The government's second key informant in the 87-count fraud trial of Catherine Duffy Petit and three other defendants spent the better part of Thursday acknowledging that he lied repeatedly to the FBI and U.S. Attorney's office in downplaying his involvement in the alleged scam.

James Erskine, a Turner resident, was subjected to nearly a day long cross-examination by Petit co-counsel David Beneman. Erskine has pleaded guilty to one count of mail fraud and agreed to testify in exchange for sentencing leniency.

First however, Erskine was questioned by Assistant U.S. Attorney Paula Silsby about his role in forging the name of an elderly So. Paris woman on her dividend checks and pocketing the money.

In what could be viewed as a strategic pre-emptive line of questioning by the prosecution, Silsby asked Erskine whether he was guilty of forging the name of Jeanette Turmenne, a former insurance customer of his who he said he had a ''very close and trusting relationship'' with.

''Yes, I signed her name on two of her checks and put them into Capital Placement Services,'' he told Silsby. ''I was somewhat desperate for funds.''

Capital Placement Services was the investment firm that Erskine started up with Thomas Blackburn, a former Auburn attorney who Beneman labelled as the ringleader of the $6.8 million fraud in his opening statement last month.

Erskine testified that he owes Turmenne over $100,000 for other investments. None are related to the fund-raising associated with Petit's lawsuit against Key Bank.

Turmenne attempted to have the state Attorney General's office launch an investigation into the forgeries, but they declined to do so. She brought the documentation of the forgeries and her other failed investments with Erskine to the Androscoggin County Sheriff's Department last year.

Last month, a sheriff's deputy said the investigation was still open. Forgery is a felony charge. Another of Erskine's co-conspirators in the case, Donald Shields, is himself facing five forgery counts in Lincoln County on charges unrelated to the Petit case.

Erskine, Blackburn, Shields, Greg O'Halloran, Armand Pelletier and Robert Paradis have all pleaded guilty to felony charges and have agreed to cooperate with prosecutors in exchange for sentencing leniency.

Petit, Paul Richard, David Hall and Roland Morin are facing 87-counts ranging from conspiracy to securities fraud. A fifth defendant, Steven Hall, was granted a mistrial last week after his lawyer fell ill and was hospitalized. He could be tried at a later date.

Erskine also told Silsby that he ''downplayed'' the amount of money he says he pocketed in the fund-raising scheme. When he first met with prosecutors in August, 1997, he told them that he - through Capital Placement Services - kept $93,000.

However, a recent summary he provided to prosecutors reveals that he pocketed nearly $450,000 out of the total of $1.8 million that he claims went from his company to Petit via her employees.

Beneman was quick to tear open holes in Erskine's testimony and his credibility.

The Colby College graduate acknowledged that he lied to the FBI and later told them about it in affadavits after he signed his plea agreement with the government. The agreement calls for Erskine to provide truthful statements and documents to prosecutors.

''Yet your plea agreement was not revoked, was it Mr. Erskine?'' Beneman asked.

He acknowledged he lied to Assistant U.S. Attorney Donald Clark in their first meeting to discuss testimony and the possibility of an agreement.

He also acknowledged he provided a false summary to Clark in a later meeting, lied to the Maine Attorney General's office on at least two occasions in connection with their civil suit, lied in depositions taken under oath about whether he paid taxes on the income he derived from his fund raising and lied to the investors when he told them that he would pay their tax obligation on the investments.

In addition, Erskine - who looked decidely less composed than he did Wednesday when he was questioned by prosecutors - acknowledged that he routinely took between 40% and 50% of an investor's money as his commission.

Erskine restified that he started raising money for Petit's lawsuit in the spring of 1994 at the suggestion of Blackburn. Both Blackburn and Erskine had worked together at Roberts Hackett, a defunct Auburn investment company that was dissolved soon after its involvement in the bankruptcy of Oxford Homes.

Roberts Hackett had conducted a leverage buyout of the modular homes manufacturer in 1993 and was later accused by a bankruptcy trustee of misrepresentation. Blackburn was house counsel for the company. Co-conspirator O'Halloran also worked at the company.

Saying that Blackburn provided him with a ''pitch'' that Petit's Key Bank suit was nearing completion, was expected to yield damages in excess of $20 million and was covered by a $3.5 million escrow account to protect investor's principals, Erskine solicited the clients of Steven Hall, a former Sun Life insurance agent who had past business ties with Erskine.

He testified that he never discussed a commission or fee arrangement with Blackburn, who would receive the funds via money order or bank draft from Capital Placement Services, Erskine's company.

Instead, he said, the commissions were picked ''randomly'' depending on the deal.

For example, Erskine ''pitched'' one of David Hall's clients, Alice Bettany, an elderly Standish woman, in the winter of 1995. Bettany - who has become a media symbol for the growing problem of fraud of elderly citizens - wrote out a $104,000 check to Capital Placement Services.

Of that sum, Erskine forwarded $28,500 to Blackburn, the alleged lead fundraiser for Petit's lawsuit. He gave Steven Hall a $14,625 fee, his brother David an $11,000 commission and then wrote out a $25,500 check to Joseph Caron, his father-in-law.

Caron, he testified, had lent Blackburn $50,000 and Erskine demanded that he be paid back, a transaction that he said Blackburn ''authorized.'' Capital Placement Services kept $25,000 as well.

In another case, investor Robert Aube wrote out a $133,900 check after he cashed in his Sun Life annuity. He was the largest single investor Erskine dealt with in his involvement, he told Beneman.

Erskine testified that he forwarded $57,000 of that sum to Blackburn, which left nearly $77,000 for he and Steven Hall to share, he said. He said he didn't remember how much he gave Steven Hall in that instance, but testified that he usually gave him between 10 and 15% of the investment amount. By that math, Erskine would have pocketed over $50,000 for the deal.

Of the $1.8 million he said he raised in his 18-month involvement raising money, Blackburn received a total of $538,000, according to his most recent summary given to prosecutors. Capital Placement Services kept $446,000, he sent $566,000 to Paul Richard, he claimed and the rest went out to commissions to the Hall brothers and various other expenses.

Blackburn testified last week that he was responsible for funnelling nearly $4.3 million back to Petit from 1989 to 1995. He claimed he kept $200,000 for himself and was not paid on promissory notes that Petit had given him.

In addition to testifying to the government's version of events that Petit was the ringleader of the fraud and Richard a sort of trusted lieutenant, Blackburn also acknowledged that he devised a scheme to defraud a pension fund, filed false legal bills, filed fraudulent federal tax returns and violated federal laws prohibiting felons from possessing firearms.

He, like Erskine, is only charged with one felony count in connection with the case.

Erskine acknowledged to Beneman that he and Blackburn had used cocaine, smoked marijuana and drank together. He was in financial straits for some time in the early 90's, he testified and owed money for a number of failed business ventures. He also owed income taxes dating back to 1986.

Soon after he began raising money in connection with the Petit lawsuit he paid off a court judgement and debts to his banks, he told Beneman when questioned about his finances at the time. The commissions that were beginning to flow in allowed him to do that, he said.

''Still, in 1995 you didn't pay your state or federal taxes and you were driving a BMW, weren't you Mr. Erskine," Beneman asked curtly. Erskine acknowledged that was true.

Prosecutor Silsby finished with her redirect examination of Erskine at 1:15 p.m. and he stepped down from the stand looking drained from his over seven hours of testimony in the last two days.

Rockport surgeon Dr. Olaf Andersen took the stand next and he told prosecutors that he invested $25,000 in the lawsuit litigation in 1994 after hearing of it from his partner, Dr. Gordon Paine. A number of his employees at Surgical Associates also invested in the suit, he said.

Andersen said he wired the money to Blackburn, and after six months had elasped and he hadn't seen a return, he called Blackburn.

''He was very abrupt and said that he would have someone call me back,'' Andersen said. "But no one ever did.''

Ultimately, he said, he sent a letter to Blackburn and a copy to Petit threatening legal action. Petit called two weeks later, he said, saying that Blackburn had ''double-crossed her'' and that she didn't receive any money that Blackburn said was destined for her.

Neither he nor any of the Surgical Associate employees have ever been paid, he told Assistant U.S. Attorney Donald Clark.

Among those in attendance Thursday was a representative of Pierce Atwood, Key Bank's lead law firm. Lawyers or paralegals from the firm have been consistent attendees at virtually every legal action involving Petit since she filed her lawsuit against the bank in 1986.

Due to the holiday Monday, proceedings will resume on Tuesday, February 16th.

Portland, Maine

7:40 p.m.