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Ritchie Capital sues to recover Petters firm loans

Date: Thursday, November 19, 2009
Author: Ann Saphir, Chicago Business

Ritchie Capital Management LLC, a Chicago hedge fund that at one time managed $2 billion, sued two former executives of companies controlled by indicted businessman Thomas Petters in a bid to win the return of millions of dollars of loans.

The lawsuit, filed Wednesday in federal court in Chicago, accuses former Petters Group Worldwide LLC Chief Operating Officer Mary Jeffries and former Petters Capital LLC CEO Camille Chee-Awai of fraud in connection with a $100-million loan Ritchie made to the Petters companies. The loan was supposed to be backed by the assets of Petters-owned Polaroid Corp., according to the lawsuit. But after Mr. Petters was indicted in October 2008 and accused of running a $3.6-billion Ponzi scheme, Polaroid filed for bankruptcy protection and was later sold to liquidators for $88 million.

CEO Thane Ritchie pressed his claims to Polaroid’s assets in the Petters bankruptcy case only to be turned down twice. Judge Ann Montgomery, who put the Petters companies into receivership after Mr. Petters’ indictment, told the hedge fund in April to stand in line with other creditors.

Mr. Petters’ federal fraud trial began three weeks ago in St. Paul, Minn. He took the stand today in his own defense.

Mr. Petters is connected to the implosion of another Chicago-based hedge fund. Lancelot Investment Management, which invested nearly all its money with Mr. Petters, closed shop last year. Its founder, Gregory Bell, was arrested in July and accused of using the fund’s money to further the Petters scheme; he pleaded guilty to wire fraud earlier this month.