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Banking and Finance

Petters Wants 50-Year Sentence Overturned

 The man responsible for the third-largest Ponzi scheme in history has filed papers seeking to have his fifty-year sentence overturned, claiming that his former attorney failed to disclose that prosecutors had previously offered a 30-year sentence in plea negotiations. Thomas Petters, 56, chose to stand trial in 2009 on allegations that he masterminded a $3.7 billion Ponzi scheme, even taking the witness stand to profess his innocence. However, the strategy backfired, and Petters was sentenced to a fifty-year term after a federal jury found him guilty of all charges. Petters' previous efforts to challenge the sentence have failed, and he is currently scheduled to be released in 2052 - just shy of his 95th birthday.

Petters was arrested on October 3, 2008 after prosecutors alleged that his company, Petters Company, Inc., was not operating a successful and highly-profitable re-sale business as he claimed, but rather a massive Ponzi scheme that had taken in billions of dollars from investors. According to Petters' motion, Petters' then-attorney, Jon Hopeman, spoke several days later with an assistant U.S. attorney, who allegedly informed Hopeman that the government would agree not to recommend a sentence of more than 30 years in exchange for Petters' guilty plea. Petters was subsequently indicted on twenty charges, including wire fraud, mail fraud, money laundering, and conspiracy, which carried a possible term of hundreds of years in prison.

Shortly after the indictment was unsealed, Petters met with Hopeman, who allegedly told Petters that he had not received any plea offer from the government. The next week, Hopeman against met with the U.S. Attorney, who reiterated the 30-year sentence offer. According to the motion, and as allegedly depicted in Hopeman's personal files, Hopeman informed the prosecutor that, "as a matter of personal pride," his "professional integrity would not allow" him to advise Petters to accept the offer. In an affidavit filed with the Motion, Petters avers that he was never advised of this offer. Petters then proceeded to trial, and on December 2, 2009, was convicted on all counts.

Following Petters' conviction, Hopeman met with Shauna Kieffer to discuss possible issues that might arise during post-conviction proceedings. In an affidavit, Kieffer claims that Hopeman told her of the Government's offer, and that he did not advise Petters of the offer because he felt "it was not a respectable offer."  The Motion concludes by stating that the sentence should be vacated or modified because of Hopeman's ineffective assistance of counsel and, in a claim likely disputed by Petters' victims, that the sentence was cruel and unusual because it was disproportionate to Petters' crimes.

In the Motion, Petters' current counsel cites to Missouri v. Frye, a recent case decided by the U.S. Supreme Court involving the ramifications of the failure to disclose plea offers to an accused. In Frye, the Court acknowledged the crucial role plea bargaining plays in the criminal justice system, stating that " Ours is for the most part a system of pleas, not a system of trials...To a large extent trading [between prosecutor and defense counsel] determines who goes to jail and for how long. That is what plea bargaining is. It is not some adjunct to the criminal justice system; it is the criminal justice system."   Missouri v. Frye, 132 S. Ct. 1399, 1402 (2012) [an enhanced version of this opinion is available to subscribers]. Holding that there were certain responsibilities required of defense counsel in the plea bargain process to render adequate assistance of counsel under the Sixth Amendment, the Court ruled that, as a general rule, defense counsel had an affirmative duty to communicate formal offers for settlement from the prosecution to the accused defendant.

While it is almost certain that the government will oppose the Motion, it will be interesting to see what position the response will tae. Frye stands in contrast to the position that  an accused's guarantee to a fair and impartial trial is an adequate backstop that immunizes any errors in the pre-trial process. The government may also seek to distinguish its communications with Petters' former counsel from the "formal offers for settlement" addressed by the Court in Frye, noting that the lack of any written offer of settlement supports a position that the 30-year offer was merely part of an informal negotiating process that did not progress to any meaningful discussion.

A copy of the Motion is here.

 For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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