March 4, 1999

Portland, Maine

After six weeks, 66 witnesses, 11,000 pages of evidence and hours of audio tapes, the 87-count federal complaint against Catherine Duffy Petit, Paul Richard, David Hall and Roland Morin went to the jury late Thursday afternoon.

Jurorrs will begin their deliberations Friday morning at 8:00 a.m. and told U.S. District Court Chief Judge D. Brock Hornby that they will break for the weekend if necessary and resume their deliberations on Monday.

Ending a grueling trial, the four defense lawyers opted not to put on a defense and instead presented a united front in their closing arguments.

Saying that the onus is on the government to prove each and every count alleged beyond a reasonable doubt, the attorneys said the government has failed to do so.

"When truth comes amongst us, it does not wear a sign saying it is truth,'' Richard's attorney, Evan Slavitt, told jurors. "It is proven by words and deeds. Our task on earth is to try to tell the difference between truth and falsehood, fact and innuendo."

Assistant U.S. Attorney Donald Clark spent 2 1/2 hours making his case to jurors that the government's allegations are clear-cut and without question.

He methodically went through the six weeks of testimony, often playing audio tapes of bankruptcy hearings and taped conversations between Petit and government informant Thomas Blackburn to bolster his claim that Petit was the ringleader of the alleged $6.8 million fraud and the other defendants and six government witnesses acted on her command.

Petit, he said, knowingly defrauded investors, the bankruptcy trustee and others in a systematic manner to support her lifestyle, using little of the money to pay for attorneys to pursue her lawsuit against Key Bank.

"The investor's money was used by Petit and her confederates on an extravagant lifestyle," Clark told jurors. "Of the millions raised, very little went back to investors or to lawyers on the Key Bank case."

Petit's co-counsel, Jim Lawson, called Clark's fixation on Petit's lifestyle a "red herring."

"We do not sit here in moral judgement on how Catherine Petit spent money. The charge is not about how she spent money," he said. "It's like a matador waving a red cape in front of the bull. The government wants to make you very angry. But you cannot decide this case with your hearts. You must weigh the evidence. You must use your heads."

In his 50-minute closing argument, Lawson focused in on the government's reliance on the testimony of Blackburn, James Erskine and Robert Paradis, all of who pleaded guilty to felony charges and agreed to testify in exchange for leniency.

All admitted to lying under oath in one forum or another, he reminded jurors. Blackburn helped himself to $500,000, not the $200,000 he testified to, Lawson said.

Saying that the former attorney was financially strapped in 1994 and desperate for money, he offered a recounting of his two days of testimony in the second week of the trial.

Blackburn pitched investors, told them of an escrow account and showed them a forged letter attesting to it and filled out agreements pre-signed with Petit's signature, Lawson reminded jurors.

Nowhere in the mountain of evidence, Lawson said, does it say that Blackburn provided any accounting of his fund-raising activities to Petit.

"With his company, Prime Capital, Blackburn said he was involved in asset-based lending. But he had no assets other than Catherine Petit's case against Key Bank,'' the Boston attorney told jurors. "I suggest to you that Thomas Blackburn hijacked Catherine Petit's good name and her valid lawsuit for his own purposes. The wrong person is on trial in this case"

Showing jurors a chart produced by Blackburn that had his name in the middle and arrows pointing out, Lawson reminded jurors of his colleague David Beneman's assertion on the first day of the trial that Blackburn was the ringleader of the fraud.

Of Erskine, Lawson told jurors that his acknowledgment of repeated lies to the FBI, Clark and state investigators before and after he signed his plea agreement made his testimony particularly suspect.

"I used to think two things in life were certain: Death and taxes. Now I know there's three: James Erskine is a liar," he stated. "He told prosecutors he only kept $93,000. Then he testified he kept $466,000. Oops, a little $350,000 mistake."

Lawson hammered at Blackburn and Erskine's plea arrangements with prosecutors, reminding jurors that neither had their agreement revoked when prosecutors discovered they lied on numerous occasions.

In a seven-minute rebuttal at the end of the day, Clark later told jurors that prosecutors rely on the testimony of informants because they are the ones involved in the crime.

"The government occasionally relies on the testimony of participants. Obviously we would prefer to have upstanding members of the community, but they don't exist," he said. "But once they leave the shadows of crime and come out to the sunlight of justice, they are branded liars and cheats and bottom feeders of the legal profession. The only deal they have is to tell the truth. If they lie, their agreements are ended."

Lawson touched on a number of other key points in his summation to the jury.

The government, he said, failed to prove bankruptcy fraud because Petit was not asked questions in the taped bankruptcy hearings about her corporations, but about herself personally.

She answered the questions truthfully, he told jurors, when she told the trustee that she was not raising money and that her corporations were plaintiffs in the Key Bank lawsuit . Never, did Lawson remind jurors, was Petit asked whether the corporations were raising money. The assignments issued in her name after the 1993 involuntary bankruptcy were done so by Blackburn, he said, and he did not tell her he was doing so.

The copies of the forged escrow account were provided to the prosecutors by Blackburn, he reminded jurors, and the government's search of Petit's office failed to produce anything related to them. The adjoining private investigator's office did contain the letterhead of the law firm that held an original escrow account, he said, but it differed from the one produced by Blackburn.

Of the securities fraud charges, Lawson reminded jurors that an excerpt Clark played of an audio tape in which Petit said the investments were securities was cut off before they heard her say she "didn't know securities from a dog." Jurors heard the full tape earlier in the trial, but, as with all the others, they only heard specific excerpts played by the prosecution Thursday.

The numerous money laundering charges - broken down into three categories involving money passed through the account of H.E.R. Inc. - were built on the premise that they were proceeds of bankruptcy fraud. Lawson told jurors that without bankruptcy fraud, there was no money laundering charges.

"You can bargain for cars or expensive art or houses," Lawson concluded. "but you can't bargain for love or friendship or justice, because if you do, you get something other than those things. It's not truth when you get a story with a a cloud of suspicion hanging over it. At the end of the day, you must be able to stand and say 'I stood for justice."

In his closing argument, Slavitt took jurors point by point through the government's allegations against Richard.

Saying that Richard might have been guilty only of choosing his associates poorly, he then proceeded in his attempt to dismantle the government's case against his client, a lifelong Lewiston resident.

Richard, he said, was simply someone who befriended Petit and tried to assist her throughout the years, both financially and morally. He did not, as prosecutors allege, lie at a bankruptcy hearing in which he said Petit owed him some $200,000.

"The government says that Richard's 1990-1996 tax returns list no income, so he was lying about the source of the money. We know that income taxes list money made that year, not assets you might have," Slavitt said. "There is no evidence about Paul Richard's assets in this case. The tax returns are a red herring."

Richard did not benefit financially from fund-raising efforts, did not pitch investors, did not tell of an escrow account and did not conceal assets from the bankruptcy trustee, Slavitt told jurors.

The fact that he used a bank account in his name and wrote checks on it was evidence enough that he wasn't trying to conceal his activities or launder money, as the government alleges, Slavitt said.

"There's lots of evidence in this case where the government says 'Richard must have known because bad things were happening.' They think if they say his name enough times and associate it with bad things, they've made a case against him," said Slavitt

Richard started H.E.R. Inc. as a legitimate company, he said, not as a scam to continue to raise money for Petit. He reminded jurors of the corporation filings, pledge agreements, stock votes and other evidence produced related to H.E.R. Inc.

Shut down by state investigators in 1996, prosecutors say that H.E.R. funnelled $650,000 from Sun Life investors to Petit. Slavitt told jurors that Steven Hall - who was granted a mistrial earlier and could be tried at a later date - Erskine and Richard founded the company to purchase distressed real estate and make money back to pay investors.

"Just because it didn't work does not make it a scam," Slavit said.

There was no evidence Richard did anything other than pay bills for Petit and make attempts to pay back investors, he told jurors. He reminded them of the numerous investors who said Richard came to visit, give then new agreements and leave his home phone number.

"Anyone who is committing a fraud on this scale does not leave his home phone number," Slavitt said.

He concluded by telling jurors that "justice is not how many witnesses you call or how much evidence you produce, but what's been proven."

David Hall's attorney, Bruce Hochman, told jurors that his client, a lifelong Standish resident, learned all he knew about the lawsuit investment from Erskine, who testified that Blackburn told him about the investment.

He was not told about Petit's bankruptcy, he said, in his solicitation of $900,000 from his Sun Life clients. He made approximately $80,000 commission, or 8 %, Hochman said.

David Hall was not at meetings when fund-raising was discussed, Hochman said, and when he confronted by his employer about the possibility that he was involved in the sale of illegal securities, he told state investigators about his activities.

"He went to his friends and neighbors and told them about a better investment than the one they had with Sun Life,"Hochman said. "Based on all the evidence, there is no proof that he knowingly defrauded them."

David van Dyke, Roland Morin's attorney, told jurors that his client, a former Lewiston police officer, was at the "far fringe" of the government's allegations.

Morin, he said, was the only one of the alleged fund-raising solicitors to be paid with ultimately worthless assignments rather than cash. He referred only four investors to Blackburn in a 13-month period and was not sued by any of then when they later filed a civil suit against Blackburn.

Out of all the witnesses, van Dyke said, only five mentioned Morin in passing and his name was not mentioned more than six times in the entire case. Of the $8.1 million the prosecutors allege flowed out of Petit-related accounts, only $12,000 went to Morin, and that was likely the result of side deals he made with Blackburn, van Dyke said.

"I'm not an apologist for Roland Morin. What he did was greedy and stupid," van Dyke said. "But in order for it to be a fraud, he had to have knowledge of it. By any account, based on the evidence presented in this case, it's inconceivable he did."

The courtroom was packed full for the penultimate day of the trial - one of Maine's longest and most complex. In addition to numerous family and friends of the defendants, John Aromando, a lead attorney for Key Bank who is counsel of record in Petit's still-pending 14-year-old lawsuit against the bank, was in attendance.

Jurors rose to leave at 3:40 p.m. after the forewoman told Judge Hornby that they wish to start their deliberations Friday morning. Judge Hornby spent an hour Thursday morning outlining the charges and instructing the 12-member, four-alternate jury on the procedures for their deliberations.

They will halt their deliberations Friday if they have not reached a verdict and will continue on Monday.

Portland, Maine

8:00 p.m.