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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Magistrate Refuses Bond For Petersen

From Staff And Wire Reports

A federal magistrate has refused bond for a Spokane man accused in a Whitefish bank fraud after a Treasury agent painted a picture of a mobster involved in loan-sharking and shakedowns.

U.S. Magistrate Bart Erickson ordered John Earl Petersen, 45, held without bond.

Petersen is accused in a federal grand jury indictment in the $10 million Mountain Bank of Whitefish embezzlement case. Charges include conspiracy, bank fraud and money laundering.

He is one of five defendants indicted in the case. One former bank employee is appealing her prison sentence, two await trial and Werner “Buster” Schreiber, the former bank president and major stockholder, is awaiting sentencing.

In a bond hearing Tuesday, Petersen’s wife, Carol, and his sister testified, saying he was a strong family man who provided well for them and was trustworthy.

But a federal Treasury agent from Spokane, David Benscoter, said Petersen employed goons who used strong-arm tactics to collect debts.

Benscoter, who has worked on the investigation for more than a year, testified that Petersen supplied two mistresses with rent and monthly expenses, paid them for sex and gave them cocaine.

He said Petersen maintained a lavish lifestyle, forged bank letters, was possibly involved with organized crime and narcotics trafficking.

The judge said the testimony and allegations that Petersen had threatened people who owed him money were enough to keep him in custody pending trial.