June 3, 2008 in City
Ex-fugitive under investigation
A Spokane man whose fraud scheme led to the multimillion-dollar collapse of a Montana bank in the 1990s is now under investigation for allegedly swindling his 95-year-old Spokane aunt out of $836,000.
Those details surfaced Monday when John Earl Petersen, who boldly walked out of a federal courtroom in Spokane six months ago and became a fugitive, was back in the same courtroom – this time in handcuffs and under guard by two deputy U.S. marshals.
He currently is charged with violating terms of his federal supervised release, but a Spokane police sergeant confirmed detectives have an active investigation that could lead to state charges for defrauding his aunt, who now lives in a nursing home.
The alleged fraud involving his aunt is one of six violations of his federal supervised release – a form of parole that can send felons back to prison if they violate terms.
Petersen is accused of gaining access to his elderly aunt’s bank account after he got out of prison, then lavishly remodeling her South Hill home where he briefly lived.
Improvements include towel-warmers in the bathrooms and flat-screen televisions in nearly every room, including one located in a refrigerator door, authorities say.
“It’s sort of a Martha Stewart-type place now, I’d guess you might say,” according to a Spokane attorney representing other family members now attempting to sell the home for $189,000.
After depleting his aunt’s bank account, Petersen then refinanced her home, leaving the elderly woman’s estate with nearly no assets.
Federal authorities say Petersen, 54, violated terms of his federal supervised release by not reporting those financial transactions as required.
A revocation hearing is scheduled June 17 before Senior Judge Fred Van Sickle, who could order Petersen sent back to federal prison for up to three years and place him on a new five-year term of supervised release.
Petersen was summoned to appear in U.S. District Court on Dec. 11 for a supervised release hearing. But before it began, he apparently saw legal paperwork showing federal authorities were going to move to have his release revoked and send him back to prison before Christmas.
Feigning that he needed to go to the bathroom, Petersen walked out of the courtroom seconds before that hearing was to begin. He was spotted hurriedly leaving the U.S. Courthouse, jaywalking across Riverside and speeding away in a late-model Cadillac.
Federal authorities quickly issued a warrant for his arrest.
He was arrested in Boulder, Colo., on April 13 by police there who spotted his leased 2007 black Cadillac DTS, reported stolen in Spokane after he fled. A police report was filed on that alleged theft.
In the luxury car and Petersen’s motel room, Boulder police said they found a blond wig and books about changing identity.
While living in Boulder, authorities say, Petersen fraudulently portrayed himself as a businessman involved in a Conoco-Phillips oil development in Colorado.
Over several days, he won the confidence of three or four people who collectively gave him $3,600, believing he was about to purchase some newly built condominiums, authorities say.
But those victims were reluctant to cooperate with federal and local investigators, apparently believing they might be involved in criminal wrongdoing.
In court Monday, Petersen looked pale in his navy blue jail jumpsuit after spending almost six weeks being transported around the federal penal system before ending up back in Spokane. A jail identification band on his left wrist replaced the Rolex he once wore.
“We’d ask that he be detained pending a full revocation hearing,” First Assistant U.S. Attorney Tom Rice told U.S. Magistrate Judge Cynthia Imbrogno. The judge ordered him detained without bond.
Petersen borrowed a court clerk’s reading glasses to fill out paperwork claiming he’s indigent. He asked the court to appoint an attorney to represent him.
Defense attorney Bevan Maxey, who in December rode to the courthouse with Petersen and had to find another ride back to his office after the aborted hearing, was appointed by the judge to continue to represent the Petersen.
Petersen was arrested in February 1998, accused of being the mastermind behind the $10.5 million collapse of the Mountain Bank of Whitefish.
He pleaded guilty to charges of conspiracy, money laundering and bank fraud for cashing phony checks through the Montana bank, then bribing bank officials with cash kickbacks when they found out about the scheme that investigators estimated netted Petersen $6.4 million.
At court hearings associated with that case, Petersen was described in testimony from federal investigators as an organized crime figure involved in loan sharking, bank fraud and strong-arm tactics, paying “goons” to collect his bills.
Petersen was sentenced to nine years in prison but only did about half that term after he agreed to become a prosecution witness and testify against the bank officials who got substantially longer prison sentences.