February 22, 1999

Portland, Maine

Government prosecutors continued their 87-count fraud case against Catherine Duffy Petit, Paul Richard, David Hall and Roland Morin Monday by calling nine former Sun Life of Canada insurance customers who allegedly invested in Petit's lawsuit against Key Bank in 1995.

Pressing forward with their efforts to tie the mainly elderly investors into their allegations that Petit orchestrated a $6.8 million scam - called Maine's largest by prosecutors - Assistant U.S Attorneys Donald Clark and Paula Silsby questioned one witness after another as the day wore on.

First however, Clark called Jeffrey Mills of Ohio to the stand. Flown at taxpayer expense to the trial in Portland's U.S. District Court, Mills told Clark he was the owner of a condominium in Ft. Meyers, Florida which he rented to Elaine Spohr from July, 1996 to June, 1997.

Spohr was a former occasional household helper of Petit. Mills told Clark that the condo was rented at $1800 a month and that he had to contact Spohr several times when rent payments slipped behind. On one occasion, he testifed, he spoke to a woman on the telephone who identified herself as Petit.

She told him, Mills said, that she wanted to continue to renew the lease on the condo. The lease, however, was never renewed. Ultimately, Mills said, his wife flew to Florida and packed up five to six boxes of clothing and shoes that were left behind.

Clark asked Mills to describe the type of clothing left behind. In it's 119-page criminal complaint, the government claims that Petit used money that was solicited for her lawsuit to maintain a "lavish lifestyle." He told Clark that some clothing still had tags on it and that it filled a walk-in closet.

The first Sun Life investor of the day was Larry Livingston, a truck mechanic from Hollis.

Livingston told Clark that he invested his money in 1995 on the advice of Steven Hall, his former Sun Life agent. He claimed that he was not told anything about Petit's lawsuit, but assumed that it was going into another Sun Life venture.

His check from Sun Life was then deposited into the account of Capital Placement Services (CPS), an investment company formerly owned by government witness James Erskine.

Erskine, who pleaded guilty to felony charges in connection with the case, testified earlier in the trial that he helped raise $1.8 million for Petit's lawsuit. He originally told prosecutors he kept $93,000 of that sum, but later admitted to lying to the FBI and prosecutors on numerous occasions to "minimize his involvement."

Later, Livingston told Clark, he received an agreement - or promissory note - signed by Paul Richard. The note promised him a 20% return on his investment. When he received an IRS tax bill for the withdrawal on his Sun Life account, he notified Steven Hall, Livingston said. Hall showed up on Easter Sunday and wrote a personal check to cover the tax bill. The check bounced, he told Clark.

As he and Silsby did throughout the entire day, Clark asked Livingston whether he received any money from Steven Hall, Petit, Richard or Erskine prior to October 8, 1997, the day Petit was arrested.

Sun Life of Canada reached an agreement with the Maine Attorney General's office prior to that to repay their customers $2.3 million to cover for the actions of David and Steven Hall, their former agents. With the exception of one reference Monday, U.S District Chief Judge D. Brock Hornby is not allowing evidence of that repayment to be heard by the 12-member, six alternate member jury.

On cross-examination from Petit's co-counsel David Beneman, Livingston said that he was never told about Petit or her lawsuit and was not told of an escrow account.

Jurors then heard Gilbert Dumas of Lewiston tell Silsby that he cashed in his Sun Life annnuities after hearing of an investment with an annual yield of 20% from Steven Hall, his agent, and Erskine.

He signed over his $6500 annuity check to CPS and gave the check to Erskine.He received an agreement, Dumas testified, that was pre-signed by Petit on behalf of her corporations.

Dumas told Clark that he spent the winter of 1996 in Florida and on returning home to Maine, saw a story about the state's investigation in the newspaper. He said he called Erskine several times and received nothing but excuses. Eventually, Steven Hall came to his house with Richard, who signed a personal guarantee to pay him $7,000, Dumas said.

Dumas told Clark that he didn't receive any money back before October, 1997.

Pauline Fournier, a retired insurance agency employee of Lewiston, told Silsby that she invested a total of $150,000 of her Sun Life annuities in April, 1995 on the advice of Steven Hall and the checks were deposited into the account of CPS, Erskine's company.

Hall, she said, told her about the lawsuit and said she would receive a 20% return in six months. In October, 1995, Hall came by her house with Petit, who "didn't say too much,'' she told Silsby.

In January, 1996, she received a large IRS bill for the withdrawal and she called Steven Hall, saying that she thought her investment was a rollover, not a withdrawal. Hall told her he would have it paid and, two months later, convinced her to invest an additional $14,000, she said.

Two months later, Fournier said she received a letter from Richard saying the note would have to be restructured and he came to her house with a new agreement in June, 1996. She didn't receive any of the money prior to October, 1997, she told Silsby.

The issue of Sun Life's repayment came up in Evan Slavitt's, Richard's attorney, cross-examination of Fournier. Slavitt asked Fournier if she had a conversation with Petit and Richard in October, 1997 and told them that she had been repaid $168,000. Fournier said she hadn't and Judge Hornby immediately told the jury to disregard the question.

Sharon Beety of Standish told Silsby that she invested $25,000 in what she was told was a property investment through Sun Life by her former agent David Hall. On the verge of tears through much of her testimony, Beety said her husband died in 1995 and that she was looking for a safe investment that would pay her interest.

She wrote out a money order to CPS, Erskine's company, and ultimately, when she hadn't received any documents from David Hall noting the investment, Hall and Richard came to her house and gave her an agreement signed by Richard on behalf of H.E.R. Inc.

In his opening arguments at the beginning of the trial, Slavitt told the jury that H.E.R. was set up after the discovery that money that investors said they had invested was diverted by Blackburn and others. He said the company was a real estate-backed investment vehicle that Richard, who was the treasurer, helped set up to pay investors back.

Prosecutors allege that H.E.R. was a continuation of the scam and that it was set up to throw state investigators off the trail. The state filed a stop order and seized the assets of the company in 1995.

Beety said she invested an additional $25,000 in the fall of 1995 and made out a check to H.E.R. Inc. She never received any money back prior to October, 1997, she told Silsby.

Jane Graffam of Westbrook told Silsby that she invested in 1995 in what she thought was another Sun Life product on the advice of David Hall, her agent. Hall, she said, promised her a guaranteed 18% annual interest return. She was not told about Petit or her lawsuit, she testified.

She signed over her Sun Life mutual fund check of $9,400 to H.E.R. Inc on the advice of Hall, she told Silsby. Months later, after she had not received any paperwork, she said she called David Hall in anger demanding some proof of investment. He brought over an agreement signed by Richard which stated that he would personally pay her back.

Eventually, Graffam told Silsby, Richard came to her house and told her there were some problems but that he would pay her back. Saying that she found Richard 'intimidating,'' she told Silsby that she never saw either Hall of Richard again and was not paid back prior to October, 1997.

On cross-examination by Slavitt, Graffam said she did find Richard a sort of "thug," but that he was not threatening and did promise to try and pay her back.

Mildred Mauthe of Sidney told Clark that David Hall, her agent, told her in 1995 about an investment in the Old Orchard Beach Pier and mentioned Petit.

Petit's 1986 lawsuit against Key Bank and a Portland law firm alleges that they conspired to force her to take on partners and withheld loans that were approved in the late 1970's for the Old Orchard Beach Pier, a family business since 1906. Key Bank's predecessor's, Depositor's Trust of Maine, was the bank handling Petit's loan request at the time.

The suit was filed by Petit and by her three corporations separately. It was dismissed in 1995 but the Maine Supreme Judicial Court reinstated the case in 1996. It is still on the trial docket at York County Superior Court.

Petit remains in involuntary bankruptcy, which puts the litigation against Key Bank in the hands of the court-appointed trustee. Her corporations are not in bankruptcy and are free to pursue the suit.

Mauthe told Clark she signed over her $22,500 Sun Life check to David Hall and received an agreement signed by Richard. Ultimately, Mauthe said, she heard a news report about the state's investigation and called David Hall. She found out that he had been fired by Sun Life and never received any money back before October, 1997.

Roger Nadeau of New Auburn told Clark that he invested $21,000 on the advice of Steven Hall, his agent, and was told about a 10% return for six months and 20% return for a year. He said he signed over his Sun Life checks to Hall and they were deposited in the account of CPS, Erskine's company. Erskine was there with Hall at the time, he told Clark.

He received an agreement pre-signed by Petit, Nadeau testified. He testified that he called Hall twice saying he needed some of his money back and Hall advised him to get home equity loans instead. Ultimately, he saw news of the state's investigation in the newspaper, Nadeau told Clark.

Learning for the first time from Steven Hall in a subsequent conversation that he invested in a lawsuit, Nadeau said Hall and Richard came to his house with $500 and promised to make monthly payments to him. He never spoke to either after and was not repaid prior to October, 1997, he testified.

Slavitt asked in his cross-examination whether his memory of events at the time might have been clouded by drinking, a charge Nadeau denied.

Collette Albert of Lewiston told Clark that she invested a total of $65,000 in Sun Life annuities in 1995 after Steven Hall, her agent, suggested she could get a better return than what she was getting with Sun Life.

She made her checks payable to H.E.R. Inc., she told Clark, and received an agreement signed by Richard. She didn't speak to Hall again, she testified, until a friend called with news of the state's investigation. Albert said Steven Hall and Richard came to her house after, but she wouldn't let them in.

Under cross-examination by Slavitt, Albert, an elderly woman, said she was confused about the discrepancy in her testimony before the grand jury and her testimony on the witness stand about how many times she met Richard and when she received an agreement.

Richard Becker of Turner told Silsby that he invested over $96,000 in what he was told was beachfront property on the advice of Steven Hall, his insurance agent. Becker said he was promised 20% annual return and was told that his taxes on the withdrawal and any penalties would be paid.

He was never told, he testified, that his money was allegedly going to Petit. His two Sun Life checks, he said, were made payable to H.E.R. Inc. He said he didn't know what the company was. Hall asked him whether he knew anyone else that wanted to invest and he recommended his daughter, Becker said.

Becker told the court that his received a $21,000 IRS bill for the withdrawal and he demanded that Steven Hall pay it. Eventually, he testified that he met Hall and Richard at a highway exit in Auburn and they gave him a cashier's check for $21,000.

Soon after, he testified, he received a phone call from a state securities investigator and he subsequently called Hall and demanded his money back. He met with Steven Hall and Richard at a beachfront condo and Richard told him that they could not pay his money back.

The day's proceedings ended with Becker on the witness stand. He will resume his testimony on Tuesday.

Portland, Maine

6:50 p.m.