October 9, 2008 in City

Former bank swindler back behind bars

By The Spokesman-Review
 

A convicted Spokane con man and key figure in the multimillion-dollar collapse of a Montana bank was sent back to federal prison for three more years Wednesday after he declined to challenge new allegations of wrongdoing.

John Earl Petersen’s supervised release – a form of parole – was revoked for failing to disclose personal financial transactions after his release from federal prison.

While on supervised release, Petersen gained power-of-attorney status over his 95-year-old aunt and moved into her South Hill home after placing her in a nursing home.

He then diverted at least $627,000 from his aunt’s stock and bank accounts, $400,000 of that amount for his personal use, First Assistant U.S. Attorney Tom Rice said in court.

He allegedly used the woman’s money to turn her house into what a family spokesman described as a “Martha Stewart-type” home, with towel warmers in the bathrooms and flat-screen televisions in nearly every room – even one in the refrigerator door.

After depleting his aunt’s bank and stock accounts, Petersen refinanced her remodeled home, leaving her estate with nearly no assets, the family spokesman said.

While Petersen remains under investigation for that alleged theft, it was his failure to report his monthly financial dealings – including handling his aunt’s financial accounts – that led to revocation of his supervised release.

“It’s clear to me that Mr. Petersen is not amenable to basic supervised release,” said Senior U.S. District Court Judge Fred Van Sickle, who ordered the new prison term.

“Clearly, there’s a breach of trust as it related to supervised release,” the judge told Petersen, 56.

Petersen’s attorney, Bevan Maxey, urged the court to impose a six- to 12-month sentence.

Petersen declined an invitation from the judge to address the court.

He will get credit for the six months he has been in jail since his arrest April 13 as a federal fugitive in Boulder, Colo.

He went there after walking out of a courtroom in the U.S. Courthouse in Spokane last December and speeding away in his Cadillac after seeing legal papers indicating he was about to be sent back to prison.

His illegal flight from the Eastern District of Washington wasn’t one of the formal counts leading to his supervised release revocation.

Boulder police who arrested the fugitive found in his possession a blond wig and books about changing identity.

While in Boulder, police said, he portrayed himself as a businessman involved in a Conoco-Phillips oil development in Colorado and swindled three or four would-be investors out of $3,600. He was not charged with those crimes.

Petersen, who had a business office in Spokane, was arrested in February 1998 and accused of being the mastermind behind the $10.5 million collapse of Montana Bank of Whitefish, Mont.

He pleaded guilty to conspiracy, money laundering and bank fraud for cashing phony checks through the bank, then bribing bank officials with cash kickbacks when they discovered the scheme that netted Petersen an estimated $6.4 million.

During that investigation, federal authorities said they had recovered or accounted for the money, but other investigators are now wondering how Petersen was able to access a large amount of cash immediately after his release from prison and return to Spokane in 2003.

Federal investigators, in previous courtroom testimony, have described Petersen as an organized crime figure involved in loan-sharking, bank fraud and strong-arm tactics, paying “goons” to collect debts.

He was sentenced to 108 months in prison for the bank scheme but served only about five years after cutting a deal with federal prosecutors to testify against his former co-conspirators in Montana, who were convicted.


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