Facing the Music

Before winter of 2001, three of six Angels were working with the FBI. As far as Petty was concerned, things were a little behind but rolling along fine until the end of last March when he decided to move the operation to Canada--for better office support, he says.

On March 30, 2002, the day after the FBI entered the mobile home and shut down TeleCom2000, Petty told one of his Angels that the company had been sold and moved out of the country. The reasons were too "complex to enumerate" he wrote in a letter that promised Angels "gratitude pay" in return for their loyalty and silence.

According to the transcript of the secretly recorded conversation, Petty said that TeleCom2000 will continue to pay, "unless somebody destroys the company. I don't know how they can do that now that it doesn't belong to me, but they might do it. If they do, well, it's not just you, but thousands of people will suffer. That's what I will do anything to prevent. I don't care what I have to do."

The U.S. District Court for the Eastern District in Tyler issued Petty a temporary restraining order on April 2. TeleCom2000 and the fun part of Petty's wild ride were over.

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Petty's preliminary hearing last June was a bit of a circus. Dozens of his estimated 3,000 supporters and investors traveled from many parts of the United States to the federal courthouse in Tyler to pray and commiserate with the accused. Some thought it was a trial, not just a preliminary hearing, according to Chuck Anderson, a Tyler resident who has written an unpublished book about Petty and TeleCom2000.

When the FBI froze TeleCom2000's operation, investors had been paid and quite recently. Many of them were angry at the government and could see nothing illegal about TeleCom2000, or at least that's what they said.

Petty's money was frozen, and he needed money to mount a defense. Incredibly, while Petty was fully engaged in criminal proceedings, on the TeleCom2000 Web site appeared a call for a "TeleThon 2000 Action Victory Fund" drive, which aimed to raise money by the same method that got Petty into trouble in the first place.

"How much is it worth to you to get your TeleCom2000 business back?" the site read. "Take advantage of the generous offers of TeleCom2000 business owners! Many of you owners have 'put it in writing' that they will purchase '2 for 1' businesses for you if you can come up with as much as $5,000 to $25,000 to contribute to our TeleThon Action Victory Fund!

"This means that--if and when we win this thing and get TeleCom2000 up and running again for a $5,000 donation to the TeleThon 2000 Action Victory Fund, the Action Committee will purchase a Pro10 for you--if and when TeleCom2000 wins and gets back in business! This earns you $60,000! A contribution of $25,000 will get you a Pro50 when TTN gets up and running! That would earn you $297,000!" (Pro10 and Pro50 refer to investment levels in Petty's scheme.)

The page said Petty needed $700,000 to "knock 'em dead" in the courtroom. The page also said they actually hoped to get jurors to join TeleCom2000 when the trial was over.

"Our goal for all 12 jurors is to sell 'em, sign 'em and put the jurors 'on the road to financial independence America,' and get a unanimous verdict of 12 votes not guilty!"

U.S. attorneys shut the site down. During the eight-day trial that ended October 30, the jurors were convinced that TeleCom2000 was indeed a pyramid scheme. Traci Kenner and Gregg Marchessault, assistant U.S. attorneys who prosecuted the case, said they plainly showed that Petty had taken in about $17 million during the two-year life of TeleCom2000 and that he owed more than $30 million.

"It escalated. Especially during 2002, which happens with these schemes. You'll see an escalation after they kind of limp along for a while," Kenner says. "He paid out around $8 million."

The pair also convinced the jurors that Petty had done enough posturing during the life of TeleCom2000 to make it plain that he knew the investment plan was a scam, Kenner says.

"He moved his operation to Canada," Kenner says. "He offered a gratitude pay plan to his employees, and one of the conditions of that plan was that they not go to the authorities, including the FBI. And on a tape recording that was entered into evidence where he had a discussion with one of his employees, he made the comment that he would continue to program [payments] even if he went to prison."

Dan Petty, Petty's only brother and his only legally recognized business associate, testified that he suspected TeleCom2000 was a pyramid scheme.

Al Petty was convicted of 24 counts of wire fraud, 20 counts of mail fraud, 31 counts of money laundering and 23 counts of engaging in monetary transactions with property derived from an illegal activity.

Based on advice he received from his attorney, Petty did not testify, which he now regrets. He is certain that he could have convinced the jurors of the truth. He also did not accept a plea bargain, which could have resulted in a lighter sentence but would have forced him to plead guilty.