Petters Arrest Won't Change Polaroid Plans

By Greg Scoblete -- TWICE, 10/13/2008

MINNETONKA, MINN. — The arrest of Tom Petters, CEO of Petters Group Worldwide, and the scandal swallowing his company won't stop Polaroid from exhibiting at International CES or launching new products in 2009.

"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.

Petters bought the Polaroid brand in 2005 from the holding company created in the wake of the original Polaroid's bankruptcy. Since then, the company has launched an expanded portfolio of consumer electronics including digital cameras, DVD players, HDTVs and digital photo frames.

Polaroid is one of several companies owned by the Petters Group holding company. Another, Sun Country Airlines, filed for bankruptcy last week.

The arrest of Petters followed an investigation by the federal government into a far-reaching scheme allegedly hatched by Petters and several associates to defraud investors and hedge funds out of hundreds of millions of dollars. Some reported estimates put the total figure well more than $1 billion.

The government has alleged that CEO Petters and several associates raised funds from investors for the purchase and resale of consumer electronics that didn't exist, then used the money for other purposes, including other business ventures and to underwrite an "extravagant lifestyle."

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 heard to say that he would have to flee the country if his activities were unearthed. Tom Petters resigned from the company on Sept. 29. He was arrested Oct. 3 on charges mail fraud, wire fraud and obstruction of justice.

Another employee, Robert Dean White, has been charged in federal court with mail fraud and illegal monetary transactions.

As the allegations of fraud surfaced, at least 20 hedge funds have come forward claiming they were bilked by Petters' scheme.