MINNEAPOLIS -- Disgraced Twin Cities businessman Tom Petters was sentenced in St. Paul Federal Court Thursday morning to 50 years in prison for masterminding and carrying out a 3.65 billion dollar ponzi scheme. Petters will recieve 41 months off that sentence for time already served, but will serve the rest of the sentence in it's entirety as there is no parole for federal offenses.
Petters lead attorney John Hopeman told reporters there will be an appeal.
The sentence, imposed by U.S. District Court Judge Richard H. Kyle, represents the longest term of imprisonment ever ordered in a financial fraud case in Minnesota history. In ordering the
prison term, Judge Kyle said, "I'm not satisfied that if he were released early, he wouldn't re-offend."
Before he handed down the sentence, Judge Richard Kyle said that Petters' testimony during the trial "did not pass the smell test." He went on to say it was hard to imagine that Petters didn't know what was going on with the scheme. "Mr. Petters was captain of the ship," Kyle said.
The judge will recommend to the Bureau of Prisons that Petters be allowed to serve his time in Minnesota. The final decision will be up to the Bureau of Prisons and that could take several weeks.
Before he was sentenced, Petters told the court "I am truly grieved for the victims... and all they had to endure because of me." He went on to say "every day I am filled with pain and anguish for all those affected in this... I will try to repair, replace... what has been lost."
He also pledged to make good on his transgressions, saying "In my life I was taught redemption... I hope and pray that some redemption will will happen through my continued cooperation."
U.S. Attorney B. Todd Jones said, "For years Tom Petters built his
life on the shattered dreams of others. Minnesotans need to be reminded there are thousands of entrepreneurs in our state who are grounded in community values, give generously to charity, act as true mentors to other business people, are ethical stewards of investors, and grow good jobs."
Jones continued, saying "They are not Tom Petters. Tom Petters is a fraud, and now he will pay a huge price for his self-enrichment and his deceit."
That scheme included not just hedge funds, but at least 10 pastors, three missionaries, dozens of retirees and a half-dozen nursing home residents, according to federal court filings.
Prosecutors have argued in court documents that Petters captained a fraud so massive that he has earned the statutory maximum of 335 years -- effectively life in prison for the 52-year-old. The defense says four years would be sufficient.
A jury convicted the one-time owner of Polaroid and Sun Country Airlines four months ago on 20 counts of wire fraud, mail fraud, money laundering and conspiracy. His sentencing hearing was scheduled for Thursday morning.
"The defendant's fraud is beyond comprehension in size and scope," prosecutor Joe Dixon wrote. "The offense is the largest fraud in the history of Minnesota. Indeed, there are only a handful of fraud schemes that are even comparable in the history of the United States."
One of those few was run by Bernard Madoff, the New York financier who was sentenced to 150 years in prison after pleading guilty for a Ponzi scheme that cost thousands of investors at least $13 billion.
Using the Madoff model and some creative math, defense attorney Paul Engh last week proposed a sentence of just over four years.
Petters plans to appeal his conviction and has maintained his innocence. The defense also disputes that what happened was a Ponzi scheme, in which early investors are paid off with money from later investors.
Petters testified that he had thought Petters Co. Inc., an arm of his now bankrupt Petters Group Worldwide, was doing real deals involving real merchandise.
According to testimony and documents presented at trial, PCI used fake purchase orders and bogus bank records to persuade investors to finance what they were told would be purchases of electronics such as big-screen televisions that PCI would resell to discount retailer such as Sam's Club and Costco. In reality, the prosecution contended, the merchandise never existed and the sales never took place.
Petters' attorneys blamed other business associates -- who all pleaded guilty in hopes of leniency when they're sentenced later -- and said his biggest mistake was trusting them.
"Petters is imperfect yes but not evil," the defense wrote in a recent filing. Another defense filing called him "a flawed but still virtuous human being."
(Copyright 2010 by The Associated Press. All Rights Reserved.)