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Maine Supreme Judicial Court Overturns Lower Court On Petit/Key Bank Case

WEB DESIGN BY:

CRIMINAL CASE: Catherine Duffy Petit, a resident of Old Orchard Beach and at one time the owner of the world-famous pier, is currently out on bail and awaiting trial (U.S. District Court, Portland/Criminal #97-46C) on a 344-count federal indictment ranging from conspiracy to securities fraud to money laundering.

The trial is scheduled to commence January 25th. Ms. Petit is one of five defendants in the case. Five other confidential informants have pled guilty to a variety of charges and are scheduled to testify for the government in exchange for leniency.

The US Attorney's Office and the FBI have alleged that Ms. Petit orchestrated a fraud which netted the group some $6.8 million since 1989. They, like the Maine Attorney General's office - which has filed a civil suit based on information provided by the US Attorney and FBI and settled claims of $2.3 million with Sun Life of Canada (Exhibit B) related to the use of their customer's annuities in the alleged scheme - are calling it "Maine's largest investment fraud'' (Exhibit C).

The government claims that Ms. Petit, in an effort to finance her long-running civil lawsuit against Key Bank (York County, CV 86-608, see web page for more details), solicited money from unknowing ''victims'' and promised large returns and an additional 15-18% interest when she won her suit against Key Bank.

According to the complaint, the other defendants in the case and the five who have pled guilty and are testifying for the government were agents in the scheme. The complaint alleges that they actively solicited the money, made false claims as to an escrow account at Ms. Petit's direction and funneled the money back to Ms. Petit so that she could support a ''lavish lifestyle'' for herself and her associates.

Ms. Petit and four other defendants deny the allegations and have pled not guilty (Exhibit D). Petit recognizes the genesis of the government's case, as well as that of the state Attorney General's Office, as having originated as the result of outside influences bringing their resources to bear. Many legal minds have questioned the government's reliance on self-proclaimed participants in a criminal scheme (Exhibit E, Exhibit F. Click here to read more about Donald Shields, a government informant who has pleaded guilty to felony charges.). In this case, many of the government's alleged ''victims'' believe that the informants - with the use of wiretaps and plea bargains for leniency - are the guilty parties and have rallied behind Ms. Petit and the other co-defendants.

A recent scathing 10-part series in the Pittsburgh Post-Gazette titled "Win At All Costs" illustrates how often the Justice Department relies on the testimony of criminals and how far some US attorneys are willing to go to obtain a conviction. Link to Pittsburgh Post-Gazette (www.post-gazette.com).

CIVIL CASE: Ms. Petit filed a lawsuit against Key Bank of Maine and the law firm of Bernstein, Shur, Sawyer & Nelson (BSSN) in 1986, The suit was filed as a result of the actions of Key Bank's predecessor, Depositors Trust, and BSSN that resulted in Ms. Petit losing ownership of the Old Orchard Beach Pier and being forced into bankruptcy (Exhibit G).

Ms.Petit and BSSN settled for a sum of $3.9 million in 1990. Ms. Petit alleges that co-defendant Key Bank, which completed the purchase of Depositors Trust in the early 1980's, obfuscated and hindered any settlement and has proceeded in a deceitful and adversarial manner since. The case has dragged on in courts for well over a decade now, including several ammended complaints being filed. It has been systematically blocked by legal maneuverings and, ultimately, the introduction of a 344-count criminal indictment last year.

In December, 1996, the Maine Supreme Judicial Court overturned a lower court ruling granting Key Bank summary judgement and reinstated the case based on a 1994 ammended complaint (Exhibit H). Contrary to rumors that have been planted by a host of interested parties that the suit is over, it is legally intact, and in the opinion of many legal experts, entirely winnable. Ms. Petit and her attorneys are prepared to diligently pursue her claims, despite being hindered by the bankruptcy action.

Key Bank and its agents have taken extraordinary steps to make sure that the lawsuit would never be allowed to be heard by a jury of Maine citizens, including suing the law firm that represented them in the early 1980's on issues related to Petit and the merger that brought them here.(Key Bank vs. Pepperell Trust, CV89-864, Trial Scheduled Feb 1, 1999, York County Superior Court). The civil suit, which has been dragged on for 13 years, is the headwaters of judicial proceedings from which all other legal matters involving Ms. Petit and co-defendant Paul Richard flow.

This isn't the first time Key Bank of Maine has been a defendant in allegations involving discrimination, conflict of interest and illegal lending practices. Since its entrance into the Maine banking community, the bank has been embroiled in civil litigation involving a number of alleged improprieties, the most prominent of which is the case in which it was ordered by a jury to pay $27.5 million to plaintiff Joe Ricci in 1987 (Exhibit I).

BANKRUPTCY: In 1993, Ms. Petit was placed into involuntary bankruptcy. The action was brought by three petitioning creditors, purportedly to protect creditor's interests in the event of a settlement. Contrary to spurious rumors about the disposition of the $3.9 million BSSN settlement, that money was distributed primarily in legal fees and costs associated with many years of civil litigation.

The bankruptcy action is crucial because it puts the assets of the estate - primarily the potential judgement against Key Bank should the case be properly pursued - in the hands of a trustee. Ms. Petit and supporters, including several creditors, saw this as a red flag since the day it was filed. Petit and her lawyers initiated an Order which was approved by the court stopping any disbursement of money until all debts had been determined. Ultimately, they had reason to be suspect. Key Bank has negotiated repeatedly in an attempt to circumvent a trial. The bank has offered to buy its own multi-million dollar lawsuit for pennies on the dollar with the trustee of the bankruptcy court.

The attorney for the petitioning creditor has subsequently testified under oath that he has reviewed documents pertaining to Ms. Petit's lawsuit against Key Bank at their lead attorneys head office, and, in fact, had an attorney of Key Bank's assist him in filling out bankruptcy forms.

Key Bank's attorneys have attended every single hearing or meeting of creditors during the bankruptcy proceedings. The theme of many of these gatherings has been to gather information which could be used as evidence in Ms. Petit's civil case against the bank. Ms. Petit tried five times to submit a plan under Chapter 11 code to provide protection for valid creditors. The petitioning creditor and its attorney have objected at every turn. The case was reverted to Chapter 7, which allows for liquidation of all assets.

The court-appointed trustee, Joseph O'Donnell of the Pilot Group in Portland, retained Stephen Morrell of Eaton, Peabody, Bradford & Veague as the general counsel for the trustee. The general counsel advises the trustee on all legal matters related to the bankruptcy. In 1997, Ms. Petit uncovered that Morrell never disclosed that his firm also represents Key Bank on some legal matters. The law requires that a trustee and counsel disclose any known or potential conflicts of interest. (Exhibit J)

Mr. O'Donnell, a trustee entrusted with fiduciary responsibilities, has not revealed the depths of his personal financial status to his employer, the federal government. A review of various public liens and attachments indicate he has serious financial problems. O'Donnell, an officer of the court as defined by federal citation, can earn 3% of any financial recovery in addition to any costs which he has incurred.

US Bankruptcy Judge Arthur Votolato recently issued an order approving Cohn & Kelakos as general counsel to the trustee. He reversed his 1997 judgement that Morrell remain as special counsel, citing ''the heavy influence and presence of Key Bank in this bankruptcy case.'' (Exhibit K)

A number of the government's purported victims hired attorneys who represented to O'Donnell and his conflicted counsel, Stephen Morrell, that they were able and willing to finance the Key Bank case and Ms. Petit's medical and personal costs. Their pleas fell on deaf ears. They also advised the state AG's office of the same thing.

In the same order as above, Judge Votolato questioned the performance of the trustee, saying ''the very filing of the present motion gives this court ongoing and increasing concern over his ability to adequately administer this case.''

In the spring of 1998, as various conflicts emerged, Senator Peter Mills, an attorney from Skowhegan, was appointed as special counsel to evaluate various issues of the validity of the Key Bank case. His various reports to the court makes it clear that the case is worth pursuing. (Exhibit L)

Mixed in with this pot of non-disclosure and breach of fiduciary responsibility is the fact that one of Ms. Petit's own lawyers - who had received fees in excess of $700,000

and who ultimately misled his client in various filings, has been supplying false information to the trustee and others. He filed a fraudulent claim in bankruptcy court that was thrown out by the judge and, when faced with the facts as stated above, filed a criminal complaint with the U.S. Attorney's office. (Exhibit M)

SUMMARY: There are dozens of ancillary issues that arise from Ms. Petit's original lawsuit against Key Bank. In and of themselves, they constitute a litany of grievious judicial and fiduciary offenses. Viewed as pieces of a puzzle, they are damming evidence that justice is served only when all parties in the process act in accordance with the law. If not, the system devolves into a forum where the individual is at the mercy of the institution and unjust acts are rewarded. On rare occasions, the individual - with help from those willing to extend an extraordinary amount of resources and time - can prevail.

WEB PAGE: www.justicewhen.org. The page is under construction and will have daily summaries of courtroom testimony after January 25. The trial is expected to last 4-6 weeks. The summaries will be stored in archives, there is historial information and there will exhibits and other materials.

This is designed not to manipulate the public and media, but to counteract the press releases from the US Attorney and Maine Attorney General's which glibly tout this case as ''Maine's largest investment fraud.'' To date, the public has been force fed a diet of rewritten press releases from Maine's media outlets. An informed society should be armed with the information that allows them to screen out the soundbites and get to the truth.

VERDICT