February 25, 1998

Portland, Maine

Government witness Robert Paradis stepped down from the witness stand Wednesday afternoon after defense attorney Jim Lawson lashed out as his credibilty and his motivation in deciding to cooperate with prosecutors 24 hours after he was arrested.

Paradis, who pleaded guilty to one felony charge of money laundering in connection with the case, was subjected to some two hours of cross-examination by defense attorneys after he concluded his testimony for prosecutors.

Catherine Duffy Petit's former bookkeeper for seven years, the Saco resident testified Wednesday and today that he handled the flow of over $4 million into accounts maintained for Petit and paid out bills at her direction.

Lawson attempted early on to have Paradis affirm the defense's assertion that much of the expenditure's prosecutors say went toward's Petit's "lavish lifestyle" were in fact spent on pursuing her 14-year lawsuit against Key Bank.

A Boston apartment and an Ogonquit condominium were used as meeting places for attorney's working on the case, Paradis acknowledged, as were trips to Florida. He agreed with Lawson that eight different attorneys were working on the Key Bank case while he worked for Petit from 1989 to 1997.

While much of his testimony through the past two days has been a dry recitation of figures backed by bankbooks and ledgers, Paradis was subjected to an animated attack on his credibility from Lawson.

One time thumping the podium, Lawson wore out a trail between the witness stand and the defense table as he asked Paradis to review seven different statements he made to the FBI in 1997 soon after he was arrested.

None of the seven, Paradis acknowledged, contained any information that Paradis committed perjury at a state grand jury hearing in 1996 regarding accounting he supplied in response to a subpoena requesting records that he kept.

"It didn't come up," responded Paradis to Lawson's question as to why he didn't tell the FBI of his perjured testimony.

Later, Paradis told Assistant U.S. Attorney Donald Clark that he did tell the prosecutors later when they asked him about his testimony.

He also acknowledged having lied at another state hearing that year in its investigation of H.E.R. Inc.

Lawson also pressed Paradis about his motivations for agreeing to cooperate with the government.

Unlike the other five government witnesses who have pleaded guilty to one felony count and are facing a maximum of five years in prison, Paradis is facing a possible 20-year sentence under federal sentencing guidelines.

He was convicted of drug trafficking in Georgia in 1984, a charge he pleaded guilty to after originally being charged with felony murder.

Reminded by Lawson that the federal system has abolished parole and prisoners serve an average of 85% of their sentence, Paradis agreed that he was trying to avoid a long prison sentence and said that he didn't expect prosecutors to request he only receive probation.

After his arrest on October 8, 1997, Paradis testified that he called his wife and asked her to go to the office at 23 Water Street in Saco and break the alarm code. The FBI went in right after her and seized boxes of documents.

Paradis then testified that he returned to the office and gathered up bank books, receipts and ledgers he kept detailing the deposits and expenditures of the bank accounts. He called FBI Special Agent James Osterreider - who will testify on Monday - and asked him whether he should take the boxes. At his attorney's advice, he brought them to the FBI.

The Saco office was in the name of Ron Caron, Petit's Key Bank lawsuit attorney, Paradis testified, but only because Petit wanted to conceal her activities from the bankruptcy court, he said. Caron, he told Clark, did not maintain an office there.

Petit's defense filed a pre-trial motion seeking suppression of evidence seized at the office. FBI agents misrepresented what the office was to a magistrate who issued the search warrant, the motion alleged.

The six witnesses - Paradis, Thomas Blackburn, James Erskine, Donald Shields, Greg O'Halloran and Armand Pelletier - will be sentenced at the conclusion of the case. Paradis agreed with Lawson's assertion that prosecutors gauge how much cooperation they receive before they make their sentencing recommendation to the judge.

Petit, Paul Richard, David Hall and Roland Morin are charged with 87-counts of conspiracy, money laundering, bankruptcy fraud, mail fraud and securities fraud. Steven Hall was granted a mistrial last month and could be tried at a later

date.

Among some of Paradis' other testimony Thursday:

• Petit took original letterhead bearing the name of Looney & Grossman, her Boston law firm, went into her office and came out a manila emvelope which she told Paradis to give to Blackburn. The exchange is led to infer that Petit was responsible for forging a letter attesting to a fictitious escrow account that was shown to potential investors.

• Petit told Paradis to assist her in providing false information to a bankruptcy trustee.

• Petit and Richard took his boxed records of accounts he intended to provide to a grand jury and instead gave him a single envelope which contained receipts to submit.

• Said it was no secret to him that people loaned Petit money, it was what she lived on and paid expenses associated with her pursuit of the Key Bank lawsuit.

• Said he had no knowledge of the activities of H.E.R. Inc. and that Richard did not receive money that came into the accounts he maintained.

Prosecutors called four more Sun Life investors towards the end of proceedings Thursday.

Dozens of Sun Life customers invested throught their former agents, Steven and David Hall, in 1995 and 1996. The company agreed to pay back $2.3 million to their customers while not admitting fault. Judge D. Brock Hornby is not allowing jurors to hear of the repayment.

Poland Spring resident Denise Martin told Assistant U.S. Attorney Paula Silsby that she invested $10,000 in Petit's lawsuit in 1996 on the advice of Steven Hall, her former Sun Life agent. Hall, she said, told her that it was a risk-free, six-month investment, but she never received money back from the principals.

Her father, Donald Martin of Lewiston, told Silsby that he invested $8,000 in Petit's lawsuit after Steven Hall, his former agent, told him of the investment. He was offered a 10% return over a year, but never received his money back, he said.

Thomas Janas of Lewiston told Silsby that he invested $30,000 in what he was told was a real estate investment by Steven Hall, his former agent. He said he only learned he invested in a lawsuit after he attempted to get his money back. He was never repaid by the principals, Janas told Silsby.

Lorraine Brochu of Lewiston told Silsby that she invested $25,000 with Steven Hall, her former agent, but was unaware she invested in a lawsuit. Hall had aproached her the year before about the investment, she said, but she laughed it off. She never received any money from the principals, she said.

At the conclusion of proceedings, Clark told Judge Hornby that the prosecution expects to conclude Monday with five witnesses, three of whom are FBI agents. Should they do so, the judge indicated to the jury that they might be free Tuesday while both sides sort through issues. They should start preparing for deliberations, he told the 16 jury members.

Portland, Maine

7:15 p.m.