Federal prosecutors said Tom Petters should be sentenced to 335 years in prison for running a $3.65 billion Ponzi scheme, while defense lawyers pleaded for mercy, saying their client has a tumor on his pituitary gland.

The 52-year-old founder of Petters Group Worldwide Inc was convicted in December by a federal jury in St. Paul, Minnesota, on all 20 criminal counts he faced, including wire fraud, mail fraud and money laundering.

The defendant's fraud is beyond comprehension, prosecutors said in a court filing. A life sentence is wholly deserved and justified given the defendant's corrupting influence on individuals and institutions, and his strident refusal to accept any responsibility.

Petters' lawyers said their client should be sent to the Federal Medical Center in Rochester, Minnesota, because of his health and because the national notoriety of his case would make him a marked man in prison.

A 335-year sentence would be more than twice the 150 years Bernard Madoff got for his estimated $65 billion Ponzi scheme. Madoff pleaded guilty rather than face a jury at trial.

A Ponzi scheme occurs when money from new investors is used to pay earlier investors.

Prosecutors accused Petters of using one of his companies to bilk investors who thought he was using their money to buy consumer electronics for resale to retailers such as BJ's Wholesale Club Inc and Costco Wholesale Corp .

The community requires a sentence that makes plain to those entrusted with power, our society's assets, and investors' money that criminal abuse of that power and trust will be met with the most serious punishments available, prosecutors said.

But Petters' lawyers said it would be unjustified to impose a sentence longer than the 12 years, 7 months given in 2007 to former Cendant Corp Chairman Walter Forbes, who was also ordered to pay $3.3 billion after his conviction in an accounting scandal.

They also said a heavy sentence would be inappropriate because Petters had no prior criminal history, did not commit a violent offense, and was already under such a stigma that the deterrent value of a long sentence was minimal.

They added, The long-term prognosis for Mr. Petters' condition -- a pituitary adenoma (or tumor) -- is bleak; he faces the risk of blindness and paralysis. He should be placed in Rochester for that reason alone. The tumor is not growing at the moment, but cannot be ignored.

Sentencing is scheduled for April 8.

The case is USA v. Petters et al, U.S. District Court, District of Minnesota, No. 08-00364.

(Reporting by Jonathan Stempel; editing by John Wallace)