The Pro Con Man

For a decade, Stephen C. Peterson has been the Energizer bunny of white-collar scamsters. And he's still going and going...

The name Stephen Charles Peterson Jr. is but a blip in the annals of Arizona white-collar crime. But the 54-year-old Peterson has earned a special place as a memorable crook, mostly by dint of his chutzpah.

Since 1990, Peterson has used legitimate institutions--city councils, a governor's office, a large corporation, a secretary of state, even the United States Coast Guard--to his own illegitimate advantage.

He's also boosted his cause with manufactured credentials, including an ambassadorship in the fictitious financial "empire" known as the Dominion of Melchizedek.

Armed with impressive-looking paperwork and a huckster's relentless patter, Peterson works variations of the same theme--defrauding people of money and property in exchange for worthless assets and empty promises.

Public records indicate he's been doing this for years, interrupted only during prison stints in Minnesota and Arizona.

Already on parole from Arizona State Prison, Peterson faces new felony-fraud charges in Maricopa County. But he and his wife of 32 years, Mary, keep their roots shallow and their suitcases packed. They fled Arizona in June and authorities haven't seen them since.

The couple split shortly before police raided Peterson's east Phoenix offices, home of Bass 'n Man, Inc., a shell corporation whose subsidiaries included a fishing-lure manufacturer. Mary Peterson isn't charged with any crimes.

Assistant attorney general Sheila Madden, a veteran prosecutor of white-collar crime, calls Stephen Peterson "the trickiest guy to get a read on--to understand exactly what he's up to in this or that scheme."

Peterson is a chilling, colorful example of how career confidence men operate. Though the man remains shrouded in mystery, New Times pieced together much of his story through use of public records in several states and by numerous interviews.

Able to cite Biblical and stock quotations at will, the physically imposing Peterson--six foot seven, 265 pounds--oozes charm and credibility. His promises of easy money are seductive, his invented track record impressive. He has a loyal, Scripture-quoting wife whose mere presence after three decades with him helped to convince potential investors of his stability and trustworthiness.

Peterson's latest-known victims include a northern California man named Terry Graham. Last year, the 47year-old Graham sunk his life savings--about $40,000--into a fraudulent Peterson financial scheme. This time, it was foreign treasury bills that were supposed to yield huge, quick returns.

They didn't. Early last year, Graham parked his motor home at Peterson's Phoenix office, hoping his presence might right things. He says Peterson kept insisting that the promised windfall was just a few glitches away. Then the Petersons skipped town.

Now, Graham says, his ranch is about to be foreclosed. "Iwas the village idiot," he says. "I guess I wanted the whole enchilada, and I wanted it fast. Steve said he could get it for me. He lied."

Peterson's victims cover the spectrum: Many, such as Terry Graham, greedily let themselves be seduced by sweet-sounding promises. Others are fellow crooks--scamsters who've been scammed themselves.

Yet others are the true innocents, people who thought they were dealing with a reputable gentleman. Sun City West residents Geri and Bill Buell fit into that category.

In late 1990, they agreed to sell The Capriccio--their 63-foot luxury yacht--to Peterson for $1.3 million. It took the couple four years and cost them more than $100,000 in legal fees and incalculable heartache before they could undo Peterson's scheme and sell the boat to a legitimate buyer.

There's a final, troubling aspect to the Stephen Peterson story: An uncoordinated, lax effort by Maricopa County probation officers after Peterson's release from prison enabled him to steal great sums of money from a new crop of victims.

Peterson had been placed on probation after his parole in late 1993, supposedly harnessed by a list of tough restrictions. But in February 1994, records show, an investigator with the Arizona Corporation Commission informed his probation officer that Peterson was trying to lease property and to start a new business.

That was forbidden, and should have landed him back behind bars--or at least gotten him a hard slap on the wrist.

The investigator, Billy Oliverio, also noted that Peterson was trying to lure a potential investor with lies about being able to issue letters of credit. This, too, was a probation violation.

Peterson's probation officer told a Maricopa County judge she intended to revoke Peterson's probation. But before that happened, she turned the case over to a new officer, who did nothing until it was too late.

Oliverio kept the new probation officer, Nick Crowder, apprised of Peterson's actions throughout 1994. That fall, he supplied newspaper clippings published in Wapakoneta, Ohio--a town of about 10,000.

Peterson had opened the aptly named Bass 'n Man Lure Company there after the State of Ohio and the Wapakoneta City Council graced him with lucrative tax breaks. But, as a series of articles in the summer of 1994 showed, Bass 'n Man was stiffing numerous local businesses and wasn't producing anything.

Peterson wasn't even supposed to open a bank account without permission. But probation officer Crowder didn't move to revoke Peterson's probation until July 10, 1995, about six weeks after the Petersons fled Arizona.

Steve Peterson fleeced untold thousands of dollars after Oliverio first contacted the probation office.

"The officer [Nick Crowder] proceeded when he felt he had enough information," says adult probation office spokesperson Gael Parks, by way of explanation. "Our officers have a considerable amount of discretion within certain guidelines, and some move faster than others."

Steve Peterson was born into a middle-class Toledo, Ohio, family on July 4, 1941, one of Velma and Stephen Peterson's two children. He lived in Toledo until graduating from high school.

Ohio court records confirm Peterson married Mary Alice Mast in 1963. Soon after that, he apparently became a minister with the Jehovah's Witnesses, preaching in the Southeast for several years with his wife by his side.

The couple presented quite a contrast: Steve is a talkative bear of a man who can dominate a room; Mary is a tiny, somewhat passive woman with a passion for Scripture. The Petersons have no children.

Until the last decade or so, Steve Peterson seems to have sought at times to earn money legitimately. After leaving the Jehovah's Witnesses in the early 1970s, he apparently worked as a commercial photographer, then ran his own photo business in Fort Lauderdale, Florida, until 1985.

But that year, Peterson's business partner died in an alleged murder-for-hire scheme involving two ex-associates. Peterson was never considered a suspect in the case, but he considered himself a potential victim. He later told a probation officer that he moved to Beverly Hills, California, out of fear for his life. There, he continued, he'd worked as a freelance photographer until 1987.

But police records tell a different story.
FBI reports show that, in November 1985, a Stephen Charles Colapietro had advised a south Texas realtor that his company, Vericorp, was in position to finance million-dollar deals. Colapietro showed the realtor a financial statement that put his net worth at $57million.

The realtor knew immediately that the statement was fraudulent. It listed as an asset property that the realtor himself had tried to sell Colapietro, and was still on the market. Another supposed Colapietro asset listed--a $10 million amusement park in the area--didn't exist.

A local banker later told FBI agents that Colapietro--armed with a phony financial statement and a letter of credit from an Arkansas bank--had attempted to secure a $10 million loan for Vericorp.

The FBI interviewed Colapietro, and he confessed after a long interrogation that his real name was Stephen Charles Peterson and that he'd tried to defraud the bank. The feds arrested Peterson, and a grand jury indicted him in November 1985 on three felony charges.

He spent about a month in jail before making bail, which he jumped before his trial could begin.

Peterson turned up in Minnesota about 18 months later, under the name Stephen Charles Marino. Peterson again presented falsified personal financial reports, this time to the owner of a motel. He then agreed to buy the motel for $2 million.

The deal never was consummated. But the owner complained to police that Peterson had stolen furniture and equipment from the motel before the deal fell through.

Police arrested Peterson in April 1987, also charging him with stealing $50,000--his commission for arranging a $500,000 loan that, naturally, never came through--from another Minnesotan.

Peterson and his attorney worked hard to secure a soft plea bargain. His promise to help Florida prosecutors in the still-unresolved murder case weighed heavily in his favor.

Prosecutors in Minnesota and Texas agreed to let Peterson plead guilty to all charges, in return for a maximum prison term of two years. He served about nine months in a Duluth prison camp before being paroled.

On February 16, 1989, a Minnesota probation officer concluded a report about Peterson with a warning: "This defendant must be monitored closely to assure his activities, including business deals."

Six months later, Peterson went into business in Phoenix.

Nobody knows why the Petersons chose Arizona as their next stop, but the state proved, for a time, to be hospitable.

Somehow, Peterson already had developed a network of associates by the time hemoved here. Among them were local "swappers," a subculture of wheeler-dealers who trade property and goods with each other.

Some newfound allies were legitimate; others were kindred spirits in crime. The latter included fellow white-collar crooks adept at swinging deals, then "papering" their victims as they milk their assets--generally by tying up properties in court to avoid paying for them.

Peterson claimed ownership of new companies to reestablish himself in the fraud game. One was the American Security Corporation, incorporated in the state of Nevada in September 1989. Another was the Keebee Corporation, a Delaware outfit whose stock was worth pennies, its operations nonexistent. And there was the Preservation Corporation, incorporated on May 30, 1990, under the laws of the Dominion of Melchizedek.

The Dominion does not appear in any atlas or almanac. That's because Melchizedek--named after an Old Testament king who blessed Abraham--exists only on paper, the creative and illegal enterprise of a career thief who called himself Branch Vinedresser.

The Dominion's public relations arm--dubbed the Universal Bureau of Information--explained itself in a 1990 release: "Although the Dominion claims jurisdiction over the entire Earth according to prophetic scriptures, [it] is only making official title its claim over the Island of Malpelo."

Located in the Pacific about 300 miles west of Colombia, Malpelo was "the mid-Pacific's leading financial center," it continued.

However, the public relations gang failed to point out one detail: The island is sometimes submerged, depending on the tides.

"Communications with the Dominion of Melchizedek are handled by Ambassadors throughout the world," founder Branch Vinedresser (his real name is Mark Logan Pedley) noted in one missive, which he signed "Superconducting Truth, Life and Love."

Melchizedek's only "export" was paper--the lifeblood of any white-collar scammer. For up to $10,000, Vinedresser/Pedley would provide all the paper one needed--meaningless charters, phony bank statements, audits, securities.

By August 1990, Peterson was a new boy on the block in Phoenix, and thanks to the Dominion, he could show "evidence" of his enterprises.

One document stated, "The Dominion of Melchizedek hereby commissions [Peterson's] American Security Corporation to build airports on the Island of Malpelo, andgovernment facilities on any territory of our Dominion in exchange for $20million [plus 20 percent profit] in a face-value Treasury certificate as attached hereto."

Peterson had no intention of building anything on the uninhabited island. But the document added to the other phony paperwork he was amassing.

According to those documents, American Security Corporation showed total assets of $41 million as of September 30, 1990, including about $20 million in "government securities" from Costa Rica and Colombia. It claimed a net income of $918,000 for the first nine months of that year.

Peterson's personal financial statement at the time put his net worth at $18 million, most of it in Keebee stock. Actually, that stock was almost worthless.

It's unknown how much money Peterson had in reserve when he started revving up in the summer of 1990, but it certainly was closer to $18 than $18 million. By all accounts, he and Mary lived frugally, with few of the trappings white-collar crooks assume.

In the second half of 1990, Peterson tried to sink his talons into every opportunity that came his way. He never paid down payments. Instead, he'd sign promissory notes supposedly secured by the Keebee stock. He'd claim that Keebee's prime asset was about 250 tons of gold concentrate--held in the form of magnetite--on property in New Mexico. While the magnetite does exist, New Mexico officials say it contains nothing of value and, in any case, Peterson didn't own any of it.

Once the magnetite was processed, Peterson would explain, Keebee would net around $8,000 a ton. The company was on the verge of getting on the NASDAQ exchange, he claimed, which guaranteed its value would skyrocket.

In July 1990, Peterson and company--a few members of the Jehovah's Witnesses, his wife and an ever-changing assortment of business associates--moved into the top three floors at the Pinnacle West building at 2828 North Central.

Peterson capitalized on Phoenix's glut of unoccupied office space: His American Security Corporation signed a ten-year lease with Pinnacle West, and got three months' free rent. He rented furniture to decorate the digs--again, with no down payment.

The Jehovah's Witnesses provided an odd twist. No evidence has linked any of them to Peterson's criminal schemes. They apparently performed odd jobs, including chauffeuring Peterson--who doesn't drive--around town.

They seem to have been swayed by Mary Peterson.
"Mary's role in all this is hard to figure," says a California man who claims to have lost $100,000 to Peterson. "She's sweet and nice and religious, and she doesn't seem like the criminal type. Maybe that's her game."

Stephen Peterson told the Jehovah's Witnesses that he would build them a church when his ship came in--literally, as it turned out.

Peterson "purchased" three motels in the second half of 1990, two in Phoenix and the other in Texas. Each was in financial straits. He paid nothing to get title to them.

Peterson had neither the money nor the desire to rejuvenate the properties. He apparently wanted some legitimate, if exaggerated, assets to add to his financial statement, something tangible he could show the unsuspecting.

For a cash infusion, he'd strip the motels clean, selling vending machines, furniture, whatever, to the highest bidder.

Two of the motels never reopened. The third, an Econo Lodge near Sky Harbor International Airport, had a wing of rooms dubbed the "Presidential Suites." Inside each room was a framed portrait of a U.S. president, Washington through Kennedy.

Peterson snatched the paintings for his North Central offices, then closed the Econo Lodge.

Around this time, Peterson somehow ran afoul of the Dominion of Melchizedek. In November 1990, he got a letter from Ben David, the pseudosovereignty's secretary of state. (The letter, by the way, had a Washington, D.C., postmark, not a water mark from the island of Malpelo.)

"Dear King Peterson," it started, "we have temporarily suspended any appointments made by us concerning your ambassadorship and other positions in our Dominion. ... You need to be specially observant of King Jesus' Golden Rule at this time of internal and external persecution."

The letter was signed, "Authoritatively, Ben David."
To get booted out of an empire, even a fake one, takes some doing. It's uncertain what Peterson did to outrage the rulers of Melchizedek. But he continued to flaunt his nonexistent Melchizedek assets to potential investors until police arrested him the following year.

In late 1990, Steve Peterson found something to drool over: It was called The Capriccio, and it was worth more than $1million.

These days, Geri and Bill Buell are happily landlocked in Sun City West, where the closest body of water is Lake Pleasant. The retirees returned to Arizona a few years ago from the state of Washington, where they'd migrated in the mid-1980s.

Both are genteel people who are still loath to discuss the painful memories that the name Stephen C. Peterson evokes.

"It's the worst thing that's ever happened to us," says Bill Buell, who retired a few years ago after working most of his career in the cattle business. "The money we lost was bad enough. But the worst thing was knowing you were getting robbed and feeling helpless to do anything. ... The guy has a handshake like a wet fish. That should have been our first warning."

Buell's dream for years had been to design and build a big, beautiful boat. He saved his money wisely and decided to make that dream come true.

The couple moved to La Conner, Washington, where Bill Buell hooked up with a veteran boat architect. Together, the men designed a fantasy yacht, a 63-foot aluminum-hulled beauty.

The Buells say they named their yacht The Capriccio for several reasons. One of Geri's favorite places is an upscale Scottsdale store of the same name. The couple also looked up the definition of the Italian word: It means light and airy, and a fanciful whim--which also fit their yacht.

For tax purposes, the Buells created a corporation, Argonaut Motor Yachts, that owned 100 percent of the stock in The Capriccio. The Buell Trust--Geri and Bill Buell--owned Argonaut.

In April 1989, Argonaut obtained a certificate of documentation--the seagoing equivalent of title--from the Coast Guard. That year, however, the couple decided to sell the yacht.

Geri Buell says she was homesick for Arizona, and the cost and stress of keeping the boat seaworthy were considerable.

Bill Buell hired a production company that year to make a videotape of The Capriccio as a marketing tool. The ten-minute tape, called "In a Class of Its Own," shows off the yacht at its best.

Down in Arizona, Stephen Peterson watched the videotape and liked what he saw. He contacted the Buells through a middleman. During negotiations, Peterson assured the yacht owners that the Keebee Corporation and its cache of precious metals would be listed on NASDAQ any minute.

Bill Buell says the contract he signed with Peterson on December 17, 1990, was designed to protect his lucrative asset: Buell agreed to deliver Argonaut's shares to an escrow agent. Peterson said he'd pay $1.3million in cash from expected proceeds of Keebee stock to the escrow agent by March 1, 1991.

But on the day the contract was signed, Peterson also filed a remarkable document with Washington's secretary of state. The amended annual report claimed that Stephen and Mary Peterson were the new president and treasurer, respectively, of Argonaut Motor Yachts.

The office put its official seal of approval on the document--even though there was no evidence that Argonaut Motor Yachts sanctioned the transaction.

"That's the standard way we do things," explains a representative for the secretary of state. "We just can't physically check up on everyone who brings in paperwork for us to process."

This would have dire results for the Buells. Peterson could wave around an official document that showed he owned The Capriccio.

Within weeks, Peterson took advantage of "his" lucrative new asset. A new middleman introduced Peterson to a retired Albuquerque orthodontist, J.B. Veale. Peterson told Veale he needed a $110,000 loan to fund start-up costs for one of his distressed Phoenix motels. In return, he'd repay the doctor $130,000 within four months.

Peterson first said he'd secure the loan with stock in the Keebee Corporation, but Veale didn't bite. Peterson then said he'd secure it with The Capriccio.

He flew to Albuquerque and showed Veale several documents, including American Security Corporation's financial statement, his personal financial statement, a copy of the Coast Guard certificate to The Capriccio and an Argonaut board of directors resolution signed by the Petersons and authorizing the use of the yacht as collateral.

Veale was impressed. He gave Peterson a certified check for $110,000--the last he would see of that money. Records show Peterson paid the middleman a finder's fee of $10,000 and pocketed the rest.

Back in Arizona, however, the middleman in the Veale loan--Neil Cooper of Scottsdale--had done some homework. Cooper says Peterson had admitted to him that he couldn't even afford to turn on the utilities at one of "his" motels, the Airporter Inn.

He saw Peterson wasn't putting anything into the motel. He perused a recent TRW credit report of Peterson's, which came up fairly clean.

"The only thing that bothered me was that [the report] was only a year-and-a-half old," Cooper says. "His answer to that was that he was in the federal witness protection program. It took about 45 days of total hard diligence before I really found out where he was coming from. But it was very, very difficult for us to determine that he didn't own the boat."

As the March 1 escrow-closing deadline neared, the Buells began to piece together what was going on--partly by luck.

First, a realtor friend in Arizona congratulated them for having sold their yacht. The friend happened to have seen Peterson's financial statement--he already was negotiating another deal--which listed The Capriccio as an asset.

Then, one of Peterson's ex-associates snitched on him, telling Buell that Peterson had filed the critical documents with the Washington secretary of state.

Buell immediately called that office. He says a clerk told him that, as far as its records were concerned, Peterson was the president of Argonaut. Buell then alerted the Coast Guard.

The closing date passed without payment from Peterson. The Buells hired an attorney to sort things out.

On March 5, Bill Buell took the precaution of applying with the Coast Guard for a new certificate listing him as president of Argonaut. The same officer with whom he'd spoken in earlier calls was on duty.

But things were truly twisted.
The officer, Ann Vollmer, issued the replacement certificate to Buell on March 15, 1991. That day, however, Peterson executed a fraudulent bill of sale that allegedly transferred title of The Capriccio from Argonaut to the Gulf Eastern Corporation. In return, he was to obtain 100 percent of the stock of a Gulf Eastern subsidiary called Bass 'n Man.

Gulf Eastern, a holding company in the mold of Peterson's American Security Corporation, had a Seattle address. But it actually was owned by a Valley man named David Morton. To this day, it isn't clear if Peterson was working intandem with Morton, or ifthe pair was trying to scam each other. (Morton couldn't be located for comment.)

But also on March 15, Morton signed a promissory note with the owner of a Phoenix piano store. The piano man agreed to lend Morton $50,000, to be secured by Gulf Eastern's alleged new "asset," The Capriccio. Morton promised to satisfy his debt within ten days, plus pay an umbrella interest payment of $25,000. (The piano-store owner later filed a lawsuit to get the money owed to him or the boat. He got neither.)

On March 25, Gulf Eastern applied with the Coast Guard for its own certificate of documentation for the yacht. This was just ten days after Bill Buell had gotten a replacement certificate, and about a month after he'd first contacted Coast Guard clerk Ann Vollmer.

Yet Vollmer accepted and recorded the fraudulent bill of sale for The Capriccio, and issued another certificate of documentation. Records show the Coast Guard never contacted Buell or did any investigation into the increasingly murky affair.

The Buells' woes mounted. Bill Buell learned in April that Peterson had attempted to fraudulently transfer The Capriccio's title to Morton.

Then the Buells got a break. While reading a yachting magazine, they saw The Capriccio in an ad which offered it for sale for $500,000. But the ad copy didn't describe The Capriccio at all. They phoned the listed salesman, whom they knew. The salesman explained that he'd obviously used the wrong boat in the photo, then mentioned an intriguing phone call he'd received.

"He said he'd just gotten a call from a guy named Morton," Buell says. "The fellow needed a skipper to pilot a boat he'd just bought, and he wanted to find a buyer for a quick sale. He gave me Morton's number, and I called him."

"... He said, 'I own that boat fair and square and I'm coming to get it.' He kept repeating, 'Due diligence, due diligence.' I told him that it was my yacht, and like hell he was going to take it."

The Capriccio then was moored in Bellingham, Washington. Buell chained it to the dock, loaded a gun and moved onto his yacht awaiting the arrival of Morton, who never came.

"Suppose Morton had found a skipper and had gotten control of the yacht," Buell says. "Then he had sold it to someone else and transferred his so-called title to that party. This is all plausible. Eventually, it might have all come out in the wash, but who knows?"

By now, Buell was talking with the Arizona Attorney General's Office, which had gotten wind of Stephen Peterson. Several people had approached the authorities; some had been victims, others wanted to volunteer information before they became suspects.

In late April 1991, Pinnacle West evicted Peterson from his offices. He had been a tenant for nine months without paying any rent.

That May 3, agents from the Attorney General's Office executed a search warrant of Peterson's office and home. They confiscated paperwork as well as the presidential portraits that hung on the walls.

A grand jury indicted Peterson on nine counts of racketeering, fraud and securities-law violations. The charges stemmed from The Capriccio caper and the $110,000 loan from Veale.

But Peterson's arrest did little to help the Buells. In August 1991, the Coast Guard declined to amend Gulf Eastern's continued "ownership" of The Capriccio. We are mere scribes, its lawyers claimed.

"The Coast Guard in effect assisted Mr. Peterson in perpetuating this fraud," Buell's attorney responded in a letter of protest.

The Buells were forced to file a federal lawsuit to regain their yacht. Months passed, then years. The clouded title kept them from selling--or even using--The Capriccio. The nightmare didn't end even after Peterson later confessed in writing to having perpetrated a fraud.

It took the Buells until 1994 to win their case. Only then did the Coast Guard agree to affirm the couple as The Capriccio's rightful owners. In 1994, Geri and Bill Buell sold their yacht at last.

"We always wondered what was going to happen when Peterson got out," says Geri Buell. "We never expected much in the way of restitution, though he was supposed to pay us $90,000. But we just wondered what he'd be up to."

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 [1995] 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.

One Peterson ally, the director of the Economic Development Council, told the Lima News: "The situation is over. The company has cleared up their bills after having some problems."

Those inaccurate comments angered Bass 'n Man creditors, who called for the director's head. Many filed legal claims against Bass 'n Man.

Word of the Ohio controversy filtered to Billy Oliverio, the Arizona Corporation Commission investigator. A cursory investigation uncovered an almost-bizarre situation in the small Ohio city: Bass 'n Man's few employees had nothing of substance to do, so they had devised an indoor golf game to pass the time at the plant.

On the rare occasion that a fishing-lure order came in, a worker would go to the local K mart, buy some lures, rip off the labels and send them out.

Authorities say they aren't sure what Peterson intended to do with the Ohio business.

"Can't say," says prosecutor Sheila Madden. "Wish I knew. But whatever it was, it wasn't working."

Oliverio alerted Peterson's probation officer, Nick Crowder. But it appears that Crowder, who deferred comment to his agency's public-information officer, did little to investigate Peterson for months.

"It's not uncommon for [probation] officers to wait for charges to be filed before they move on someone," says the agency's Gael Parks.

Crowder's failure to act spelled trouble for some of Peterson's victims.
When authorities raided Peterson's home and office in June, Terry Graham and his motor home were the only ones around.

On July 12, 1995, the attorney general filed a complaint against Stephen Peterson in East Phoenix Justice Court. The single count accuses Peterson of defrauding Terry Graham of at least $10,000.

Those presidential paintings Stephen Peterson hung in his Central Avenue offices gather dust in a warehouse where the attorney general stores evidence. No one, it seems, has put in a claim for the artwork.

As for the Dominion of Melchizedek, its founder, Branch Vinedresser, nŽe Mark Logan Pedley, was arrested in February 1991 on parole violations. Authorities found him at the Nevada offices of the Banco de Asia, a linchpin of his phony empire.

But Pedley's fantasy island lives on. A recent trek into the Internet turns up a prospectus for the "Polynesian Melchizedek Dominion," which claims to be an "offshore business center based on its island Karitane--located some 1,500 miles south of Tahiti." For $650, anyone can create a corporation based in the dominion.

Prosecutors and victims--even Stephen Peterson's "associates"--wonder where he might be.

Terry Graham received a religious book from Mary Peterson in the mail several months ago. The package had a Wisconsin postmark and no return address.

She recommended that Graham read asection of Psalm 118, one verse of whichironically reads: "It is better to take refuge in the Lord than to put confidence in man."

Mary Peterson inscribed it, "Please enjoy this valuable treasure. ... Perhaps we will see you again somewhere, sometime in the future.

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