An air of mystery has engulfed one of the key players in the investigation of Tom Petters and the alleged $3.5 billion Ponzi scheme that authorities say ran through Petters Company Inc., until it fell apart last fall.
Larry Reynolds, the Los Angeles businessman who testified that he helped launder billions of dollars for the Petters operation, may have done so under the government's nose.
Petters' attorneys have filed a motion raising the question of whether Reynolds, 67, is enrolled in the Justice Department's witness security program, also known as the witness protection program.
Little more is said about Reynolds in the short motion. But attorneys Jon Hopeman and Paul Engh contend they need to know about Reynolds' past if they attempt to impeach any testimony he may give against Petters.
It's not clear that he would testify, however. Reynolds' plea agreement does not explicitly require his cooperation in the investigation.
The witness protection program is run by the U.S. Marshal's Service and provides security, including new identities, for government witnesses who've provided testimony against major criminals that could prompt retaliation. Participants usually have been involved in criminal activity themselves.
The U.S. Attorney's Office in Minneapolis has yet to respond in writing to the Reynolds motion and is saying nothing until it does.
Reynolds' attorney, Frederic Bruno, said he cannot comment on the motion.
Petters' attorneys state in their motion that "cooperating witnesses and informants receive certain government benefits in exchange for their testimony." The motion also asserts that the government "monitors enrollees" in the program and "also restricts their activities."
But the government may not have known about Reynolds' involvement with Petters. Federal prosecutors have said they knew nothing about the alleged Ponzi scheme until one of Petters' executives, Deanna Coleman of Plymouth, approached them in September to negotiate a plea agreement.
The motion regarding Reynolds' background is expected to be argued, along with other pre-trial motions, on Monday before Magistrate Judge Arthur Boylan in St. Paul.
Criminal defense attorneys unconnected to the Petters case said participation in the witness protection program could damage a witness' credibility with jurors.
"Obviously, he's got a previous criminal record. It may look like he's trying to curry favor with the government," said Minneapolis trial attorney Ron Meshbesher.
St. Paul lawyer Ron Rosenbaum agreed. "He -- per se -- is going to be a suspect witness," Rosenbaum said. "He's basically on the government payroll."
The Star Tribune received an anonymous phone call on Oct. 20 suggesting that reporters look into Reynolds' background. "If you do a little research you will find out that Larry Reynolds is not Larry Reynolds. And if you check the Boston area you will see that I believe he is part of the witness protection program out of Boston," the caller said.
Bruno has said Reynolds is a native of Brockton, Mass.
Checks with law enforcement, Boston-area reporters and organized crime experts found no one who recognized his photo, however. The Star Tribune also ran an ad with Reynolds' photo in a Brockton newspaper asking anyone who recognized him to call. No one did.
A nationwide search of commercial public records found that Reynolds got his current Social Security number in Nebraska between Jan. 1, 1986, and Dec. 31, 1987. Records show his wife, Antoinette, 61, got hers in California in 1985.
Yet reporters found no records of Reynolds living in Nebraska or anyplace else before March 1986, when he appeared in La Jolla, Calif., a posh beach community near San Diego. He and his wife have had various addresses since then in southern California and Las Vegas.
Keeping a low profile
Only a sketchy portrait of Reynolds has emerged since his guilty plea in October to one count of money laundering. Indeed, the government seemingly took steps to keep his profile low. After his arrest in California, prosecutors wouldn't say where he was being held or when he would appear in Minnesota.
The hearing for his release pending sentencing was not put on the public court docket as is customary. It was discovered only when a Star Tribune reporter encountered attorneys for the government and Reynolds walking toward a courtroom. Chief U.S. District Judge Michael Davis looked into the matter and said a mix-up kept it off the docket.
What is publicly known about Reynolds comes largely from his testimony at his plea hearing. He said he hooked up with Petters in 2002. Reynolds set up a bank account at his Los Angeles company, Nationwide International Resources, to process funds from investors who thought they were financing the purchase of consumer electronics goods. In reality, the goods didn't exist, Reynolds said.
Upwards of $12 billion was funneled through the account until last year, and Reynolds got $6 million in commissions, according to his testimony.
Reynolds is a high-stakes poker player whose name and photo have appeared in gambling magazines and websites. He has multimillion-dollar homes in California and Las Vegas, according to Doug Kelley, the court-appointed receiver who oversees the assets of Nationwide International Resources and Reynolds' estate. Reynolds also led authorities to an account at the Bellagio Hotel in Las Vegas where he kept $150,000.
Staff writers Dan Browning and Jon Tevlin contributed to this report. David Phelps • 612-673-7269