Petters Ponzi Scheme Nets 50-Year Sentence

Despite attempts by Tom Petters' attorney to use Bernie Madoff math to set his sentence for running a $3.65 billion Ponzi scheme at four years, U.S. District Judge Richard Kyle at the U.S. Courthouse in St. Paul, Minnesota, sentenced Petters to 50 years in prison.

Prosecutors had asked for a 335-year sentence, while Petters' attorney Paul Engh calculated he should only serve four, based on the sentence handed down to Madoff.

Petters was convicted last November of running a Ponzi scheme through Petters Co., one of his lesser-known corporate entities.

Petters solicited billions of dollars in financing for PCI, telling investors he'd use their funds to buy and resell consumer electronics and other goods for a profit.

Those transactions never occurred, and Petters used investor money to prop up his other, often legitimate, businesses and for his own personal use.

On Thursday, before hearing his fate, Petters thanked his family, friends, and associates and apologized.

"Every day I feel the pain and anguish for all of those whose lives have been destroyed by all of this," he said, pledging to work for the rest of his life to return that which he stole to the victims.

But his plea for leniency was followed by prosecutor Joe Dixon, who said Petters' life sentence "is what he's earned for himself.

"This crime was outrageous. Prior to September 8, 2008, I don't think anyone in Minnesota thought a financial fraud like this was possible," Dixon said.

Engh said at least $500 million may be recovered and returned to investors.

Before Kyle declared Petters' sentence, his attorney argued that a lengthy sentence was irrational, political, out of step with sentencing guidelines, and would not deter others. Kyle disagreed.

"I'm going to consult the guidelines, I am going to consider them as I'm supposed to, but I'm not going to follow them," he said. "I'm not satisfied that if he were released (earlier) that he would not reoffend," Kyle said in front of his filled-to-capacity seventh-floor courtroom.

With possible time off for good behavior and time served while awaiting trial, Petters will serve no fewer than 41 years in prison, Kyle said.

Dixon said that Congress, not Engh, has already decided the role deterrence should play in sentencing.

"These are serious crimes—they devastate lives and need to be punished accordingly," Dixon said.

Petters is expected to appeal.

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Jim Hammerand writes for the Minneapolis/St. Paul Business Journal