663 F.3d 375 (8th Cir. 2011), 10-1843, United States v. Petters

Docket Nº:10-1843.
Citation:663 F.3d 375
Opinion Judge:SHEPHERD, Circuit Judge.
Party Name:UNITED STATES of America, Appellee, v. Thomas Joseph PETTERS, Appellant.
Attorney:Jon M. Hopeman, argued, Paul C. Engh, Eric Riensche, and Jessica Molyneaux Marsh, on the brief, Minneapolis, MN, for appellant. Joseph T. Dixon, III, AUSA, argued, John R. Marti and Timothy C. Rank, on the brief, Minneapolis, MN, for appellee.
Judge Panel:Before LOKEN, MELLOY, and SHEPHERD, Circuit Judges.
Case Date:December 09, 2011
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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663 F.3d 375 (8th Cir. 2011)

UNITED STATES of America, Appellee,


Thomas Joseph PETTERS, Appellant.

No. 10-1843.

United States Court of Appeals, Eighth Circuit.

December 9, 2011

Submitted: Feb. 17, 2011.

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Jon M. Hopeman, argued, Paul C. Engh, Eric Riensche, and Jessica Molyneaux Marsh, on the brief, Minneapolis, MN, for appellant.

Joseph T. Dixon, III, AUSA, argued, John R. Marti and Timothy C. Rank, on the brief, Minneapolis, MN, for appellee.

Before LOKEN, MELLOY, and SHEPHERD, Circuit Judges.

SHEPHERD, Circuit Judge.

After a month-long trial and five days of deliberations, a jury convicted Thomas Joseph Petters of ten counts of wire fraud in violation of 18 U.S.C. §§ 1343, 2; three counts of mail fraud in violation of 18 U.S.C. §§ 1341, 2; one count of conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 371; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); and five counts of money laundering, in violation of 18 U.S.C. §§ 1957, 2. The district court 1 sentenced Petters to 50 years imprisonment and 3 years supervised release. Petters appeals, challenging his conviction and sentence. We affirm.

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Petters was a prominent Minneapolis, Minnesota businessman. He owned numerous businesses, including Petters Group Worldwide LLC (PGW), Sun Country Airlines, Polaroid Corporation, Fingerhut, and Petters Company, Inc. (PCI). On September 8, 2008, Deanna Coleman, one of Petters's employees, confessed to government authorities that she was assisting Petters in perpetrating a multi-billion dollar Ponzi scheme through PCI. Under the scheme, investors were told that their money would be used to purchase electronic goods that were then sold for profit to large retailers such as Sam's Club and Costco. Over the sixteen days following Coleman's confession, she secretly recorded multiple conversations with Petters. Based on these conversations and other information supplied by Coleman, the Federal Bureau of Investigation, the Internal Revenue Service, and the United States Postal Inspection Service executed search warrants at Petters's business headquarters and residence. Government agents located counterfeit purchase orders purporting to show that PCI was owed over $3 billion by Costco, Sam's Club, and other retailers. Petters does not dispute that there was a fraud; rather, he argued at trial that he was not aware of the extent of the fraud and was not responsible for perpetrating the fraud.

A grand jury indicted Petters on multiple counts. Several individuals agreed to become cooperating witnesses, including Coleman and Larry Reynolds, a Petters business associate from California. Beginning in 2001, Petters wired money to Reynolds's company, Nationwide International Resources, Inc. (NIR), which returned the money to PCI or some other company owned by Petters, less Reynolds's " commission." Reynolds aided in the fraud by supplying false purchase orders, arranging for warehouse space claiming that the space was used by PCI, and providing assurances to investors. In truth, PCI funds were funneled to purchase and maintain various Petters companies or to Petters personally.

As pretrial discovery and independent investigation developed, Petters learned that Reynolds was in the United States Marshals Service's Witness Security Program (WITSEC). Upon learning this information, Petters filed a motion requesting an order from the court compelling the government to disclose whether any informant, cooperating witness, or alleged co-conspirator was involved in the WITSEC program. At a pretrial hearing, the court denied the government's motion to close the hearing, but granted the government's request that Reynolds's name not be used during the argument on the motion to compel disclosure.

The district court directed the government to provide a redacted copy of Reynolds's WITSEC file, but the file was placed under seal and Petters was not allowed to introduce the file into evidence during the trial. The district court also prohibited the use of the WITSEC file to impeach Reynolds. However, the district court permitted the defense to refer to Reynolds by name, to reveal that he had a prior criminal history and was a participant in the WITSEC program, and to cross-examine Reynolds based on the information in the WITSEC file.

During the government's direct examination of Reynolds, Reynolds admitted to a history of involvement in scams, that he had cooperated in the past with the government in an effort to receive reduced sentences, and that the United States Marshals Service had placed him in the WITSEC program to protect him from a purported threat made against him and his family. Pertaining to Petters's case,

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Reynolds testified that Petters requested fraudulent invoices and that Reynolds provided those fraudulent invoices so that Petters could secure funding from other sources. Reynolds also testified that after he rendered assistance and additional help in perpetuating fraudulent transactions, his relationship with Petters strengthened and they started conducting more business together which included both legitimate and fraudulent transactions.

During cross-examination, Reynolds admitted that, as a young attorney, he defrauded insurance companies and clients; that he fled to Europe to avoid prosecution; that he was later found, arrested, and extradited to the United States; that he was disbarred; and that he served time for defrauding insurance companies. He further testified that after release from prison, he began a clothing business that later went bankrupt and participated in a scheme to purchase a large quantity of marijuana for which he received a three year term of incarceration. Reynolds testified that, after his release on the marijuana conviction, he joined a scheme to steal money from a bank account and to convert those proceeds to jewelry purchases. When that scheme was discovered, Reynolds again cooperated with the government by wearing a wire and testifying against a target of the investigation, George Kattar. He received a sentencing reduction for his cooperation and later entered the WITSEC program when Kattar reportedly put out a contract on Reynolds's life.

At one point during the cross-examination, after Reynolds denied being a member of the mafia or associating with members of the La Cosa Nostra mob, defense counsel attempted to impeach Reynolds using his WITSEC file. At a sidebar conference, defense counsel indicated that he wished to use the WITSEC file to show that Reynolds was a liar. Stating that counsel had " established that all over," the court refused to allow defense counsel to use the WITSEC file to impeach Reynolds. When cross-examination resumed, defense counsel questioned Reynolds about criminal activities he was involved in while a participant in the WITSEC program. After proceedings ended for the day, defense counsel made an offer of proof as to what he would have presented from the WITSEC file, and later filed under seal the questions he would have asked Reynolds, attaching specific evidence from the WITSEC file to support the questions.

After five days of deliberations, the jury returned guilty verdicts on all twenty counts of the indictment. The district court subsequently sentenced Petters to 50 years of imprisonment to be followed by three years of supervised release.


Petters argues that his Sixth Amendment rights were violated when the district court sealed Reynolds's WITSEC file, limited Petters's ability to reference Reynolds by name at a pretrial hearing, prevented Petters...

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