Petters, who claimed subordinates carried out the fraud without his knowledge, sat glumly as U.S. District Judge Richard Kyle read the verdicts in quick succession. Petters was convicted of wire fraud, mail fraud, conspiracy and money laundering by jurors who deliberated for parts of five days.
Kyle said he expects sentencing to be in a couple months. Assistant U.S. Attorney Joe Dixon estimated guidelines would call for a range of 30 years to life in prison, but declined to say what prosecutors would seek.
The verdicts completed a stunning fall for the 52-year-old Petters, who before his arrest a year ago was seen as one of the state's most successful businessmen. From early deals disposing of liquidated goods, Petters built a diversified company that held well-known names such as Polaroid, Sun Country Airlines and Fingerhut. He also was known for charitable work.
But prosecutors convinced jurors that Petters' empire was a sham, with evidence that included secret tape recordings and testimony from company officers who had earlier pleaded guilty.
Petters' attorney, Jon Hopeman, was ready for the verdict, handing reporters a printed statement.
"Though we disagree with today's outcome, we respect the jury and its decision," the statement said. "As much as anything, the trial showed how much good Mr. Petters has done in the world. This too is worthy of reflection."
Assistant U.S. Attorney John Marti said: "The jury's verdict speaks clearly: Mr. Petters' company was a fraud and Mr. Petters was his company."
Petters had testified in his own defense. Jury forewoman Jolyne Cross said Petters had been "a very good salesman," but jurors discounted his testimony because he was fighting the charges.
"I don't think it was ever his intention from the very beginning to do this, but he got caught up in it. He still did it," she said.
Petters' scheme began to unravel in September 2008, when a vice president at his Petters Co. Inc. subsidiary, Deanna Coleman, went to federal authorities. Coleman returned to the company's headquarters the same day wearing a wire to help prosecutors. But Cross said e-mails from Petters to Coleman and others that showed the company's dealings before investigators got involved turned out to be more convincing to jurors than the recordings.
Prosecutors said the scheme used fraudulent documents such as purchase orders and bank statements forged by Coleman and Bob White, another Petters officer, to trick investors into thinking they were financing purchases of TVs and other electronic goods that would be resold to discount retailers such as Sam's Club, Costco and BJ's Wholesale Club.
The government said two other defendants - Larry Reynolds and Michael Catain - helped launder billions of dollars by allowing PCI to run the money through their own businesses' accounts to make it look like their companies were the source of the nonexistent merchandise.
Defense attorney Paul Engh agreed there had been a large fraud at PCI. But he told the jury Petters was an innocent victim, and that Coleman, White, Reynolds and Catain carried it out behind Petters' back. Engh said there was ample reason for jurors to distrust them: All four reached plea deals, then testified against Petters in hopes of getting lighter sentences.
Two hedge fund officials also pleaded guilty to their involvement in the scheme, while Petters' accountant, James Wemhoff, pleaded guilty to tax charges. Their sentencing hearings have not been scheduled.
Marti told jurors that evidence showed most of the investors' money went to pay off other investors, but that some $400 million went to PCI, where he said Petters used it to buy Fingerhut, Polaroid and Sun Country or subsidize money-losing companies in his Petters Group Worldwide empire. He said the $400 million total included $82 million that flowed into Petters' personal accounts, and that Petters used it to "live the life of a corporate tycoon."
A court-appointed receiver working to sell off Petters' holdings has so far recovered nearly $200 million to compensate victims. Kyle also will hold proceedings to determine whether Petters should forfeit personal property and funds.
While hedge funds suffered the biggest losses, victims also included retirees who lost life savings. Dixon wouldn't predict how much compensation ultimately would be available, but said the recovery won't be a significant percentage of the losses.
"Clearly the assets there do not come close to the $3.5 billion investors are out," he said.
Associated Press writer Brian Bakst contributed to this report.