By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
In early 1992, Stephen Peterson pleaded guilty to charges of fraud and theft. A Maricopa County judge sentenced him to five years in prison.
In his intake interview with the state Department of Corrections, Peterson said he hadn't known that his Keebee stock was worthless. This claim was radically different from what he'd told the judge as part of his plea bargain.
A prison psychologist concluded Peterson is "irresponsible, resistive, criminally oriented, manipulative, ego-centered"--a classic confidence man.
But Peterson was a model prisoner--he took computer classes, completed stress management and other therapies and awaited his wife's frequent visits. Still, the parole board in June 1993 concluded: "The board believes that you would not remain at liberty without violating the law for the following reasons: Extensive criminal history, repetitive nature of offense, short period of incarceration."
Six months later, Stephen Peterson got out.
At Peterson's exit interview, a prison official asked him about the crimes he'd committed: "The subject was nonresponsive regarding the instant offense--showed no emotion or remorse. No other problems noted ..."
His employment plans, the exit report reads, were "to be developed."
Peterson faced seven years on probation after he was paroled. His conditions of release were strict: The court forbade him to open a checking account without his probation officer's approval.
His only opening came in a provision of release which stated: "Do not manage, operate or participate in any business without the supervising probation officer's written permission, with the exception of having involvement in the Bass 'n Man Lure Company, as long as the state approves the transaction."
Bass 'n Man was the company Peterson had secured from Morton in The Capriccio deal. Peterson had gained control of it with an asset he didn't own. (David Morton never asked a court to order Peterson to return the Bass 'n Man stock.)
"Allowing Peterson to run this little lure company was seen as a kind of rehabilitation," recalls prosecutor Sheila Madden. "Hopefully, he would make a little money and begin to make restitution to his victims."
But Peterson had bigger fish to fry. Using Bass 'n Man as a holding company, he quickly and quietly created several subsidiaries--a record company, an investment firm, a restaurant-supply business.
Each of the subsidiaries had its own bank account, in violation of his probationary terms. None was legitimate.
Word seeped out that an Arizona man was looking for investors and that he was offering amazing yields.
"He's smooth and deceptive, and he'll be a con man until the day he dies." says Nathaniel Risley, a northern California real estate broker who invested with Peterson in late 1994. "His story sounded legitimate, and he has paperwork to back himself up. He told a group of us one day that he'd been in prison, but that he'd been the victim, not the bad guy."
Livermore, California, resident Terry Graham says he borrowed money against his ranch to invest more than $40,000 with Peterson in 1994 and early 1995.
"He was supposed to save my butt and then some," says Graham, a former rodeo calf roper. "That $40,000 was supposed to be doubled every month through his program of buying and selling these foreign treasury bills. But it wasn't happening. I didn't even have feed for my horses. So I came on down around the first of the year  to see what was up."
Graham eventually parked his motor home at Peterson's office, waiting for something to break. He says he knew deep down that his money was gone, but he wouldn't admit it to himself.
"Stephen would dole me out a couple of hundred bucks every now and then and tell me to hang in there," Graham says. "Then, in June, after another deal fell through, he told me, 'It's gone.'"
Graham was one of the lesser investors in Peterson's postprison scams. Interviews indicate that others invested more than $500,000 with Peterson in 1994-95. One person, a Mesa ex-con, apparently provided Peterson with about $250,000 of other people's money as the latest in a series of middlemen.
Several of those interviewed say a young Ohio attorney named Matthew Kentner brokered their transactions with Peterson. Ohio records list Kentner as the statutory agent for the Bass 'n Man Lure Company, which filed papers of incorporation in Ohio on June 7, 1994.
Contacted by phone, Kentner declined tocomment on his association with Peterson.
Wapakoneta Daily News editor J Swygart says Bass 'n Man's appearance in town in mid-1994 was greeted with fanfare.
"Mr. Peterson was talking jobs, and that's always a plus," says Swygart. "He got the city council and the Economic Development Council behind him, and it all sounded really solid. But it didn't turn out that way."
In March 1994, Ohio Governor George Voinovich awarded coveted tax credits to13 companies, including Bass 'n Man, Inc.
Around that time, the Wapakoneta City Council approved a second tax abatement package for Peterson's fishing-lure company, which was slated to open the following month. The politicians were swayed by Peterson's promise to employ 50 people at his factory within three years.
But even with all the tax breaks, Bass 'n Man was doomed.
A story by Swygart in August 1994 started, "A local factory--one with no equipment or product in town--on Monday missed another of its self-imposed deadlines for paying creditors." The piece described how Bass 'n Man owed area businesses almost $20,000, and that locals were mightily upset.