Star witness in Petters fraud case says despair of finding way out of scam drove her to feds

Petters aide weeps as she recalls going to feds

ST. PAUL, Minn. — The star prosecution witness in the fraud trial of Minnesota businessman Tom Petters wept Tuesday as she explained her decision to go to federal investigators.

Deanna Coleman, who was vice president of operations at Petters Co. Inc., testified that by the middle of 2008 she no longer believed Petters’ promises to find them a way out of what prosecutors say was a Ponzi scheme. She said pressure from investors was building.

Coleman said when she and her lawyer went to authorities last fall, she had a list showing Petters Co. Inc. owed investors more than $3.5 billion. The investors included some prominent Twin Cities businesspeople, including Ted Deikel, who was owned $10 million.

Petters Co. Inc. was a branch of Petters Group Worldwide, whose holdings included well-known and legitimate companies such as Polaroid and Sun Country Airlines before it collapsed last year. Prosecutors say PCI was at the heart of the fraud and the economic engine of Petters’ corporate empire.

Coleman also acknowledged that she and Petters had an intimate relationship in 2005 and 2006. She cried as she recalled Petters promising in those years to get them out of the scheme — promises she says he never kept.

The 52-year-old Petters, of Wayzata, is charged with 20 fraud-related counts. His attorney says he’s innocent and that Coleman and others carried out the scheme without Petters’ knowledge.

The defense will cross-examine Coleman Tuesday afternoon.

U.S. District Judge Richard Kyle informed jurors Monday that Coleman has a plea deal with prosecutors, who will recommend a reduced sentence for one count of fraud conspiracy in exchange for her cooperation. The maximum sentence on the count would be five years in prison. Kyle said jurors could use that information in deciding how much weight to give Coleman’s testimony.