His empire was crumbling, the feds had already infiltrated the building and the phone calls had gotten desperate and angry, investors demanding their millions. So Tom Petters apologized to the woman who allegedly helped him orchestrate the crime that epitomized this American decade -- the Ponzi scheme. He began to cry, then asked Deanna Coleman for a hug.

There would be no hugging that day in Petters' office. If Petters had held her tight, he'd have known his long ride was over, obvious in the recording device hidden in the small of her back.

"I'm sorry you ever had to meet me," cried Petters, in a conversation recorded for posterity.

The jury sat riveted in the dark paneled room in federal court, dressed for comfort in their Minnesota soft clothes. One wore a sweater hoodie, another a rugby shirt. One young woman had a punkish streak in her hair.

They were watching a story of our times, a microcosm of the American economy where the workers lived on other continents, phantom money was borrowed from one another, mortgages were given from the over-leveraged to the under-funded, the Play Station IIIs behind the big box signs didn't really exist.

We thought it would go on forever; the party that would never end, the great, insatiable whirligig of life.

"[I'm] dancing," Petters wrote in an e-mail to Coleman, describing how he was trying to evade creditors. "I've got holes in my shoes."

At the end of each e-mail, Petters included a hokey, now ironic, quote by Henry David Thoreau:

"Go confidently in the direction of your dreams! Live the life you've imagined. As you simplify your life, the laws of the universe will be simpler."

Coleman is a plain, slender woman in a plain suit, her hair short and feathered, her cadence reminiscent of Marge in the movie "Fargo." In a movie, she could play the part of a secretary, just as she did in real life. A "C" student from Elbow Lake High School's 1982 class of 52 students, Coleman started as "office manager" -- in an office of three. She had taken two accounting classes, yet before long she was vice president, doing the books and making $250,000 a year. Sure, anything was possible in America. We all believed that.

The guy in the other office, Robert White, was literally cutting and pasting fake purchase orders and invoices, she said, the currency of the boom years. Petters was afraid an investor may stumble in and see the mess of paper scraps and Wite-Out and realize he was building a conglomerate, one scissors snip and one lie at a time.

When investors began to call, raising their voices, the excuses sounded like they came from a junior high class dodger: I am sick. I have a family emergency. The guy who handles that is on vacation. Tom is in India. The check is in the mail.

"A lot of the time, Tom was standing right there," Coleman said.

Wire transfers for millions went to Larry Reynolds, a convicted criminal who had somehow acquired mansions while in the Witness Protection Program, and to Mike Catain, a guy who owned such lucrative inventory as the rights to Vanilla Ice songs. One million. Ten million. Fifteen million per day, passing from one hand to the next, from here to there.

Only there was no "there" there.

Who was the Svengali, and who were the rubes? The jury sat mesmerized.

Was the transaction real? The prosecutor asked, over and over.

"No," Coleman said mechanically.

Some of Petters' products were real. The earliest ones fittingly included a hangover remedy and an ice pack. Hello, Ms. Coleman, Mr. Petters? The decade that just passed would like to order $200 million of each, because we really need it.

Put it on our bill.

But here's the thing: It didn't have to happen. Years ago many investors began to catch on. They called Costco, and realized it was a fake. Checks for millions bounced; evidence of fraud. But hey, they got their money back. The Ponzi scheme had found other suckers to replace them. Coleman asked Petters if they knew it was a Ponzi scheme.

"These guys have so much in, you think they want to know?" Petters said on a recording. "They don't want to know."

Paul Engh, Petters' attorney, asked whether some hedge funds that were complaining made hundreds of millions of dollars.

"Yes," she said.

Did any of them call the feds?

No, they were too busy making money in the decade that danced with holes in its shoes.

jon.tevlin@startribune.com • 612-673-1702