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A former manager of three Lucky Diamond casinos in Missoula and Billings must repay nearly $1 million that he embezzled from the casinos owned by his family members and best friend.

Missoula County District Court Judge John Larson issued the restitution order last week in the case against Scott Peterson, who pleaded guilty in July to two counts of embezzlement and one of tampering with or fabricating physical evidence.

The case concerns the Lucky Diamond casino in Missoula and two in Billings, known as Hudson’s and Zephyr. All of the owners – including Peterson’s wife, mother-in-law, brother- and sister-in-law, and his best friend – live in Missoula.

Deputy Missoula County Attorney Shaun Donovan called the case “very, very complicated … tangled from every imaginable perspective, financially and emotionally.”

Some family members didn’t want the case prosecuted at all, Donovan said. But “if a family member commits a crime against another family member, we don’t usually give them a pass,” he said.

Peterson’s restitution amount could have been even higher. But Peterson’s mother-in-law, Mary Ann Bertlin, who owns 80 percent of the Hudson’s casino, and his wife, who owns 20 percent, didn’t want to pursue the case against him, Donovan said. So Larson subtracted $268,478 from the total restitution.

On the same day of Larson’s order, which also included 22 years’ worth of suspended and deferred prison sentences, Peterson filed a motion seeking attorneys’ fees from his victims.

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Peterson allegedly siphoned money from the casinos for his own use between 2006 and 2010. He also was accused of switching money from one casino’s account to another to cover the money he’d taken. In 2010, worried owners contacted an accountant about financial discrepancies, according to court records.

A later review by a certified fraud examiner found that Peterson had been using business accounts and credit cards for his personal expenses, as well as writing IOUs that weren’t repaid.

Things appeared to have been resolved in 2010, when the casino owners confronted Peterson and he agreed to repay nearly $64,000, divided among the three casinos, according to the court documents.

But, those documents said, “Mr. Peterson’s check to cover the IOUs for cash taken from the Missoula and Billings Lucky Diamond casinos was returned by his bank for insufficient funds.”

Lucky Diamond and Gene and Nancy Mostad – Peterson’s brother- and sister-in-law – sued him in February 2011. That suit was dropped in October 2011, three months after the state filed criminal charges against Peterson.

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In addition to ordering the restitution, Larson sentenced Peterson to 10 years in prison, all suspended, for the embezzlement charge involving the Lucky Diamond in Missoula.

The embezzlement from the Lucky Diamond Billings Heights/Zephyr, brought a six-year deferred sentence. And the charge of deceptive practices, involving the misuse of credit cards and the like, resulted in a six-year deferred sentence.

The deferred sentences mean those charges will be dropped from Peterson’s record if he complies with a long list of terms, which includes staying away from casinos.

Peterson also was ordered to transfer the right, title and interest in the business operations, liquor licenses, buildings and land comprising the Missoula Lucky Diamond and the Pangea Corp. to Gene Mostad. Pangea owns the land and building housing the Missoula Lucky Diamond.

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The court estimated that value at $115,000, an amount that will be subtracted from Peterson’s restitution when he has complied with the order.

The restitution was divided among:

  • Gene and Nancy Mostad, $491,482.
  • Missoula Lucky Diamond, $327,806.
  • Zephyr and shareholders, $68,503.
  • Randy Rupert, Peterson’s friend who owns the Zephyr, $94,000.

Peterson’s motion seeking attorneys’ fees called the restitution claims “frivolous because they are founded upon irrelevant, unreliable and false information.”

The claims aren’t warranted under law, and they unnecessarily dragged out the case, thus increasing his costs, he said.

Michael Sherwood, his attorney, said Friday he doesn’t comment on ongoing cases.

“This is an ongoing case,” he said.

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