Trial begins in major investment scheme

  • Article by: DAN BROWNING
  • Star Tribune
  • April 20, 2012 - 9:20 PM

A federal prosecutor spent nearly three hours Friday explaining to jurors in Minneapolis how the government expects to prove that three former associates of Trevor Cook helped him to defraud hundreds of investors in the second-largest Ponzi scheme in Minnesota history.

Assistant U.S. Attorney David MacLaughlin detailed myriad entities that he said the defendants used as part of Cook's bogus currency investment scheme, which he said bilked nearly 700 mostly elderly investors out of more than $190 million.

He described a separate scheme in which one defendant allegedly used investor funds to try to defraud the National Hockey League into believing he was a billionaire so he would qualify to buy a piece of the Minnesota Wild. And he said jurors would learn how the defendants reeled in investors through radio programs and investment seminars.

Cook pleaded guilty to running the scheme and is serving a 25-year federal prison sentence. MacLaughlin said he wouldn't call Cook to testify because he's a scoundrel and a liar.

In a nod to the complexity of the case, MacLaughlin told the jury of nine women and seven men that he'd just given the longest opening statement of his career, "and I've been doing this for 15 years."

"If the case seems like a mess," MacLaughlin said, "it's a mess on purpose."

The defendants didn't want anyone to "untangle the spaghetti," he said. "But it's not about unwinding the spaghetti."

MacLaughlin said the case boils down to a question of whether the defendants lied to investors. He promised jurors that they'd see that in documents and hear about that from victims themselves -- one of whom is 96.

"This is a case about people getting hurt," MacLaughlin said. "Very, very badly hurt."

The three defendants, alleged to be among Cook's top lieutenants, are:

• Jason "Bo" Beckman, 42, of Plymouth, a securities broker who claimed to be one of the nation's top money managers and who attempted to buy into the Wild hockey team.

• Gerald Durand, 61, of Faribault, an entrepreneur and longtime Twin Cities salesman.

• Patrick Kiley, 73, of Minneapolis, another longtime Twin Cities salesman who promoted Cook's currency investment program on some 200 radio stations and a Christian amateur radio network.

Each defendant faces various counts of wire and mail fraud, money laundering and conspiracy. Beckman and Durand also face several tax charges. Durand faces an additional count of concealing cash transactions.

Beckman's attorney, Douglas Altman, reserved his opening statement until he puts on the defense. In the past, Beckman has insisted he was duped by Cook and was a victim himself.

Durand's attorney, Brian Toder, agreed with the government about Cook's "despicable character."

"He's a drunk and a gambler. He would go down to Rio de Janeiro two or three times a year and do terrible things," Toder said. But the attorney said Durand broke away from Cook about June 2008, making Durand "more of a whistleblower than anything else."

Until the break, Toder said, Cook's strategy seemed to be working and Durand believed it was legitimate.

Cook's on the list of potential witnesses for Kiley.

H. Nasif Mahmoud, Kiley's attorney, said his client was fooled by Cook. He blamed Cook for misrepresenting Kiley on a website and in correspondence as a "senior economist" with more than 40 years of investment advisory experience for big corporations.

"You can't hold Mr. Kiley responsible for something he did not know about and was not involved in," Mahmoud said.

MacLaughlin and his co-counsel, Assistant U.S. Attorney Tracy Perzel, anticipated that strategy. MacLaughlin said the government would prove that there was no meaningful accounting or record-keeping at any of the myriad business entities involved in the alleged scheme and what existed was a fiction. None of the defendants did anything significant to alert investors long after they had evidence that the investment program was a sham, he said.

Jurors can expect to hear from Christopher Pettengill, a former associate who pleaded guilty and is cooperating with the government in hopes of getting a lighter sentence. They'll also hear from several "unindicted co-conspirators," including former Star Tribune business columnist Gene Walden, who worked closely with Beckman, and James Pieron, a Michigan entrepreneur who formerly had a tech company in Switzerland.

Gordon Schepke, a 73-year-old retired pipefitter from Troy, Mich., was the first witness to take the stand. He said he and his wife listened to Kiley's radio show every week for years and that he talked with Kiley on the phone for hours before they invested about $500,000 in cash, collectible coins and precious metals stocks.

Schepke said he was influenced by Kiley's age, purported investment experience and record of financial success, together with his conservative Christian values.

"I built up a personal trust in him," Schepke said. "Now that I look back on it, I feel like I was being groomed like a pedophile would groom a child."

Next up was Sharon Phillips, one of eight Ohio investors who helped bring down Cook's fraud scheme when they filed a federal lawsuit in Minneapolis on July 8, 2009, demanding the return of nearly $5 million. She said her family dealt almost entirely with Durand, who seemed to be Cook's senior partner. She said she considered Durand a friend and grew concerned when he abruptly stopped returning calls and e-mails in March 2008 -- after he learned of serious problems with Cook's investment program, the government says.

"We could not understand why he left. If it was so bad he had to leave, why didn't he tell us so we could get our money out?" Phillips said.

The trial continues Monday in the courtroom of Chief U.S. District Judge Michael Davis. It's expected to last six to eight weeks.

Dan Browning • 612-673-4493

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