With his first public comments in more than a year, a contrite Tom Petters apologized Tuesday for participating in an alleged Ponzi scheme over the last decade, but denied guilt for his role in an operation that the government says caused investors to lose $3.65 billion.

Asked if his actions have hurt people, Petters said, "That's for sure. I have a lot of regrets about that. I don't know where to start. I ran too fast. I trusted some people too much."

The Wayzata businessman's long anticipated testimony in his federal fraud trial, which continues today, began in U.S. District Judge Richard Kyle's courtroom in St. Paul at 3:25 p.m. and lasted for 55 minutes before proceedings adjourned for the day.

Petter got emotional only once, choking up as he said, "I apologize to my employees and all their families, to investors I never met, people like Ray Ross."

Ross, a retiree, had testified earlier in the trial that he lost his life savings by investing with Petters.

"My apologies to them, and then to my family, and then to my mentors," Petters said. "It's a horrid situation."

Petters is charged with conspiracy, fraud and money laundering in what the government contends was a wide-ranging Ponzi scheme masquerading as a consumer-products resale business. If convicted, he could face life in prison.

Petters' attorney Jon Hopeman asked his client, "Are you guilty?"

"No, I'm not," Petters replied.

Asked if he had intended to commit a fraud, Petters said, "Definitely not knowingly."

There had been intense speculation among courtroom observers whether Petters would testify. His attorneys had been coy about the subject. But as the last defense witness left the stand, Petters and his two attorneys exchanged a here-we-go glance at one another before Hopeman stood up at the podium and said softly, "Tom Petters."

Telling his side of story

Petters, wearing a subdued blue suit, white shirt and tie, pushed himself up from the defense table and stood before Kyle to be sworn in.

Jurors who had previously been taking copious notes during the testimony of other witnesses put down their pencils and watched Petters closely as the man whose voice they had heard only on secret government tape recordings stood before them.

Petters' family members, along with his fiancée Tracy Mixon, filled more than one of the six rows of benches in the courtroom.

Under questioning by Hopeman, Petters was calm and direct in describing his St. Cloud upbringing, his dislike of academics and his teenage interest in the stereo business.

He also talked about working in consumer electronics sales as he entered his 20s, including a stint in Colorado, where he ran a small chain of stores.

Petters explained his entrance into the liquidation business when he moved back to Minnesota in 1989. He characterized the field as "not for the fainthearted."

"When I started, I had nothing," Petters told Hopeman. "I hated it. I wrote checks on checks. I did everything I could do to avoid lawsuits," he said. "If you didn't have the money, you didn't get the deals."

Opening doors

In the late 1990s, Petters said, he started to expand Petters Co. Inc. (PCI), with a retail foray onto the Internet with a company called Redtag. Among his associates in the Redtag operation was Ted Mondale, son of former Vice President Walter Mondale. Petters said the elder Mondale's service as ambassador to Japan "opened up incredible doors" with Asian manufacturers for Redtag.

Earlier Tuesday, Petters' attorneys called witnesses who testified that in recent years, Petters left decision-making to others, especially during a period after his son was murdered in Italy in 2004.

Steven Ratliff, a former executive with Polaroid Corp., testified that Petters left day-to-day operations of the company to others even as its annual sales rose to $1 billion. And Sandra Indahl, a former bookkeeper for PCI, said that Deanna Coleman -- the woman who ultimately told authorities that Petters' business operations amounted to little more than a Ponzi scheme -- seemed to run the business.

Ratliff said Petters "was at 30,000 feet" when it came to oversight of his many companies, including Polaroid. "I can't tell you what he did behind the scenes," Ratliff said.

He also said that Petters became "kind of disconnected for quite some time after his son's murder" in Italy during a college study trip.

After his son's death, Petters created a nonprofit foundation named for his son. He also gave generously to other charities, Ratliff said, describing them as "a major focus of his life." Ratliff estimated that Petters had donated tens of millions of dollars to nonprofits.

Under cross-examination by First Assistant U.S. Attorney John Marti, Ratliff said he had no idea where Petters got the money to buy a house on Lake Minnetonka (now on the market for more than $6 million), a bigger house in Florida, a condo in Keystone, Colo., and a customized passenger jet, or for trips to Las Vegas and the Bahamas.

In charge, not in charge

Indahl, the former bookkeeper for PCI, testified that she was hired in 2002 by Robert White, a former chief financial officer for PCI. White has since pleaded guilty in the fraud case.

Indahl said that Coleman, who has pleaded guilty to conspiracy, "pretty much handled all of the financial transactions."

The former bookkeeper said she did not have access to company bank statements, but was given a spreadsheet listing purported transactions.

The government contends that the transactions were a sham, that Petters raised money from investors to buy consumer goods for resale when in fact no such goods existed. Petters attorneys said in their opening statement that the evidence would show that Petters employees and business associates operated the alleged scheme.

Indahl testified that Coleman had control of the bank statements and wouldn't give them to her. She said that in late 2007 or early 2008, she noticed that the amount of money provided by a new lender was the same amount as a recent transaction for Nationwide International Resources.

"I was concerned that all we were doing was borrowing money and not getting any money back," Indahl testified. She said there were no accounts receivable indicating they were owed money for transactions.

Nationwide International Resources is a Los Angeles firm run by Larry Reynolds. Formerly known as Larry Reservitz, he is a disbarred lawyer with a history of fraud who spent years in the federal witness security program. He has pleaded guilty to money laundering conspiracy in the Petters case and, like Coleman and White, testified that Petters ran the operation.

Patricia Hamm, former executive vice president for human resources at Petters Group Worldwide, testified that Petters was "extremely" popular with employees.

"He had a gift of showing employees that he cared," Hamm said.

She also described him as a busy executive -- "a 24-7 type of operator" -- who traveled a lot.

Government prosecutors, who rarely get a chance to cross-examine defendants because they so seldom take the witness stand, are expected to begin questioning Petters today. They might also call rebuttal witnesses. At the rate things are going, jurors could get the case this week.

David Phelps • 612-673-7269