Petters Associate Explains How Alleged Scam Worked

STEVE KARNOWSKI

ST. PAUL, Minn. (AP) — A key figure in the case of a Minnesota businessman accused of orchestrating a massive Ponzi scheme acknowledged Monday that he was a disbarred lawyer with a criminal record who had entered the federal witness protection program decades earlier.

Larry Reynolds testified about his past and about the Ponzi scheme, saying he and Tom Petters started doing fraudulent deals together in 1998. Reynolds also testified that he lied to auditors and helped stall nervous investors as late as last year to keep the scam going.

Reynolds already pleaded guilty to money laundering conspiracy for operating one of the companies involved in what authorities say was a $3.65 billion fraud by Petters, operated out of Minnetonka-based Petters Co. Inc.

Reynolds could face up to 20 years in prison and doesn't have a formal cooperation agreement with prosecutors as several other defendants do. But the 68-year-old acknowledged he hopes for a reduced sentence so he doesn't die in prison.

"I only agreed with them I'd come here and tell the truth," he said. "Nothing more."