Welcome to CanadianHedgeWatch.com
Saturday, November 16, 2019

Petters Group Founder Gets 50-Year Term for $3.5 Billion Fraud


Date: Friday, April 9, 2010
Author: Bob Van Voris and Beth Hawkins, Bloomberg

Petters Group Worldwide LLC founder Thomas Petters, convicted of orchestrating a $3.5 billion fraud scheme, was sentenced to 50 years in prison.

Petters, 52, was found guilty in December of 20 counts in what prosecutors said was the biggest fraud in Minnesota’s history. Prosecutors said he used his Petters Company Inc. to lure investor funds for fake deals to buy shipments of consumer goods and then used the money to support his lavish lifestyle.

“This was a massive fraud. There are victims who have been devastated here,” U.S. District Judge Richard Kyle in St. Paul said yesterday at Petters’s sentencing hearing. “There’s nothing wrong with having three houses and airplanes and all of that, so long as it’s your money.”

Petters ran a Minnetonka, Minnesota-based business empire that bought companies including Sun Country Airlines Inc. and Polaroid Corp. until federal agents raided his home and offices on Sept. 24, 2008. Petters was found guilty by a federal jury in St. Paul of all charges filed against him, including money laundering and conspiracy.

“I will work the balance of my life, free or in prison, to repay what was lost,” Petters told Kyle before learning of his sentence. “Every day I am filled with pain and anguish for all whose lives were affected by this.”

Didn’t React

Petters, who sat with his head down, chin resting on his hand, didn’t react when Kyle announced the 50-year sentence. Members of Petters’s family broke down in sobs outside the courtroom afterward.

With time off for time already served and for good behavior, Petters may be released after 41 years, Kyle said. At Petters’s request, Kyle said he will recommend that he serve his sentence in Minnesota.

Petters, who testified in his own defense, claimed that the fraud at PCI was committed by former Vice President Deanna Coleman and former Chief Financial Officer Robert White without his knowledge. Coleman and White, who pleaded guilty in the case, testified at Petters’s trial that they helped carry out the fraud under his direction. Four other prosecution witnesses in the case also pleaded guilty.

At the sentencing yesterday, Kyle, who presided over the trial, said that Petters’s testimony “didn’t pass the smell test.”

“The testimony was unbelievable -- let’s leave it at that,” Kyle said.

‘Divine Intervention’

At the trial, prosecutors played tape-recorded conversations between Petters and Coleman, who turned him in to federal authorities. On one of the tapes, Petters credited “divine intervention” for keeping the scheme from being discovered.

“When it gets down to it, there is no possibility we could have got away with this for so long,” he told Coleman.

In court papers filed last month, prosecutors asked Kyle to sentence Petters to the maximum allowed under law, 335 years, more than double the 150-year sentence given in June to Bernard Madoff, who pleaded guilty to running a $65 billion Ponzi scheme, the biggest in history. Petters’s attorneys, citing his charitable giving, asked for less than 13 years.

“There is no conception in Tom Petters’s mind, no acknowledgement that what he did was wrong,” Assistant U.S. Attorney Joseph Dixon said, arguing yesterday for a long sentence.

500 Victims

The government said there are more than 500 victims of the fraud, including hedge funds and individual investors.

“Regular people, not greedy people, regular people were investing for their retirement and it’s gone,” Kyle said.

Petters’s attorney, Paul Engh, asked Kyle to “treat him as a flawed but benevolent individual.”

Petters took $82 million from the fraud for himself and used $315 million for his money-losing businesses, prosecutors claimed. He bought Sun Country and Polaroid with the proceeds of the fraud, they said.

Prosecutors said they are satisfied with the sentence. Petters’s attorneys have said he will appeal the verdict.

The case is U.S. v. Thomas Joseph Petters, 08-00364, U.S. District Court, District of Minnesota (St. Paul).

To contact the reporters on this story: Beth Hawkins in U.S. District Court in St. Paul, Minnesota, at hawkins@visi.com; Bob Van Voris in New York at rvanvoris@bloomberg.net.