Petters associate Catain gets 7 1/2 years

His attorney said Michael Catain was clueless about the Tom Petters Ponzi scheme. The government said he was a willing associate in the fraud but helpful once caught.

On Monday, U.S. District Court Judge Richard Kyle sentenced Catain to 7 1/2 years in prison, saying the former Excelsior businessman played "a major role" in the $3.65 billion fraud but not as major as others.

Catain, in a navy blue blazer and gray slacks, apologized for his participation as a money launderer in the scheme and said he was truly sorry. "I strayed off my path, and that was wrong," he said. At one point during the sentencing, he appeared to wipe his eyes.

Separately Monday, court-appointed receiver Doug Kelley entered guilty pleas on behalf of the corporate organizations owned and operated by Petters, Petters Group Worldwide (PGW) and Petters Co. Inc. (PCI), on charges of mail and wire fraud and conspiracy to commit money laundering.

In court documents filed in both federal court and U.S. Bankruptcy Court, the agreement said the two corporate entities used false statements and false documents "to fraudulently induce investors to provide PCI and PGW with billions of dollars."

The plea agreement also said funds from investors to the two companies were used to pay off previous investors and to purchase other corporate assets, including Polaroid Corp. in 2005 for $425 million.

Petters and the companies also contacted outside individuals and organizations to finance the scheme and provide "lulling payments" to keep the fraud alive, according to the document. In one instance, an entity identified as "O.F." had a credit arrangement with PCI that totaled $2 billion that began in 2001 and lasted until 2008. Others that provided loans to Petters were identified as "T.R." and "D.V."

'Profoundly remorseful'

Catain, 54, could have received up to 240 months. U.S. District Judge Richard Kyle cited Catain's cooperation in the case against Petters for the lesser sentence. But Kyle said it in "no way" equaled the cooperation of whistleblower Deanna Coleman, who received a prison sentence of one year and one day. Catain's attorney, Michael Colich, asked for the same sentence for his client.

Colich called Catain "profoundly remorseful" and said he was an outsider in the operation. "He didn't know about the stealing. He didn't know about the false invoices. He didn't know about the false purchase orders. ... [But] he accepts responsibility."

After the hearing, Colich said his client was "disappointed" with the sentence.

"He was certainly hoping for a sentence of less time," Colich said. "He was clearly an outsider" in the fraudulent operation.

Rank said Catain laundered $12 billion through his accounts on behalf of Petters, picking up $15 million in fees over six years for his services.

Catain pleaded guilty to the money-laundering conspiracy charge nearly two years ago. He ran a front company for Petters called Enchanted Family Buying that collected funds from investors for the purported purchase of consumer goods when instead the money was immediately funneled back to Petters.

In April, Petters was sentenced to 50 years in prison for orchestrating the $3.65 billion Ponzi scheme. The other money-laundering co-defendant in the case, Los Angeles businessman Larry Reynolds, is scheduled for sentencing on Tuesday.