Petters Group, CEO, Under Investigation

By Greg Scoblete -- TWICE, 10/2/2008

Minnetonka, Minn. — The Petters Group Worldwide is under investigation from 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 CEO Tom 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.

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 was claimed to say 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.

Calls to several Petters executives were not returned at press time.