Defense In Fraud Trial Highlights Legitimate Deals

STEVE KARNOWSKI

ST. PAUL, Minn. (AP) — A cousin of Tom Petters testified in the Minnesota businessman's fraud trial Monday that they worked on a multitude of real deals involving real merchandise such as home entertainment systems, other electronics and clothing.

The defense called Karl Petters as one of its first witnesses in an attempt to show that Petters Co. Inc., the company prosecutors say was at the heart of a $3.65 billion Ponzi scheme, was a legitimate business — at least in its early years.

Karl Petters, of Austin, Texas, testified he was involved in a 1996 deal in which PCI bought thousands of home entertainment systems from 3M Co., which was getting out of that business. Karl Petters, who is not charged with a crime, said PCI sold the majority of them to Sam's Club for about $5 million.

An IRS agent testifying for the prosecution told the jury earlier Monday that money flowed into PCI mostly from hedge funds plus some individual investors, including Minnesota business figures Ted Deikel and Dean Vlahos. Special Agent Kathy Klug said almost none of it from 2003 to 2008 went to buy electronic merchandise as the investors were told.