February 23, 1999

Portland, Maine

Seven more investors and three Sun Life employees were called by the prosecution Tuesday to testify in the 87-count fraud trial against Catherine Duffy Petit, Paul Richard, Roland Morin and David Hall.

After proceedings concluded Tuesday, Assistant U.S. Attorney Donald Clark told Judge D. Brock Hornby that he expects the prosecution to conclude its case by Wednesday or Thursday of next week.

Hornby also ruled at the end of the day Tuesday that the jury cannot hear that Robert Paradis, a government witness who pleaded guilty to felony charges in connection with the case, has a 1984 Georgia conviction for drug trafficking.

Paradis, who was charged with felony murder in that case but pleaded guilty to lesser charges, was arrested, jailed and freed in less than 24 hours in connection with the Petit case. He is expected to be called by prosecutors Wednesday or Thursday.

Jim Lawson, Petit's co-counsel, argued that the jury should hear of Paradis' prior conviction and the effect it might have had on his decision to cooperate with prosecutors in this case.

However, Judge Hornby ruled that more than 10 years had passed since the conviction and it was not prejudicial enough to allow into evidence. He did say that he would reserve a blanket prohibition pending the testimony of Paradis.

Paradis, Thomas Blackburn, James Erskine, Donald Shields, Armand Pelletier and Greg O'Halloran all pleaded guilty to felony charges in connection with the case and have agreed to testify in exchange for sentencing reduction.

Blackburn, who the defense has labelled as the ringleader of the alleged $6.8 million fraud, and Erskine have both testified already.

Richard Becker of Turner resumed his testimony from Monday when jurors took their chairs Tuesday morning. Becker told prosecutors that he continued a dialogue with Steven Hall, his former Sun Life agent, and Richard in an effort to retrieve his $96,000 investment. Not until nearly the end did he realize he invested in Petit's lawsuit, he said. His investment in H.E.R. Inc. was supposed to be for real estate, he told Assistant U.S. Attorney Silsby.

Prosecutors allege that H.E.R. was a conduit for money going to Petit and it was set up to throw state investigators off the money trail. The company was issued a cease and desist order by the state in 1996 and had its assets seized by the Attorney General's office.

Becker testified that he was shown some property in Saco by Steven Hall that he was told was purchased by H.E.R. Inc.

Richard's attorney, Evan Slavitt, told jururs in his opening statement last month that H.E.R. was initially started by Steven Hall, Richard and Erskine as a real estate development company that was attempting to pay back investors who were defrauded by Thomas Blackburn and others.

Much of Tuesday's testimony had investor's money going straight to H.E.R. Inc. All of the transactions were in 1995 and most involved Sun Life of Canada customers who were approached by former agents Steven and David Hall.

Steven Hall was granted a mistrial last month after his attorney became ill and was hospitalized. He could be tried at a later date.

Karen Becker, Richard Becker's daughter, told Silsby that she invested a $10,000 bond that was left to her by her grandmother after her father told her of the investment. She signed the check over to H.E.R. and received an agreement signed by Richard

When she was not paid back, Becker testified that she confronted Richard, telling him that she "wanted to meet the man who stole her money." She told Silsby that Richard responded angrily to her notion that she would take signs to his neighborhood picketing his house, saying that "he had people who would take care of me if I caused any trouble."

Under cross-examination from Slavitt, she acknowledged that she did not tell the FBI of that exchange when she was interviewed in 1997.

Lori Lennox, Sun Life of Canada's Director of Compliance was next on the stand. She told Silsby that she was called in to investigate for the company when the state's securities division informed them of illegalities related to David Hall.

She interviewed David Hall on a number of occasions she said and he initially denied Sun Life customers had withdrawn their annuities and other products reinvested in H.E.R. of Capital Placement Services (CPS), James Erskine's company.

Eventually, in an interview with the state's securities division, David Hall acknowledged that he solicited customers to invest in H.E.R. Inc. Both Halls were fired by Sun Life. David Hall reached a settlement with the state to pay back over $80,000. Sun Life of Canada agreed to pay back $2.3 million to its customers, though it didn't acknowledge any wrongdoing.

Sandra Ross, a computer software consultant and former Sun Life internal audit director, told Silsby that she conducted an audit of all Sun Life customers who signed over checks to H.E.R and CPS and discovered that some $2.1 million went to the two companies.

Slavitt questioned the accuracy of Rosses summary and later asked that the government exhibit not be allowed in evidence because of questions of its integrity. Ross acknowledged at least one discrepany between the summary and another government exhibit related to Alice Bettany, a Sun Life investor. The judge denied Slavitt's request.

Bettany, who was expected to be called by the prosecution, has yet to testify. A frequent media interview when the state issued press releases about its investigation into H.E.R Inc., the elderly woman from Standish invested over $100,000.

Erskine testified earlier in the trial that he kept $76,000 of Bettany's money and forwarded the rest to Blackburn.

Debra Nutter of Swampscott, Ma. told the court that she worked for MRK Management, a property management company that owns an eight-unit office building at 23 Water Street in Saco.

Her company signed a lease with Petit in 1989, she testified, and was asked in 1994 to change the lease to the name of Ron Caron, Petit's attorney in her lawsuit against Key Bank.

The lease for the office, which relocated upstairs and expanded later, was in Caron's name when the FBI raided the building and seized documents after Petit's arrest in 1997.

David Beneman, Petit's co-counsel, filed a motion with the court last year saying that the raid violated attorney/client privelege and that the FBI knew it was a law office but didn't tell a magistrate when it requested and was granted a search warrant.

Douglas Wright of Standish, the manager of a well-drilling company, told jurors that he was a Sun Life customer and that he was introduced to an investment in 1995 by David Hall, his former agent. He was told, he testified, that the investment was in real estate and paid a 20% return in 14 days.

Wright and his partner Michael Sullivan invested $50,000 between them, he told Clark. Neither was told about Petit's lawsuit until much later on, he said. Sullivan was paid back $30,000 and both invested again. Wright said that he never received any money from Hall or Richard.

Buxton resident Sullivan, the owner of a telephone company, said he met David Hall after his second investment was overdue and told him that he better pay back money that he solicited from his mother.

"He better have," he told Hall's attorney Bruce Hochman about his demand of Hall. She was paid a week later, he told Clark. Sullivan was not repaid on his second investment, he said.

Harold Hebert, a retired CMP employee from Standish, told Clark that he knew David Hall when he was a boy and decided to invest $17,000 with him in what he was told was a real estate venture through H.E.R. He was promised a 10% return in six months and was not told anything about Petit or her lawsuit, he testified. He never received his money, Hebert said.

Lewiston resident Lorette Levasseur, a beauty shop owner, said she decided to invest $87,000 on the advice of Steven Hall, her former Sun Life agent. She told Clark she trusted Steven Hall to make a sound investment and thought her money was rolled over into a new Sun Life product.

She became aware it was not a rollover when she was hit with a $16,000 IRS bill, Levasseur said, and she later got assurances from Hall and Richard that her taxes would be paid by H.E.R Inc. Later, in 1996, she found out her money was invested in Petit's lawsuit, she said. She did not receive any money from the principals, Levasseur testified.

Bradley Marean of Standish went to Bonny Eagle High School in Standish with David Hall and decided to invest after meeting him in a restaurant. He initially invested $25,000, received $30,200 in 16 days and decided to invest an additional $70,000 in two separate transactions.

"It was just bait,'' he told Silsby of his first investment. A woman seated in the gallery burst into applause at that comment. Neither Judge Hornby or a U.S. Marshall seated next to the woman admonished her or acknowledged the outburst.

Marean testified that David Hall told him H.E.R Inc. had a $13 million escrow account to back investments. He didn't receive any of his later investments back from the principals, Marean said.

Testimony will resume on Wednesday. David van Dyke, Roland Morin's attorney, told Judge Hornby that his client has an appointment for bone scan on Wednesday at 12:30 and was not able to reschedule it. The judge asked him to try again and left open the possibility that deliberations will be cut short tommorrow. Morin has been treated for a brain tumor in the past.

Portland, Maine

6:30 p.m.