Petters Arrested
By Greg Scoblete -- TWICE, 10/6/2008
Minnetonka, Minn. — Tom Petters, founder and CEO of the Petters Group Worldwide, was arrested on Oct. 3.
He has yet to be indicted or arraigned and is due for a bail hearing on Tuesday, according to published reports.
Tom Petters and his holding company, The Petters Group Worldwide, is under investigation by the federal government for a far-reaching scheme designed to defraud investors.
According to reports published in the Minnesota Star Tribune, the government is investigating whether Petters and his associated companies raised funds from investors for the purchase and resale of consumer electronics that didn't exist, then used the money for other purposes.
Tom Petters resigned from the company on Sept. 29.
Petters markets a number of CE devices under the Polaroid brand license. In 2005, Petters bought the Polaroid brand from the holding company created in the wake of the original Polaroid’s bankruptcy.
“Polaroid is an independent operating company. We are working closely with our retail partners, and we continue to build and ship product,” said Cheryl Mau, Polaroid marketing VP. Polaroid intends to exhibit at International CES next year and introduce new products, Mau added.
According to an affidavit unsealed in court, Petters is said to have created sham companies to show investors that money was being used to manufacture and sell goods through retailers such as Sam’s Club. An informant planted recording devices in Petters’ Minnesota headquarters. In those recordings, Petters allegedly said he would have to flee the country if his activities were unearthed.
On Sept. 24, federal investigators searched Petters’ headquarters and the home of its CEO. Already, Robert Dean White, a former Petters employee, has been charged in federal court with mail fraud and illegal monetary transactions.
The company has been sued by Minneapolis hedge fund, alleging it was defrauded $60 million. Several other hedge funds have reportedly invested in Petters as well.
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Lancelot Lent About $1 Billion to Petters Affiliates (Update1)
By Katherine Burton
Oct. 6 (Bloomberg) -- Lancelot Investment Management LLC, a hedge-fund firm in Northbrook, Illinois, lent about $1 billion to a company whose former chief executive officer has been arrested amid allegations he ran a fraudulent investment scheme.
The loans to Petters Group Worldwide and affiliates represented ``nearly all'' of the assets managed by Lancelot, Gregory Bell, the firm's president, said in a Sept. 30 e-mail to investors. While the e-mail didn't disclose the amount, three people with knowledge of the firm said it was about $1 billion.
At least 20 investors may have been victimized by a lending scam run by Thomas Petters, the founder of closely held Petters Group, according to the U.S. Federal Bureau of Investigation. Officials at one of Petters Group's units allegedly used fake documents to entice them into phony deals, the FBI said in court papers. Damages from the transactions may exceed $2 billion, FBI agent Dan Harris said in an Oct. 1 affidavit filed in U.S. District Court in Minneapolis.
Petters, 51, had been running the scheme since at least the mid-1990s, siphoning off money for his own use, according to a separate affidavit by FBI Special Agent Timothy Bisswurm. Petters told investors their money would be used to buy merchandise that would then be resold to retailers including Costco Wholesale Corp. and Sam's Clubs, a unit of Wal-Mart Stores Inc.
Lancelot was ``one of many lenders to Petters Group Worldwide and its affiliates, providing them with liquidity in advance of payments for goods with major retailers across the country,'' according to Bell's e-mail. Bell declined to comment.
Holdings Not Affected
Petters resigned as CEO on Sept. 29 after the FBI raided the company's Minnetonka, Minnesota, headquarters. He was arrested Oct. 3 on charges of mail fraud, wire fraud and money laundering.
Petters Group owns or holds stakes in companies including digital-camera maker Polaroid Corp., Sun County Airlines Inc. and Fingerhut Direct Marketing Inc., a catalog retailer. Those and other companies owned by the firm aren't a target of the investigation, Andrea Miller, a Petters Group spokeswoman, said in a Sept. 24 statement.
Minneapolis-based Fingerhut, in which Petters Group owns a minority stake, said Sept. 25 that it had recently completed a new round of financing, receiving more than $50 million from controlling investors Bain Capital LLC and Battery Ventures.
Back to Jail
Petters made an initial appearance Oct. 3 in federal court in Minneapolis without entering a plea. He was sent back to jail pending a detention hearing on Oct. 7. His lawyer, Jon Hopeman said, said Petters ``maintains his innocence.''
Lancelot is working with other lenders to recover assets and cooperating with federal authorities investigating the alleged fraud, according to its e-mail.
``At this juncture, it is impossible to determine the extent to which any assets will be recovered,'' he wrote.
Investors who have about $30 million invested in Palm Beach Finance Holdings Inc., another hedge fund that invested in the Petters scheme, have hired Sadis & Goldberg LLC to investigate whether the fund has engaged in any wrongdoing, said Doug Hirsch, a partner at the New York-based law firm.
Getz Better - 2008-6-10 13:22:00 EDT -
MINNEAPOLIS, Oct. 4 (UPI) -- Minnesota businessman Tom Petters, considered a flight risk, is jailed this weekend on charges he defrauded investors of $1 billion or more, authorities say.
Federal agents arrested Petters Friday, in part because of taped conversations indicating he intended to flee the United States, the Minneapolis Star Tribune reported Saturday. He was being held without bail, charged with mail and wire fraud, money laundering and obstruction of justice, pending another hearing Tuesday in federal court in Minneapolis, the newspaper said.
Assistant U.S. Attorney John Marti requested Petters be kept in custody until trial. Marti submitted court papers alleging the businessman was "a serious risk" to flee.
Petters' home and company headquarters in Minnetonka were searched Sept. 24 by federal investigators looking into allegations he swindled more than 20 investors and investment groups out of "well in excess of $1 billion, and possibly substantially more."
His business holdings include Polaroid, Sun Country Airlines and Fingerhut.
"Mr. Petters maintains his innocence and he intends to fight to get out of custody on Tuesday," his attorney, Jon Hopeman, told the Star Tribune Friday night.
Two of Petters' business associates -- Michael Catain, 52, of Shorewood, Minn., and Larry Reynolds, 65, of Las Vegas -- also are charged in the case.
George Swindle - 2008-6-10 13:12:00 EDT
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