An heir to the Kroger fortune testified about three ex-associates in the Ponzi scheme.
Plymouth securities broker Christopher Pettengill connected the dots this week in the prosecution's case against three former business associates who are standing trial in Minneapolis on federal charges related to Trevor Cook's $194 million Ponzi scheme.
Pettengill, 55, an heir to the Kroger grocery store fortune, pleaded guilty last year to charges of securities fraud, conspiracy and money laundering and faces up to nearly 20 years in prison. He said he hopes to get a break in exchange for his cooperation and the three days he spent testifying against his former friends and associates.
Pettengill said he and his associates all knew that Cook had a tainted history when they joined forces with him to pitch a foreign currency investment program that supposedly eliminated all risk to capital and produced steady double-digit returns. Cook, a hard drinker and former sports bookie, had worked for Pettengill as a commodities broker and came under investigation by the FBI in 2003 on allegations that he helped steal an elderly woman's valuable coin collection.
Even so, Pettengill said he and his brother Jonathan invested $1 million with Cook, who quickly lost about $700,000 of it. He says he stuck around because Cook promised to make it up to him, and much more. Pettengill said he believed him, because by the fall of 2007, Cook had purportedly turned $10 million into $40 million in the currency market.
Doubts piled up
But Pettengill said he began having doubts by December 2007. The profits had nearly vanished, he said. And defendant Gerald Durand, a longtime Cook associate, was raising concerns about the liquidity of a Swiss trading firm called Crown Forex SA that supposedly held their investors' money. Durand feared that its CEO, a Jordanian named Shadi Swais, was siphoning off funds, Pettengill said.
He said he and his associates hatched a plan to take over Crown Forex at a meeting in Las Vegas in late January 2008. They had a Swiss consultant named Felix Tschopp review the company's books. Tschopp said in an e-mail dated Feb. 27, 2008, that Crown Forex was "illiquid" and was in the red by 14 million Swiss francs.
After reading that, Pettengill said, "I knew it was a fraud."
Pettengill said he discussed the consultant's memo with defendant Jason "Bo" Beckman in March 2008. Beckman was undergoing a thorough background check by the National Hockey League at the time because he wanted to buy a $5 million chunk of the Minnesota Wild. All he wanted to talk about was how the Crown Forex problem would affect his claim to have $4 billion in assets under management in its accounts, Pettengill said.
Defendant Patrick Kiley pitched the currency program on more than 200 radio stations and shortwave radio and drew in more investors than anyone. Pettengill said he met with Kiley in May 2008 to discuss the problems with Crown Forex and ask whether the bank accounts Kiley oversaw had $50 million in profits, as Cook had claimed.
"He said no, that's client funds in there," Pettengill testified. "I said we'd better do something or we're all going to prison. He said, 'I don't care. I'll go to jail for Trevor, he's been so good to me.'"
Defense attorneys tried to punch holes in Pettengill's testimony, but he remained resolute. He admitted that he had lied to federal regulators and law enforcement agents but said he finally came clean at a meeting in the U.S. attorney's office in February 2011.
"I knew the jig was up. I knew I couldn't avoid the consequences," he said.
Pettengill said that even when he still believed in the currency program, he knew that it was being sold under fraudulent pretenses. Résumés were hyped, and everyone involved made false promises about safety, liquidity and performance, he said.
The currency investment was sold through two entwined groups of entities. One group used Universal Brokerage or UBS in its names and is most closely associated with Kiley and Cook. The other group used Oxford in its names and is most closely associated with Beckman and Cook.
Pettengill said there was no real business structure or accounting. Ownership shares would shift around whenever there was a need, such as bolstering Beckman's unsuccessful bid for the Wild, he said. And investor money flowed freely and could be tapped at will.
Pettengill said he finally quit in June 2008 and moved to his second home on Cape Cod. "I basically ran away to hide," he said.
Dan Browning • 612-673-4493