Eric Riensche and Paul Engh, the principal attorneys who sat at the defense table during the trial.

David Phelps • 612-673-7269