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At the beginning of 2008, Tom Petters was a Twin Cities businessman who owned a number of well known companies such as Sun Country Airlines, Fingerhut and Polaroid. Petters' personal wealth was reported to be more than $1 billion.
Tom Petters was the owner of Petters Company, Inc. (PCI), Petters Group Worldwide, LLC (PGW), and Thomas Petters, Inc. (TPI). PCI is the company which operated a $3.65 billion Ponzi scheme while PGW and TPI were separate legitimate holding companies which owned a variety of valuable operating companies (including Sun Country and Polaroid) and real estate (including Polaroid's sprawling office park outside Boston).
In September of 2008, Deanna Coleman, who was a high-ranking officer of PCI, went to federal authorities and blew the whistle on PCI. Petters is currently on trial and faces 20 counts of wire and mail fraud, conspiracy and money laundering for his alleged involvement in the PCI Ponzi scheme that ran from 1995 through September of 2008.
Lawyer Doug Kelley has somehow managed to wear many hats in the Petters' proceedings...
First off, after the FBI raided his offices and before his arrest, Tom Petters retained Doug Kelley as legal counsel for his companies.
Doug Kelley put on a second hat when Judge Montgomery appointed him as receiver of PCI and PGW, putting him in charge of managing the assets of Petters' creditors and victims. Kelley was appointed receiver despite the fact he had previously been retained to represent Petters’ companies following the FBI raid.
A third role came when Kelley was appointed bankuptcy trustee for PCI and PGW by U.S. Bankruptcy Judge Gregory Kishel. Kelley’s appointment as trustee was contested by creditors who felt it was a conflict of interest, but both Judge Kishel and Judge Montgomery rejected their arguments.
Note: in the Bernard Madoff case, these three roles were held by three DIFFERENT people. The receiver and trustee also had NO previous connections to Madoff.
Meanwhile Doug Kelley is paying himself and many of his friends/associates in the Minnesota legal community large sums of the creditors' money for legal, accounting and other professional services.
Mary Jeffries was the President and COO (Chief Operating Officer) of PGW, Petters' legitimate company, at the time of Petters’ arrest. Jeffries was also previously the COO of PCI, the vehicle for the Ponzi scheme, while the Ponzi scheme was in operation.
Immediately after Doug Kelley was appointed receiver, he allowed Mary Jeffries, the former COO of PCI, to remain as CEO of Polaroid, Petters’ most iconic and valuable company. Doug Kelley also offered to pay for Jeffries’ legal fees from the fund of the victims and creditors.
When the FBI released a list of suspicious December 2007 bonus payouts, Mary Jeffries was on the list as having received a $1 million bonus, the same as many of Petters’ alleged co-conspirators.
Despite being at the heart of Petters’ business dealings (not to mention having spent time as the COO of PCI, the Ponzi vehicle), Mary Jeffries has managed to walk away without being prosecuted AND has been allowed to retain all bonuses previously paid to her by Petters.
In the Polaroid auction Mary Jeffries ran roughshod over Polaroid’s senior secured creditors, who wanted to postpone the auction until the economy had begun to recover. Jeffries managed to neutralize the creditors, and keep them completely out of the process, by attempting to connect them to PCI (the fraudulent company) despite the fact they had lent money to PGW (the legitimate company) and were not connected with PCI. The Polaroid auction was completed in April 2009, which is now acknowledged as being close to, if not the actual, low point of the financial crisis. In the auction, the valuable Polaroid brand name, and all of the company’s other intellectual property, was sold for approximately $88 million; the company had been valued at between $800 million and $2 billion only a few months earlier.
Jeffries led an effort to get her friend, business associate and fellow Zink investor Gerard Lopez, selected as the stalking horse bidder for Polaroid, without disclosing, as required by bankruptcy law, that he had business and personal dealings with Polaroid and Jeffries.
PCI was the vehicle through which the Ponzi scheme was conducted.
PCI was established during the early 1990s to buy consumer merchandise (such as electronics) from manufacturers and wholesalers at discounted prices, and sell them to discount retailers such as Costco, Target Corp. and Wal-Mart Stores Inc.’s Sam’s Club.
Eventually PCI stopped actually buying products for resale, created fictitious transactions, and used the money of new investors to pay of existing creditors.
**Click here to watch a video for better understanding
Tom Petters' holding company for over 20 legitimate businesses,including Polaroid and Fingerhut. Real revenue was generated by providing real goods and services. Nowhere in the FBI affidavit was PGW mentioned or alluded to as a fraudulent company. PGW's businesses were conducted separately from the fraudulent operations of PCI - the only thing PGW had in common with PCI was a common ultimate owner (Tom Petters).
Billy Procida has over 25 years of business experience including asset management, crisis management, restructuring and financing. As a result he was chosen by PGW creditors to protect their interests.
Procida met with PGW creditors in Chicago after Petters' arrest, where they interviewed Procida and selected him to be the receiver in charge of protecting their interests. The creditors then went to an Illinois court, and the court officially named Procida as the receiver.
However...when Procida tried to contact the heads of PGW’s various companies, they wouldn’t return his calls, and he eventually got word they were being pressured by Doug Kelley not to cooperate with him.
Meanwhile, Doug Kelley was dealing behind the scenes with the District Court. At a private meeting an "emergency situation" was presented to Judge Montgomery. The decision to appoint Doug Kelley was made by Judge Montgomery "ex parte" (ex parte is a legal proceeding brought by one person in the absence of and without representation or notification of other parties).
As a result Billy Procida was sent home against the creditors’ wishes and Doug Kelley took control as receiver. Creditors were dumbfounded by this turn of events.
Larry Reynolds was the document forger. He admitted of laundering over $12 billion for PCI.
It came out later that Reynolds' real name was Larry Reservitz, and he was in the witness protection program due to former mob ties. In other words, he was paid by the government while working for Petters.
Jim Wehmhoff has pleaded guilty and was a key player in the PCI Ponzi scheme. Wehmhoff was the primary finance and accounting officer at PCI.
Robert Dean White has plead guilty and was a key player in the PCI Ponzi scheme. White acted as a document forger and admitted to creating false purchase orders in order to lure investors -- and he received millions of dollars for his efforts.
White made a deal with the FBI and wore a wire where a conversation was recorded between himself and Tom Petters while they discussed how they were going to escape the whole mess.
Deanna Coleman was Petters' secretary and then later office manager for PCI. She blew the whistle on the Ponzi scheme in early September 2008.
Coleman decided to become an informant for the government after a hedge fund investor started asking too many questions.
Michael Catain also laundered money for Petters.
Catain admitted to have moving over $12 billion for PCI.
The man behind a $60 billion Ponzi scheme, which was discovered 6 weeks after the PCI Ponzi scheme was exposed.
Unlike in the Petters case in Minnesota, in Madoff’s court proceedings, officials have gone out of their way to avoid certain conflicts of interest.
Jeff Werbalowsky is Senior Managing Director Co-CEO of Houlihan Lokey.
Houlihan Lokey was the company hired by Doug Kelley to run the auction of Polaroid. In November of 2008 they valued the global licensing of Polariod at over $1 Billion. They went on to sell the company for $88 million, less than 5 percent of their estimates just 5 months before. Houlihan Lokey also gave almost no consideration to creditors’ proposal for a restructuring of Polaroid to increase its worth prior to auction. They ignored the legitimacy of the creditors’ liens, and moved forward with the auction, for which they received a fee of $1.7 Million.
You know her as Senator Klobuchar, but in 1998 she was the newly elected Hennepin County Attorney.
In 1998 lawyer Garrett Vail, representing a community bank, asked Klobuchar to investigate loans a woman named Ruth Kahn had defaulted on. Richard Hettler and Tom Petters had their names all over Kahns loan documents. Vail suspected Kahn and Hettler were borrowing money for a larger player and asked Amy Klobuchar to look into the matter. Klobuchar prosecuted Hettler for theft by swindle charges and commenced a forfeiture action to seize two $1.3 milliion dollar Petters Company, Inc. promissory notes made payable to Hettler, but completely avoided prosecuting Petters, missing an opportunity to discover his alleged Ponzi scheme early on.
By the time Tom Petters was arrested in 2008 Klobuchar was a U.S. Senator and Petters was one of her top contributors.
Former U.S. Senator from Minnesota, recently unseated by Al Franken. Doug Kelley has acted as Norm Coleman's personal attorney.
Norm Coleman tried twice to leverage a presidential pardon for convicted money launderer and Tom Petters associate Frank Vennes Jr.
* Details of The Meter Calculations
1. The fee meter depicts the attorney and professional fees that are being paid out of the pot of money left for creditors -- in the 1345 receivership case and the PCI/PGW and Polaroid bankruptcy cases. It doesn't include the attorneys fees of Petters' creditors who are having to litigate to protect their interests.
2. It is based on all fees paid to date, plus estimated fees through December 1st*.
3. The meter simply divides these total fees equally by the number of weeks since this case began (Oct 6, 2008) and then calculates a per second incremental cost.
