Con Err

Editor's note: Hours before this story went to press, the Arizona Attorney General's Office informed

New Times

that the subject of this story, Stephen Charles Peterson, was arrested at his Scottsdale office Tuesday morning on suspicion of fraud and theft. Peterson's wife, Mary, also was arrested on the same charges. They were booked at the Madison Street Jail.

Independent filmmakers Doug Valente and his wife, Kimber O'Neill, were excited last month at the prospect of a financial angel entering their lives. The couple own Bad Kitty Films, a San Francisco company with several feature-length projects in preproduction.

One film project is titled Cat and Mouse, a psychological thriller. Funding, however, has been scarce. That's where the angel was supposed to come in.

This angel calls himself "Big Eagle," for purposes of e-mail and other temporal necessities. But he doesn't claim to have wings or a halo, just access to extraordinarily large sums of money that he's willing to share -- for a price.

His name is Stephen Charles Peterson.

Documents indicate the 59-year-old Ohio native is the chairman of Camero Worldwide Limited, the parent company of Paracrete International, Eagle Pacific Investments, Big Eagle Entertainment and Austin Stevens Incorporated.

But as court documents, police reports and an earlier New Times story show, Steve Peterson also is an exceptionally resilient con artist, and a twice-convicted felon whose modus operandi has served him well for decades. He's a master at defrauding people of their money and property, often in exchange for worthless assets and tempting promises of untold riches.

Peterson's also got a knack for conning law enforcers. He's currently on "intensive probation" -- and was barred from handling other people's money, until his probation officer last May inexplicably gave him permission to do so.

Camero's Web site and letterhead cite a Wall Street address in New York City, though its "corporate history" says the firm moved to Arizona in October 1999. The move was necessary "in order to have the investments properly administered on the West Coast," the Internet site claims.

Camero's president and chief executive officer is listed as Ken MacRae, an Australian native about whom little is known.

Last month, the screenwriter of Cat and Mouse visited a "venture capital" Web site on the Internet. Umbrella sites such as these tout themselves as "information exchanges," where allegedly legitimate investors review pitches of budding entrepreneurs and then contact those who interest them -- and vice-versa.

The writer found a reference to Camero Worldwide and phoned for more information. She got a return call within a day from a woman who said she worked for a Mr. Peterson. We're interested, the Camero employee said, and want to hear about all of Bad Kitty's proposed films.

Valente and O'Neill faxed summaries of the six films in preproduction to Scottsdale. Through his employee, Peterson soon expressed more interest in one of O'Neill's own screenplays, a drama called Once the Fog Rolls In, than in Cat and Mouse. It revolves around a teenager's suicide and its aftermath.

On August 16, Peterson sent the couple a letter of intent that signaled his firm's wish to fund Bad Kitty for the production of Fog. The letter indicated that he was Camero's "chairman."

Peterson promised to advance $1.2 million to the filmmakers. In return, he demanded only to review Bad Kitty's bank statements, accounting ledgers and other financials. Camero Worldwide also would get 50 percent ownership in the "limited partnership" formed to get Fog made.

"We were excited," recalls Valente, "but we decided to check the guy because of some past experiences we've had with rip-offs. . . . We probably would have signed with him if we hadn't found the [New Times] article about the guy."

While surfing the Net later that day, Valente came upon a March 1996 New Times story,"The Pro Con Man," about an Arizonan named Stephen C. Peterson. He immediately e-mailed New Times for more information.

"I hope you can help us," Valente wrote. "Yesterday, we were contacted by a gentleman named Stephen C. Peterson from Camero Worldwide Limited, the address given is 6991 E. Camelback Road, Suite B-310, Scottsdale AZ 85251. . . . A search for the company reveals nothing, however, a search for Stephen C. Peterson returned a [New Times] article. We are really hoping it isn't the same person, but suspect it is."

The couple suspected correctly.

Kimber O'Neill phoned the Camero employee and told her Bad Kitty Films wouldn't be doing business with Peterson. By way of explanation, they faxed her a copy of the article.

The following day, August 17, the employee e-mailed Kimber O'Neill in San Francisco:

"Although I am in tears, I want to thank you for the information you sent me. I am eight months pregnant and have a 6-year-old daughter. We moved out here from Texas for this job five months ago. Steve led me to believe that this job would make me a millionaire by the end of the year. Sadly, by the end of the year, I will be broke. He also promised me that I would have full medical coverage . . . that was five months ago! I am now on welfare for that because my pay here is so low. I apologize because I was not aware of Steve and Mary's part. He has ruined my life!"

Also that day, New Times received an e-mail from a person who claimed to be the same one who'd corresponded with Bad Kitty. It said in part, "I have just read your 1996 article on Stephen Charles Peterson. . . . We have a plush office in downtown Scottsdale across from the Fashion Square Mall. . . . Everything mentioned in your article sounds hauntingly familiar."

Indeed. The earlier story said 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."

Stunningly, the same thing has happened again.

In this instance, Peterson's probation officer, James Meeks, allowed him to work in an office whose parent company was formed, according to its "corporate profile," for the purpose of "investing in small businesses to help them grow."

Allowing somebody like Peterson to work in the "investment" field is like letting a hooker work on a street corner.

The repercussions of such lax monitoring have been tangible. Not everyone has been as lucky as the Bad Kitty people, who came to their senses before sending money or valuable financial data to Peterson.

Peterson and his minions have pocketed an unknown sum from yet another new crop of victims, again under the pretext of making them millions in no time. It's impossible to say exactly how much the new marks have invested, but Ray Whitby -- who quit on Monday as Camero's financial manager -- says it's probably hundreds of thousands of dollars.

"It's hard to say how much because Steve never told me anything," says Whitby, whose father, Farrell Whitby, is listed on the Camero Web site as president of Eagle Pacific Investments, a subsidiary said to specialize in real estate transactions.

"I know that a lot of deals fell through, because people normally want to see your track record and your financials before they sign anything or turn over money. We could never produce that. But I do know that some people did bite, anyway. The whole thing adds up to stink."

Ray Whitby and other sources say a northern California man invested $125,000 with Peterson months ago, apparently believing that a European bond trading program would turn that sum into millions almost overnight. It didn't, and hasn't.

On August 25, the Camero employee who had sent an earlier e-mail to New Times wrote of an unnamed client "who has already given Steve $40,000 three months ago, and is still waiting to get funded. This poor man cashed in his IRA for this project."

Stephen Peterson is a perplexing, impenetrable character, even to experienced white-collar prosecutors such as Sheila Madden. She's the assistant state attorney general who put him behind bars years ago. Madden and others intimate that, to Peterson, it seems as if the con itself is as important as its successful execution.

That includes conning the "system" -- in this case, his latest probation officer. For months, the Big Eagle -- he stands 6-foot-7 -- his wife, Mary, and new associates have been ensconced in a Scottsdale Road office doing business as Camero Worldwide and its subsidiaries. Local prosecutors long ago nicknamed the building the "Fraud Towers" -- because of the propensity of white-collar criminals who have officed there.

None of them have anything on Steve Peterson, the prototype of a confidence man.

"Steve builds up an amazing amount of hype," Ray Whitby says. "I guess it's the ultimate definition of a con man that they have that special way of building trust, of mesmerizing, if you will, as he keeps you in the dark about everything important. But there's always some excuse why things aren't happening. No deal is ever done. We had no idea he'd been in prison for stealing from people."

The 1996 New Times story told how Peterson had used legitimate institutions, including city councils, a governor's office, a large corporation, a secretary of state and the United States Coast Guard, to his own illegitimate advantage.

Authorities eventually had brought him to justice -- or so they'd thought.

He served more than two years in prison in the early 1990s on fraud and theft charges, was put on probation after his 1993 parole, fled to parts unknown in 1996, was recaptured in 1998, and got resentenced last October.

At that time, Maricopa County court commissioner Carey Snyder Hyatt reinstated Peterson on probation after he promised in writing not to "manage or operate or own any business without the written approval of his probation officer."

He was operating a business -- Camero Worldwide -- within weeks after he signed that document. One of Peterson's fraud victims of the early 1990s was speechless when told of his antagonist's latest incarnation.

"Back in October, I told [Commissioner Hyatt] in a letter that Peterson is an incorrigible crook," says Sun City West resident Bill Buell, whose unfortunate business deal with Peterson cost him more than $100,000 in legal fees and years of litigation. "I wanted him to have to wear an electronic bracelet if he got out, which he did. So he's back in business, huh?"

Buell says no one told him Peterson was running a new business, or that a probation officer in June had okayed Peterson's managerial involvement in Camero.

The probation office also didn't inform the prosecutor who put Peterson behind bars in the early 1990s, in part for the scam involving the Buells.

Sheila Madden said last week that she didn't know anything about Peterson's latest enterprise.

"This is news to me," she said. "I would have liked to have known something before now."

Camero Worldwide, Ltd. Began in 1987 as a Financial Services Company. . . . Our offices were moved to London, England, in 1989, where they remained until 1998. During this time, we have invested in owners in the Fishing, Hospitality, Real Estate and Music industries. Since that time we have purchased, as wholly owned subsidiaries, Bass 'N Man Lure Co. Inc., American Security Corporation, Balco Investment Inc. It was in 1998 when we decided to move to the United States, that our offices were moved to Wall Street in New York City. . . . In order to have the investments properly administered on the West Coast, in October of 1999 Paracrete International Inc. was established as a Delaware corporation. Administrative offices were opened in Phoenix, Arizona, to look after investment interests."

-- from Camero Worldwide's Web site

Simply calling Steve Peterson's scams "fraud" and "theft" doesn't do Peterson justice: He's far more creative than the average con.

He burst on the scene in Arizona in the early 1990s with fake credentials, including an ambassadorship in the fictitious "empire" dubbed the Dominion of Melchizedek. Named after an Old Testament king, the Dominion was the creation of a career thief named Mark Logan Pedley -- who adopted the alias Branch Vinedresser along the way.

For a handsome fee, Pedley would provide people like Peterson with impressive-looking, but phony, bank statements, audits, securities and charters.

The Dominion laid claim to a small Pacific island off the coast of Colombia, which Pedley marketed -- mostly in early versions of the Internet -- as "the mid-Pacific's leading financial center." Pedley "commissioned" one of Peterson's early-1990s companies -- American Security Corporation -- to build airports and government facilities on the island, which is called Mapelo.

Actually, American Security existed only on paper, if one doesn't include the fancy penthouse office in downtown Phoenix where Peterson conducted "business" for almost a year in the early 1990s. He was eventually evicted for nonpayment of rent.

Peterson used the Melchizedek documents to "prove" to potential marks that he was a legitimate, big-time businessman. Neither he nor Pedley noted, however, that Mapelo is an uninhabited place that is submerged much of the year, depending on the tides.

Peterson made a model prisoner during his early 1990s stint behind bars. Records indicate he took computer classes, was counseled in stress management and other self-help issues, and always obeyed his captors.

But not everyone fell for his patter. In 1992, a state prison psychologist concluded Peterson was "irresponsible, resistive, criminally oriented, manipulative, [and] ego-centered."

It seemed as if authorities were going to keep a tight leash on the slippery con man after he won early parole in December 1993: A judge ordered Peterson to regularly report to a probation officer for seven years, and told him not to open a checking account without official approval.

Another provision, however, allowed Peterson the opening he needed. It said, "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."

Using the lure company as a holding company, Peterson quietly created several subsidiaries, including a record company, an investment firm and a restaurant-supply operation. Each subsidiary had its own bank account; none were legitimate.

Word got around that an Arizona businessman was seeking investors, and could make them a pile of money in a hurry. Peterson spoke enchantingly of European treasury notes, and of their mysteriously high yields. He used the usual props -- a phony résumé, a devoted wife, a sincere mien -- to convince people in several states to invest, and later lose, more than $500,000 from 1994-95. Some lost their life savings.

Peterson moved his operation to Ohio, where, in early 1994, that state's governor and the Wapakoneta City Council approved tax breaks for his lure company. Actually, the company had few employees and was successful only at incurring debts and outraging creditors.

An investigator for the Arizona Corporation Commission heard about the Ohio imbroglio and alerted Peterson's probation officer. But the officer didn't do anything about the obvious violations until months passed. When authorities finally raided Peterson's home and office in June 1995, he and his wife had vanished.

Court records suggest he allegedly engaged in a tangled new set of scams under various aliases in several states before Texas authorities nabbed him in August 1998.

Agents from the AG's Office and the FBI pieced together some of Peterson's activities during his three years on the lam -- scams, scams and more scams, though none of his activities have led to new criminal charges.

In late 1995 and early 1996, he ran a quasi-loan operation in Memphis, Tennessee, using the alias Charles Capilano. Later, he adopted the name Stephen DePietro and started a coupon-book operation in Charlotte, North Carolina.

FBI agent Bob Hammon noted in a report that the business worked as a multilevel marketing scheme: Individuals sold the books for $500 each, and Peterson said they could earn huge commissions for bringing new sellers into the fold. But troubles arose -- as they always do with Peterson -- after customers sent in rebate receipts, but got no response.

Hammon wrote that Peterson's North Carolina business collected about $1.5 million from mid-1996 until mid-1997. His report alleged Peterson/DePietro left behind more than 2,000 victims when he headed for Texas.

Using the name Steven Romano, Peterson operated there from the summer of 1997 until police arrested him August 1, 1998. He and yet another new partner had put the word out in Texas that for an advance fee, they could secure loans for distressed companies that couldn't get approved through traditional means. The pair did at least $2 million in business there, court documents indicate.

But Peterson then ran afoul of his Texas compadre, who informed police who Steven Romano really was.

After his arrest, Peterson told authorities he'd fled from Arizona fearing retaliation for his testimony years earlier in a Florida murder-for-hire trial that involved a former partner. He denied having any assets, here or abroad.

It seemed a formality that Peterson would be returned to prison after his extradition to Arizona in December 1998. Prosecutor Sheila Madden sought the maximum sentence of 14 years, telling Commissioner Hyatt, "He should be incarcerated for as long as possible to protect the public."

Probation officer Nick Crowder -- the officer who hadn't reacted quickly enough to Peterson's shenanigans years earlier -- added, "It is [my] opinion that [Peterson] holds very little hope of ever operating in a legitimate fashion in his business dealings."

But what business could Peterson possibly operate from the Arizona Department of Corrections, surely his inevitable residence for the foreseeable future?

Peterson hired veteran Phoenix attorney Dave Derickson to shepherd him through his latest legal crisis. Derickson, a former Superior Court judge who usually commands a substantial retainer fee, devised a crafty strategy to try to save his client from prison.

In court papers filed in May 1999, Derickson said Peterson was prepared to immediately remit $60,000 of $90,000 owed to the Sun City West couple whom Peterson had defrauded almost a decade earlier.

In the early 1990s, Bill and Geri Buell had agreed to sell their 63-foot luxury yacht to Peterson for $1.3 million in what turned out to be worthless stock. Peterson nearly had pulled off the paper heist, and it had taken the Buells four years and more than $100,000 in attorney's fees to right things.

In part, Peterson had gone to prison for defrauding the Buells. He was supposed to have reimbursed the Buells for their losses after his parole, but hadn't. Now he was belatedly offering to make good on his debt.

"The court is presented with a unique opportunity," Dave Derickson wrote to Commissioner Carey Snyder Hyatt in May 1999. "To force Mr. Peterson to repay Mr. Buell far more than anyone could reasonably expect if Mr. Peterson is sentenced to prison at this point."

Bill Buell says he knew Peterson's release from custody bode poorly for those with whom he'd come into contact.

"I wanted him on electronic monitoring and I wanted him watched very carefully," he says. "Peterson's lawyer wanted probation as a guaranteed part of the deal, but the judge [Hyatt] wouldn't go for it. She said Peterson would have to give me $60,000 under any circumstance -- probation or prison. Well, he rolled the dice, and he won."

On October 29, 1999, Hyatt did give Steve Peterson "one last chance," as Derickson had suggested she do in his presentencing pleadings. She put Steve Peterson back on probation, sentencing him to time already served at the Madison Street Jail.

Peterson signed court documents in which he promised -- as he had years earlier -- not to have anything to do with a business "without the supervising probation officer's written permission."

Unlike the previous time, Hyatt didn't allow Peterson to run any business, such as the ubiquitous Bass 'n Man Lure Company. She also put Peterson on "intensive" probation, more stringent than "standard."

Recalls Hyatt, a former prosecutor herself, "I was really torn at the time. The fact that the victim was getting such a huge chunk of his financial loss was a consideration, though I wasn't going to be blackmailed, in a way, into putting the guy back on the street. I have had a lot of confidence in the Probation Office's ability to keep track of people, especially those on intensive probation. At least until I'm hearing about this."

Last May 5, Peterson's probation officer, James Meeks, asked the court to reduce his level of probation. That meant less monitoring, less supervision, an action Bill Buell says "is absolutely incredible to me knowing what I know about this guy. I know we didn't ask the judge to keep him in the joint for the sake of society. But I also thought the authorities have a responsibility for keeping their eye on him, don't they?"

They do, and that responsibility fell to Meeks.

On Monday morning, New Times asked his office's spokesperson, Gael Parks, if Meeks knew Peterson had been running Camero Worldwide. She said Meeks told her he hadn't given Peterson permission to "manage" any business.

"[Meeks] tells me that [Peterson] has been working for someone, but not in any managerial capacity," Parks said then. "At any rate, we don't like to have our white-collar probationers working in computer-type businesses, if that's what you're alleging he's been doing."

But later on Monday, New Times obtained a copy of a letter that Meeks received last June 20. Written on Camero letterhead and signed by Ken MacRae -- the company's ostensible president and chief executive officer -- it says:

"This letter is to request that Stephen C. Peterson be allowed to participate in our operations as the manager of the administrative department. As compensation he will receive an increase of $150 per week in pay, as well as a stock option to purchase eight percent of the authorized shares of the company. We have also agreed to help him pay the balance of the $90,000 restitution owed upon completion of his intensive probation."

Meeks approved the request.

Told on Tuesday morning about the discrepancy in accounts, Parks checked back with Meeks, then said, "He in fact did give Mr. Peterson his permission. Obviously, our guy didn't think it was a horrible thing, and it didn't ring any bells."

It's uncertain how Steve Peterson linked up with Ken MacRae. It's equally uncertain just who Ken MacRae (whose surname also is spelled McRae in official Camero correspondence) is.

Ray Whitby, the company's financial manager until a few days ago, says MacRae "has always seemed like a nice guy to me, legitimate and all. I couldn't tell you much about him, other than that he and Steve are tight."

A résumé Peterson sent Bad Kitty's owners says MacRae has "been in financial investments for over 20 years. He started his career in Australia as owner of a very successful accounting practice. This he sold, after which he devoted himself to investing in other people's businesses for equity. . . . The company has gained much stature in international financial circles and has strong connections with many high Government officials as a result of his efforts."

MacRae has been a sporadic presence at Camero's Scottsdale office, according to Whitby.

"It's Steve's shop," he says.

As always, Peterson has used his captivating patter to convince folks to part with their money. Not surprisingly, he continues to target eager-to-get-rich-quick types such as Robert "Rocky" Paulsen, a mortgage broker in his early 40s who lives in Southern California.

"I'm a blue-sky guy, admittedly," says Paulsen. "But when you look back with 20-20 hindsight, you can see a lot of things. I can see that I was easy pickings for him. I mean, his only reference was Ken MacRae, his own partner. Then he showed me two certificates of deposit that said he was worth $50 million. Meanwhile, he's rubbing two nickels together back at the office. The guy is pathological."

Last November, Paulsen turned over $5,000 of his and his partners' money to Peterson as part of a "funding agreement" between his firm, Mortgagebidz.com, and Camero. He says Peterson promised to find him $2 million by February 15, in return for a piece of the business as equity, and an interest rate not to exceed 12 percent.

"At first," Paulsen recalls, "he was going to give me the $2 million, and I'd give him back $300,000 to put into these high-yield investment programs he's supposedly hooked into, which buy and sell bank notes. But he kept missing the deadline, and I started putting two and two together, though I didn't really want to believe it."

Paulsen not only bought into Peterson's so-called "program," he went to work earlier this year as president of a Camero subsidiary called Austin Stevens Incorporated. He was supposed to find budding Internet-based companies from which to collect front money for the parent company.

Paulsen says he built Peterson's Internet Web site, and that Peterson paid him about $2,000 for three months' work (not the $2,000 monthly he says Peterson first promised him). But he insists he never brought anyone into the fold.

"I couldn't burn anyone by telling them Peterson's programs really do work when they weren't working for me," says Paulsen, who hasn't worked for Camero for months. "That's why I want this guy to go down, because he doesn't care who he ruins."

But Paulsen is responsible in a way for another California man who may have lost a bundle to Peterson. He says he recommended Peterson's supposedly high-yield financing programs to a loan broker friend of his, Mike Gibbons. Gibbons says he passed along the good news to a client who lives in the Stockton area.

Later, that client invested $125,000 with Peterson and Camero.

"I spoke briefly with Peterson over the phone," says Gibbons, "and I didn't like what I was hearing, the vagueness of it all. I told my guy that, and let him handle it from there. It's a shame, but I think he's going to take a $125,000 bite.

Ray Whitby says he and Peterson first hooked up last fall, after Whitby's father, Farrell, put out an advertisement seeking an investor for a real estate project in Costa Rica.

Peterson responded, and, soon, father and son were working for Camero Worldwide.

"We never knew he was in prison, I swear, never knew he was dirty," Ray Whitby says. "The guy has the cojones to look you in the eye and get you all caught up in his world. He surrounds himself with a cloud of substance, but things are all collapsing all around him now."

On the surface, it didn't seem as if things were collapsing at the well-appointed Camero offices on Monday afternoon.

A six-foot-tall bronze sculpture of a soaring eagle faced visitors in the waiting room, where copies of financial magazines and New Times sat on a coffee table.

A friendly receptionist said Peterson was out of the office, supposedly in meetings for the duration of the day. Asked about the eagle -- whose countenance is at once arrogant and majestic, she said proudly, "That's just an eagle. But it's not our Big Eagle. That's Steve. That's what he likes us to call him."

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