Petters associate is more than his crime

Michael Catain sat at the last table of a coffee shop in St. Louis Park, his back literally to the wall.

His two arthritic hips were bothering him, and he has a tumor on his thyroid gland. He said he can't afford an operation because the receivers in the Tom Petters Ponzi scheme case cancelled his health insurance.

Two days prior, Catain had been sentenced to seven years in prison for allowing Petters to use his Wayzata car wash to launder $12 billion from the scheme. He has insisted from the start, however, that he had no knowledge of the overall Ponzi. Minutes before I arrived, Catain had learned that Robert White, who admitted to actually creating the false documents, got only five years.

Catain spread his arms and shook his head in disbelief.

"I [messed] up," he said. "[But] I was working every day. I wasn't getting up every day saying, 'Who am I going to con today?'"

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 who thought Petters was using them to buy consumer goods. Instead, the money was funneled back to Petters, sometimes in envelopes stuffed with cash.

Catain wanted to talk to me because I had written unflattering things about him, he said. Shortly after his house was raided, I interviewed neighbors who portrayed him as mean and brutish, and famous musicians who worked with Catain as he bought up rights to their music and found him untrustworthy. I also called him a "palooka" after learning that his father, Jack Catain, was frequently called a mobster and loan shark in media reports. More than 20 years ago, Jack was also involved in what was then the largest Ponzi scheme in America. He died of poor health before serving a day in jail.

The younger Catain readily admitted to laundering $12 billion, but not to being a palooka. He seemed genuinely concerned that people not see him as an evil thug and bad neighbor, but as someone who made a mistake and is now sorry. He correctly pointed out that he also filed protection orders against his neighbors. He talked about his charity, loyalty and hard work, and asked that I be fair to him because his family is suffering. "My son has my same name," he said.

He also wanted to complain about the receivers, whom he claims are on a spending spree with seized assets that should go to victims. "They are out of control," he said.

In a story filled with mythical scoundrels, Catain is indeed a complex and contradictory man -- a business success who is at turns deceptive and disarmingly honest, a smart and charming guy who used those qualities to facilitate a major fraud. If not for old newspaper clippings about his father, the back story of a guy living obscurely on Lake Minnetonka might be hard to believe.

Catain, 54, said his dad started Rusco Industries, allegedly a door and window manufacturer, but which the Wall Street Journal called a company designed to launder mob money. Either way, he was rich and connected and entertained mob figures and celebrities, including O.J. Simpson, Ernest Borgnine, Shelley Winters and former Los Angeles Dodgers coach Tommy Lasorda, Catain said. His father married Kathy Hilton, grandmother of Paris. (His stepsisters will soon star in a reality show about the housewives of Beverly Hills.)

When I asked if his father was a gangster, Catain fidgeted and deflected the question. "You know, he had a big heart," he said. "They make up stories. His cousin set him up with counterfeit money. Did he know everybody in the organization? Yes. Did he want to be [a gangster]? I think he thought the power" would be nice.

Later, Catain dropped that mafioso who he'd seen playing cards at his house could end up on the news a few days later, in pieces. He ticked off an impressive list of suspected and known mob members. "They were all my dad's friends, and they are all dead, including my dad," he said. "It was a horrible way to grow up."

His father, a "strict authoritarian," made his kids wear suits and ties in high school. They had to work and pay their own bills. "I didn't have much of a childhood," he said.

Catain did his first deal at age 15 when he liquidated the business of a family friend. He bought a house at age 19. He worked for United Artists and Motown, started his own company and bought rights to songs. He also assessed business foreclosures and built a small fortune that afforded him the Minnetonka home, a Costa Rican compound and fancy cars. Even his marriage to his wife, Joan, was a negotiation, the terms scrawled on a napkin after he'd known her just 30 days

"Everything I do is a deal," he said.

The advent of music downloading dropped Catain's income from about $3 million to $1 million, he said. That's about the time Petters called him and wanted to do a deal. Catain hung up. But eventually Catain did assessments of warehouses of goods in China for Petters, and thought his deals were real. But when Petters began using his bank account to push massive amounts of money and gave Catain millions for the inconvenience, didn't he know something was up?

"Yeah, I did. Look, you reach a certain lifestyle. You have bills. I would have lost everything back then. It was the easy way out, and I strayed off," Catain said.

Asked why he referred to Petters' payments as "cabbage" in e-mails, Catain said that's what his dad's friends called loose money from the casinos. Now all of it is gone, he said.

While federal authorities say they can prove Catain made $15 million in "commissions" from Petters, he says it's closer to $3 million.

Assistant U.S. Attorney Tim Rank said Catain could have gotten 20 years, but that his sentence is fair. "He knowingly laundered $12 billion over six years and funneled cash back to Petters, and he knew he was misrepresenting it to investors," said Rank.

Receiver Doug Kelley also said Catain tried to shift assets to his wife during a divorce proceeding that Kelley believes was a sham. Kelley doesn't know if they have found all of Catain's assets. Catain says he and his wife are back together.

Mostly, he wants people to know he is more complicated than portrayed.

I asked Catain if being part of a massive Ponzi scheme, just like his dad, was coincidence, irony or providence.

"I couldn't help think I was going to get 12 years and die before I went to prison," he said with a pained smile.

Then he got up slowly and limped across the cafe and into a hard rain. He got into a white 2005 BMW SUV registered to his wife, and drove away.