January 27, 1999

Portland, Maine

Prosecutors concluded an abbreviated opening week in the federal trial of Catherine Duffy Petit and four co-defendants Wednesday by calling Thomas Blackburn, a lawyer who was named by Petit's defense team Monday as the ringleader in the 87-count fraud trial.

Blackburn, who testified at a hearing in June that he had resigned his license to practice law in Maine, has pleaded guilty to bankruptcy fraud for his self-proclaimed role in the case and is facing a sentence of up to five years at the conclusion of the trial.

He was reminded of that fact almost immediately by U.S. Assistant Attorney Donald Clark, the lead prosecutor.

Monday, in his opening statement, Clark told jurors that Blackburn and five other men who have pleaded guilty and agreed to cooperate with the prosecution in exchange for sentencing leniency recommendations were ''criminals whose testimony we ask you to scrutinize carefully.''

Wednesday, before a court that was dotted with media upon hearing of Blackburn's testimony, Clark opened his questioning by asking Blackburn about his guilty plea and also about the fact that he sold two shotguns to a pawn shop three weeks ago, a clear violation of rules prohibiting felons from possessing firearms.

Saying he was not aware that he was prohibited from possessing the guns, Blackburn also replied to Clark's questioning of his drug use by saying that he and James Erskine, another co-conspirator who has pleaded guilty to felony charges in connection with the case, had used cocaine together ''a very long time ago.''

The Deering High, Northeastern University and New England School of Law graduate told jurors that he was responsible for helping to raise $4.2 million over the course of seven years to help Petit finance her civil suit against Key Bank.

Saying that he first met Petit in 1986 - the year she filed a lawsuit against Key Bank and the Portland law firm of Bernstein, Shur, Sawyer & Nelson for their alleged attempts to force her to take on partners at the Old Orchard Beach Pier and her subsequent bankruptcy - Blackburn said he began to raise to solicit money from investors at Petit's request in 1989.

He said Petit asked him to help her fund her costly litigation efforts by soliciting investors.

Monday, one of Petit's two lawyers, David Beneman of Portland, told jurors that Blackburn approached her with an offer to raise capital.

Blackburn, a lawyer who is still registered wth the Maine Bar Association despite his felony plea, also testified that he was involved in the mortgage lending business over the years, including a stint in the early 1990's when he worked as house counsel with the investment firm of Roberts Hackett.

That company eventually dissolved, but not before it garnered some negative publicity for its role in the controversial 1994 leveraged buyout of Oxford Homes, a modular home maker that filed bankruptcy soon after.

Reading from exhibits submitted by Assistant U.S. Attorney Clark, Blackburn said he maintained detailed records that listed investors, the amounts they contributed and the amounts they were promised when the Key Bank lawsuit came to frutition.

He told the court that Petit gave him a stack of assignments - the form which was given to investors with promises of double their money and usually an additional 18 % interest - that were pre-signed with her signature. He was the only one to witness her signing the forms, Blackburn testified.

He initially sent those assignements to Petit's attorney, Ron Caron, or to her Boston law firm, Looney & Grossman, he said, upon fillling them out. Eventually, Petit told him to stop sending the forms , he testified. Instead, he said, he kept them in a safe deposit box and in his office.

On questioning from Clark, Blackburn also said that he promised investors that their money was protected by a $2.5 million escrow account set up at a Manufacturer's Hanover bank branch in New York. This, he said, he did at Petit's urging.

The checks from investors, Blackburn told the court, were made out to him and he deposited them into his trust account and then issued checks to Petit's employees at her request. In total, Blackburn said, he wrote checks to three Petit employees - Sherrie Girard, government informant Robert Paradis and his wife Louise - and co-defendant Paul Richard that amounted to $3.7 million.

Out of the total raised, Blackburn testified he kept $200,000 over the seven-year period. In addition, he claimed that he received two promissory notes in 1988 and 1990 that totalled $250,000. He was never paid on the notes, he testified.

In 1990, Blackburn said, he was told by Petit to tell investors of her $3.9 million settlement with the Portland law firm of Bernstein, Shur, Sawyer & Nelson despite a confidentiality agreement that prohibited any discussion of the agreement.

''I understood it was a violation of a court order,'' he told the court.

Asked repeatedly by Judge Hornby to speak up so jurors could hear his testimony, the government's star witness said he received two letters advising of an escrow account from Petit that were signed by a lawyer for a Boston law firm that represented Petit in the settlement.

As testimony drew to a close for the day, Beneman questioned Blackburn out of earshot of the jury about why the government exhibits of the letters submitted were photocopies and not originals. Blackburn acknowledged that he never saw the originals of the letters.

A number of television and newspaper reporters waited outside in the chill winter air for Blackburn to exit from the court by day's end. However, they waited in vain, as he apparently slipped out a back entrance.

Blackburn is expected to receive blistering cross examination by Petit's defense team when the government wraps up its questioning.

Monday, Beneman said Blackburn took the money from investors in Petit's name and only in 1995, when she began hearing tales of his activities, did Blackburn stop. A number of government-called witnesses testified earlier in the week that Blackburn told them he was ''washing his hands of them'' in 1995.

Earlier Monday, Litchfield resident Rick Ricker was called by the government and testified that in 1993 he heard of the investment from co-defendant Roland Morin, a former Lewiston policeman. Morin introduced him to Blackburn, he said, and ultimately, after Blackburn told him of Petit's lawsuit and an escrow account that would protect his investment, he wrote out a total of $42,000 in checks to Blackburn.

In 1996, three years after he failed to realize a nickel from his investment, he received a call from Petit, he testified, who asked him to bring copies of his paperwork from Blackburn to a meeting at the Ramada Inn in Lewiston.

There, he told Assistant U.S. Attorney Paula Silsby, Petit looked carefully at the paperwork and then informed him that her signature on the agreement was a forgery.

''She seemed very distraught and became almost ill,'' Ricker testified.

On cross examination by Petit attorney Jim Lawson, Ricker said that Petit told him she would do her best to get his money back to him and make it good.

''I was very comfortable that the Key Bank case could still be won when I walked out of the room,'' he said.

The government's first witness, Clarence Gowell Jr. of Litchfield, told the court that he met Blackburn through Morin, a customer at his general store in Litchfield, and invested $30,000 in cash with Blackburn in 1992. Ultimately, he too was asked by Petit to bring his paperwork to the Ramada Inn meeting.

Boston lawyer William Looney, Petit's former attorney who filed the lawsuit against Key Bank and the Portland law firm in 1986 - a case which is still pending in York County Superior Court - testified as to the settlement agreement with Bernstein, Shur, Sawyer & Nelson and the subsequent $700,000 escrow account that was set up by the firm to handle claims.

The original lawsuit, he told the court, included Petit's four corporations as plaintiffs in the case.

Judge Hornby, who kept proceedings flowing smoothly in his typically congenial manner, told jurors when they sat down Wednesday morning that the trial would be postponed Thursday because he would be attending the funeral in Bangor of retired Maine Supreme Judicial Court Justice David Roberts, a former colleague and friend.

Testimony will resume on Monday.

January 27, 1999

7:15 p.m.