March 1, 1999

Portland, Maine

After more than five weeks and 80 witnesses whose testimony ranged from dramatic to mind-numbingly mundane, prosecutors rested their case Monday in the 87-count fraud trial against Catherine Duffy Petit, Paul Richard, David Hall and Roland Morin.

In what has been one of Maine's largest and longest criminal trials, Assistant U.S. Attorney Donald Clark finished his re-direct examination of an FBI accountant Monday afternoon at 1 p.m. and then announced with little fanfare that the government had concluded its case.

Prosecutors and defense attorneys will meet with U.S. District Court Chief Judge D. Brock Hornby Tuesday on an off-day for jurors and discuss legal issues before the defense is scheduled to begin its case later in the week.

Judge Hornby told jurors that he expects them to be back in Wednesday, but that they should call and confirm before then.

Monday, jurors heard from the lead FBI agent, the FBI accountant, Petit's former housekeeper, the owner of a Boston personal services company and two investors.

FBI accountant William Iacopucci told Clark that he analyzed all bank and credit card accounts prosecutors say were controlled by Petit and concluded that some $8.1 million in expenditures flowed out from 1989-1997.

Using an easel and enlarged summary charts for jurors, Clark had Iacopucci walk through a breakdown of expenditures for the period, referring to categories the prosecutors listed to bolster their claim that much of the $6.8 million allegedly raised from investors were used to support Petit's "lavish lifestyle."

While the expenditures were detailed, the prosecutors did not produce a finalized accounting of deposits into the accounts maintained by Sherrie Girard, Robert Paradis, Louise Paradis, Elaine Spohr - all former Petit employees - and Paul Richard.

On cross-examination from David Beneman, Petit's co-counsel, Iacopucci acknowledged that some $1 million in money orders and bank checks - listed on the summary as miscellaneous expenditures - could be have been duplicated in the summary to show the flow of money from the bank accounts.

In theory, he told Clark later on his re-direct examination, there might only have been $7.1 million in expenditures from the accounts.

Iacopucci also told Beneman that he did not know specifically which credit card payments were for restaurants and other expenditures. His summary chart listed categories such as restaurants, hotels, entertainment and others and the expenditures for each.

Earlier in the day, FBI Special Agent James Osterrieder, the lead agent, explained to Clark the search warrant seizure of documents taken from Petit's 23 Water Street office in Saco on October 9, 1997.

FBI agents searched the office, which is leased to Petit's Key Bank attorney, Ron Caron, and the adjoining office of Coastal Associates, leased to a private detective retained by Petit's defense team.

They did so the day after Petit and Paradis were arrested. Paradis agreed to cooperate in less than 24 hours and gave agents a key to the building and the code for the alarm.

Monday, Osterrieder went through an accounting of documents contained in two boxes introduced by prosecutors. Of all the exhibits, only one, a letter from Petit to Richard, was taken from Petit's office. The rest were taken from boxes in the hallways of the Coastal Associates office.

Agents also seized two computers from Petit's office and one from the Coastal Associates office. None of the evidence introduced was obtained from the computers or computer discs seized, Osterrieder told Beneman in his cross-examination.

A large part of the evidence had to do with the activities of H.E.R. Inc., which prosecutors say was the company of Steven Hall - who was granted a mistrial last month and could be tried at a later date - government informant James Erskine and Richard.

Documents seized in the raid were stored in the Coastal Associates office as discovery material related to the state of Maine's suit againt H.E.R. Inc. in 1996 and its later ammended complaint against Petit, Richard and others in 1997.

Prosecutors allege that H.E.R. was set up to continue to raise funds illegally to finance Petit's lawsuit against Key Bank and say some $650,000 was raised through the company and funnelled through to Petit.

Defense lawyers say H.E.R. was a company that was established to use real estate as collateral to fund reimbursements to investors once Richard and Petit discovered the extent of fund-raising without their knowledge.

In his opening statement, Beneman told jurors that government informant Thomas Blackburn, Erskine and others went about raising money using Petit's name and lawsuit without her knowledge. In addition to testifying that he committed a number of felonies in connection with the case, Blackburn said he raised $4.1 million over a six-year period for Petit.

Erskine, Blackburn, Paradis, Donald Shields, Greg O'Halloran and Armand Pelletier all pleaded guilty to felony charges and agreed to testify in exchange for sentencing leniency. Shields, O'Halloran and Pelletier were not called to testify.

Evan Slavitt, Richard's attorney, questioned Osterrieder on H.E.R. Inc. documents seized in the raid.

Citing corporation filings, references to real-estate holdings, pledge agreements by Richard for real estate and other H.E.R.-related documents, Slavitt implied that the company was a legitimate entity. Clark immediately tried to rebutt that inference, asking Osterrieder whether he ever discovered any H.E.R Inc. assets. He didn't, he told Clark.

David van Dyke, Roland Morin's attorney, asked the FBI agent about one payment from H.E.R. and Richard to his client of $5,000. Osterrieder had provided a summary of a Richard bank account showing $500,000 in expenditures in a three-month period in 1995. Some of those payments were to investors, many others to attorneys working on Petit's bankruptcy or Key Bank case. Under cross-examination from Slavitt, the FBI agent acknowledged that roughly 1% went to Richard himself. The payment to Morin was the only reference of any money to him - aside from some sub-assignments from Shields - in the five plus weeks of testimony.

Elaine Spohr, Petit's former part-time housekeeper, began proceedings Monday by telling Assistant U.S. Attorney Paula Silsby that she used her credit cards at Petit's direction to pay personal expenses for Petit and her family.

The Portland resident - who testified that she worked for Petit from 1992 until her arrest in 1997 - also said she opened two bank accounts under the name Litigation Resources at Petit's direction and one in the name of CVL.

Saying Petit told her that her 1993 involuntary bankruptcy didn't mean "she had to live like a pauper," Spohr said she paid bills from those accounts. She also leased a Florida condominium in her name, she told Silsby, and leased a Lincoln Town Car for Petit to use when she was in Florida.

Christopher Smith of Boston, the owner of personal service company, Popham Services, told Silsby that Petit responded to an ad from his company in 1990 when she was staying at an apartment in Boston's Back Bay.

Over the years, he said, he provided a variety of services for Petit and her family. He arranged for caterers, helped arrange Petit's daughter's wedding in Boston, shopped with Petit, took Petit's son to frequent doctor's appointments and did a number of other jobs until 1997, Smith testified.

The short, soft-spoken man said he also arranged for Petit to rent an apartment in Nashua, N.H. for a family friend at the cost of $52,000 over a five-year span, sent catered food to Petit's son while he was in school in Connecticut and provided limousine service for Petit because she couldn't drive due to a medical condition.

Over the seven years, Smith testified, he was paid approximately $75,000 and was reimbursed $170,000 for expenses he incurred for Petit.

John Chandler, a Portland firefighter, testified that he knew David Hall from an affiliation at a local car racing track and decided to invest $10,000 from a credit union in 1996 after Hall told him that it was a Sun Life deal in heavy equipment.

He made the check payable to Richard, Chandler told Clark and received a promissory note. He was never repaid, Chandler said.

Gerard Desjardins of Auburn said he was a Sun Life Assurance Co. of Canada customer and Steven Hall was his agent. He decided to invest in 1994 after Hall told him of the Petit lawsuit and cashed in his $18,300 annuity and made it payable to Capital Placement Services, Erskine's company.

Later, when the note was past due, he received six monthly checks of $166 from H.E.R Inc., but never received any money from the principals, he said.

Like all the other Sun Life investors, Desjardins did receive a settlement from Sun Life after it agreed to reimburse its customers $2.3 million to cover their investments. Judge Hornby is not allowing jurors to hear of that settlement and defense attorneys have issued objections on the issue should the case go to appeal.

NOTE: THIS SITE WILL LIST DEVELOPMENTS AS THEY UNFOLD IN THE CASE. CHECK DAILY UPDATE FOR TUESDAY TO FIND WHETHER JURORS WILL BE CALLED BACK IN WEDNESDAY AND PROCEEDINGS WILL CONTINUE.

Portland, Maine

6:45 p.m.