January 26, 1999

Portland, Maine

The government's lead witnesses - the first of what is expected to be 80 in what has been billed as Maine's largest fraud case - took the stand Tuesday and offered up conflicting testimony as to the role of Catherine Duffy Petit in fleecing 125 investors out of $6.8 million, as prosecutors have alleged she did.

The day after the media circus of Monday's opening day statements was marked by the workmanlike procession of prosecution witnesses to the witness stand. Proceedings in the grand U.S. District Court were not without elements of drama and pathos, however.

Jurors heard Sabbatus resident Joan Roberts resume her testimony from yesterday by immediately telling Assistant U.S. Attorney Paula Silsby that she lied to the FBI when called in for questioning in September, 1997.

Under direct questioning from Silsby, she then said she waited a couple of days before calling the FBI back to offer up a different version of events in her role in personally soliciting over $1 million from family and friends to invest in Petit's long-running civil suit against Key Bank.

All that money solicited, she told the court, was turned over to Thomas Blackburn, the Auburn lawyer who was publicly named by Petit's defense team Monday as the real ringleader of the fraud.

Petit and her four co-defendants - Paul Richard, Steven Hall, his brother David and Roland Morin - listened on as her lawyer David Beneman informed Roberts that she in fact was on FBI records as having gone back to see them over six months after she had lied to them initially.

''Records show that you didn't contact them again until April, 1998,'' Beneman pointed out.

Roberts acknowledged such, saying that she had retained a lawyer who told her to seek an order of protection from the FBI in exchange for her new testimony.

Under cross-examination from Beneman, Roberts, a former friend of Petit's, also told the court that she filed a proof of claim against Petit's involuntary bankruptcy estate for over $1.2 million last June, despite having given Blackburn only $272,000 of her money to invest. The larger figure reflected the profits she was promised by Blackburn, she said.

During the course of the day, the 12 jurors and six alternate jurors heard the names of Blackburn and Petit repeatedly.

What emerged from the testimony of the ensuing three witnesses after Roberts - Annette Lyon of Aroostook Co., Roderick Maheux of Turner and Daniel Boutin of Litchfield - was that all three were convinced to invest by Blackburn, wrote their checks or bank drafts out to Blackburn and contacted him over the ensuing months and years after the promised returns on their investments failed to materialize.

Lyon testified that Blackburn was her former attorney and he convinced her that her $30,000 investment would be doubled, padded with 18% interest and protected by an escrow account of $4 million to $6 million that had been set aside by a court.

He also alluded to the parallels between Petit's case against Key Bank and Scarborough Downs racetrack owner Joe Ricci's successful $15 million lawsuit against the bank in 1987.

''Blackburn said that her case was better than Ricci's,'' Lyon testified. ''It was a deciding factor in my investing. I figured if they [Key Bank] did it once, they could do it again.''

Lyon eventually received back some $25,000, she said, but was unable to receive the rest from Blackburn. In 1995, she testified that Blackburn told her he was ''washing his hands of her'' and asked her to sign a release. She refused.

Later, on the phone, she spoke to Petit, who told her that Blackburn had no right to be taking her money in her name and she would do all she could to right the wrong. Never, she testified, did she meet or speak face to face with Petit.

Roderick Maheux, a Turner truckdriver who decided to invest after being referred to Blackburn by his friend Lyon, told the court that he initially invested $20,000, wrote the checks out to Blackburn - ''I remember, it was the largest check I ever wrote,' he said wryly - and eventually was able to recover some of his money in small increments. However, before he was paid in full, Blackburn contacted him and told him that he was no longer responsible and that he should contact Paul Richard.

Richard, he said, arranged for him to get $3,000 in cash and put him in touch with Petit when he pressed for his money's return.

''When I spoke to Petit, she said, 'Mr. Maheux, what has Tom Blackburn told you?'' The government's witness told the court that Petit then went on to tell him she could not right Blackburn's wrongs, but would try to work it out.

Boutin, a Litchfield real estate investor, met Blackburn through a chance encounter at a Litchfield convenience store with Roland Morin, one of the defendants. Morin told him about the investment and put him in contact with Blackburn, who met with him at his office at Roberts Hackett investment firm.

Ultimately, he was persuaded to write checks to Blackburn on four separate occasions, he said, after Blackburn told him about a fictitious escrow account.

However, his repeated attempts to get a return on his investments went for naught and he hired a lawyer to bring suit against Blackburn.

He then met with Petit on two separate ocassions She told him that she had been ''screwed'' by Blackburn and cautioned him not to talk to him anymore.

In June, 1997, Boutin testified that he called the U.S. Attorney's office and spoke to Assistant U.S. Attorney Donald Clark, the lead prosecutor in the case.

Boutin said that he told Clark that he had not been misled by Petit, but rather put the blame for his loss on Blackburn.

He also told the court that he gave all his money to Blackburn, but the only money he received back was from Paul Richard, who his lawyer characterized Monday as a man who was attempting to help Petit sort out the financial ruin that began to reveal itself in 1995.

Blackburn is expected to testify for the prosecution Wednesday. He was implicated by Beneman on Monday in his opening statement.

He is one of six government witnesses who have pleaded guilty to a variety of felonies in exchange for sentencing leniency. The others are James Erskine, Donald Shields, Robert Paradis, Greg O'Halloran and Armand Pelletier.

Petit and the four co-defendants have been charged with 87 counts of conspiracy, mail fraud, money laundering, bankruptcy and securities fraud. They were initially indicted on 344 counts in August, 1997.

The trial is expected to last six weeks.

January 26, 1999

6:30 p.m.

Presiding Judge D. Brock Hornby said deliberations for Thursday were in question due to the death of Maine Supreme Judicial Court Justice Roberts. His funeral is tentatively scheduled to be held in Bangor, the judge told the court.