With his financial world crashing wildly around him, a red-eyed Tom Petters was denied a taste of freedom Wednesday by a federal judge who determined that Petters is crafty enough to flee the country with or without a passport and other identification papers.

"He had control of billions of dollars. He was involved with hugely complex business deals. He was accustomed to making grandiose schemes work," U.S. Magistrate Judge Jeffrey Keyes said in a ruling he read from the bench.

"He's facing a very, very long prison sentence -- perhaps for the rest of his life. This is one of the greatest frauds in American history," Keyes continued in his packed St. Paul courtroom.

"He has the personality to pull off a flight caper."

Petters and several members of his family, including his daughter, waved goodbye to one another as Petters was escorted from court after the ruling was announced. He is currently confined at the Sherburne County jail in Elk River.

Petters was arrested and charged Friday on charges of mail and wire fraud, money laundering and obstruction of justice.

Federal investigators say he masterminded a fraudulent investment scheme exceeding $3 billion. Keyes' ruling Wednesday upheld the request of the U.S. attorney's office in Minnesota to keep him locked up while the case ensues.

Petters' attorney, Jon Hopeman of Minneapolis, said at the conclusion of the hearing that he objected to the judge's decision "for the record." Hopeman said an appeal of the decision "is under consideration."

Petters wore dark slacks and an open-neck dress shirt with monogrammed cuffs, a fashion picked up from his onetime prosperous lifestyle.

Hopeman had urged Keyes to order Petters confined to his Wayzata home with strict oversight. But Keyes agreed with federal prosecutors that alternatives to jail, including home monitoring, were not workable for Petters.

"There is no condition or set of conditions that can reasonably assure his appearance at trial," Keyes concluded.

Keyes said a tape recording of a conversation between Petters and an associate in the investment operation, in which Petters talked about leaving the country, provided "strong evidence of flight risk."

On the recording, Petters suggested to Robert White that he should take "a vacation" and that there are ways to get false identification documents from the Internet. "I have one of those," Keyes quoted Petters as telling White. "We can start over."

White, 67, of Excelsior, pleaded guilty Wednesday morning to participating in the alleged investment fraud scheme. He was freed on a $25,000 unsecured bond.

Keyes said Petters appeared obsessed by the experience of Marc Rich, an international commodities trader who stayed out of the United States for 18 years while facing tax evasion charges and was ultimately pardoned in 2001 by then-President Bill Clinton.

"It's clear Mr. Petters has his own ideas about pulling off a similar plan for himself," Keyes said.

The judge also made note of a comment Petters had made to White about hiding in Wisconsin a number of years ago when Petters faced fraud charges in Colorado that involved $75,000. "Now there is much more at stake," said Keyes.

The judge said that there is no certainty that federal authorities have located all of the assets of Petters and that there is "no assurance that Mr. Petters does not have access to sufficient resources" to flee. Nor would his community and family ties necessarily deter him from flight, Keyes said.

"Home detention would not stop a resourceful defendant from fleeing," he said.

In addition to White, two of his former colleagues pleaded guilty for their roles in the alleged investment scheme. Deanna Coleman, a former vice president of operations for Petters Co. Inc., pleaded guilty to conspiracy. Michael Catain, owner of one of the companies that received investor funds and sent the money back to Petters, pleaded guilty to money laundering and conspiracy. White, who created many of the phony documents used to lure investors, pleaded guilty to mail fraud and money laundering.

The fifth person charged to date is Larry Reynolds, owner of another finance company that passed through the funds of investors who thought they were buying and selling consumer electronic goods. Reynolds of Las Vegas faces the same charges as Petters. He was arrested in California but has yet to make a public appearance in Minnesota. Asked when that might occur, prosecutors declined to comment.

David Phelps • 612-673-7269