Tom Petters, International Scammer, a Flight Risk
This picture of Tom Petters was found [here].
Hedge Funds Snared In Alleged Fraud At Petters Group
NEW YORK -(Dow Jones)- Alleged fraud at Petters Group Worldwide has already led to the ouster of the private company's chief executive, but it's also causing pain for several hedge funds around the world.
Already, Swiss fund-of-hedge-funds manager Gottex Fund Management has cited exposure to Petters, Minnetonka, Minn., as one of the reasons it's closing its fund of funds that does asset-based direct lending to companies.
The alleged fraud at Petters, which was founded by Tom Petters, goes back to the 1990s and involves Petters Co. Inc., a subsidiary of Petters Group. The Federal Bureau of Investigation has been investigating allegations that Petters' managers produced fake documents and showed them to their investors stating they were reselling goods at a profit. Petters Group's Tom Petters, who denies the charges, resigned as chief executive Monday.
Hedge funds are involved in a few ways: Some may be investors in Petters, and others, like Gottex, have investments in hedge funds that lent money to the company through their asset-based lending funds. Petters, a holding company that owns brands such as Polaroid, Sun Country Airlines, Fingerhut and Mr. Coffee, was founded in 1988 and has about $2 billion in annual sales.
Toronto-based Northwater Capital Management Inc., an $8 billion-plus asset manager with more than $4 billion in hedge fund of funds, also disclosed this week that some of its funds of funds are exposed to Petters.
"If the allegations are true, NCMI believes that it will have a material negative impact on the net asset value of the trusts," Northwater said in a Monday statement. Two separate Northwater funds had 4.3% and 2.5% of their assets invested in Petters. A Northwater spokesman said the company wouldn't comment beyond the release. Northwater and Gottex, which make direct investments to several different individual hedge funds, would not name the funds that were exposed to Petters.
However, some individual hedge funds have already taken Petters to court.
One hedge fund, Minneapolis-based Interlachen Capital Group, sued Petters on Monday in federal court, saying it gave Petters $60 million to buy electronic equipment that was used for another purpose. Petters offered "imaginary televisions as collateral," according to Interlachen's complaint.
Last month, according to court documents, another asset-based lender, Acorn Capital Group of Greenwich, Conn., sued Petters in New York's Southern District, demanding money for one of its loans. The suit names Thomas Petters himself, but not Petters Group.
Gottex has been forced to temporarily halt redemptions from its ABI Fund until it is able to assess the value of the portfolio, a spokesman confirmed, citing the Petters Group exposure as the main reason.
"As soon as more information regarding the Petters Group-related investments becomes available, the ABI Fund will endeavor to bring the period of suspension to an end as promptly as possible," the group said in a statement.
Gottex's asset-backed lending fund predominantly invests in hedge funds that make direct loans to borrowers, taking control over their assets as security. Its asset-backed investing fund does the same thing, but also invests in some of the companies it makes loans to.
Petters Group is no stranger to dealing with hedge funds. In October 2006, Andrew Redleaf's Minneapolis-based hedge fund Whitebox Advisors went in on a deal with Petters Group to buy Sun Country Airlines, with each side taking a 50% stake. Petters, through its Petters Aviation affiliate, bought all of Whitebox's stake by November 2007. The airline has struggled since, along with the rest of the industry.
-By Joseph Checkler, Hans Schoemaker and David Walker, Dow Jones Newswires; 201-938-4297; firstname.lastname@example.org
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(END) Dow Jones Newswires
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Congressman Keith Ellison is proposing a Private Attorney General bill bolstering Grand Juries and our ability as citizens to present evidence of public corruption and laws broken. [click here for more information]
Would there have been a need for a 700 Billion dollar bailout if the Private Attorney proposed legislation was national law and these White Collar Criminals and Judges had to fear being arrested and prosecuted?
Richard Hettler's testimony to Congress and the US Senate, regarding Petters and the Banking Scandals
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US District Judge Ann Montgomery ordered the seizure of the Petters companies’ assets at the DOJ’s request and has frozen the personal accounts of individuals charged or under suspicion. But according to a St. Paul Pioneer Press article, she repeatedly thwarted an investor’s attempt to obtain $1.3 million he says was stolen from him by Petters Company, Inc.
Richard Hettler, who started investing with Petters in 1997, claims PCI gave him two hot checks totaling that amount in January 1998 in payment of promissory notes. He sued in 2002 but Montgomery not only dismissed it, she barred him from filing further lawsuits over the notes. In 2005, when Petters announced that he was buying Polaroid, Hettler went public with his accusations, only to have Montgomery grant a restraining order against him at Petters’ request. And in Decemeber of 2006, Montgomery granted a Petters motion to hold Hettler in contempt of court for posting “inflammatory” material online, and ordered the material removed.
There’s much more; read the whole story here.
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Tom Petters’ arrest on fraud charges in October 2008 was not
his first encounter with the law. Back in 1990, he was c h a r g e d i n
Colorado with forgery and fraud in a bad-checks case. Nobody would
know about it, though, because Petters got a Minnesota court to erase his
Colorado record. In 1994, the Hennepin County Attorney agreed to wipe
the Colorado case off the books. As a result, investors checking into
Petters’ reputation and record couldn’t find out about those fraud charges.
After that victory in Minnesota state court, Petters went on to win
favorable rulings in federal court here. In 2002, Judge Ann Montgomery
threw out a lawsuit that an investor, Richard
Hettler, had filed against Petters. Not only
that, but Montgomery later barred Hettler
from filing any further suits over amounts he
alleged Petters owed him.
In the fall of last year, Petters knocked on
Montgomery’s courthouse door again. At
his side was Doug Kelley, a lawyer he had
just hired to represent his companies.
Kelley went way back with Montgomery.
They had been law school classmates at
the University of Minnesota. During the
late ’70s and early ’80s, they worked
together in the U.S. Attorney’s office.
Montgomery was asked to freeze some of Petters’
assets, the ones that were related to the alleged Ponzi scheme, and she
did so on October 3rd, 2008, a Friday. Her court order was issued ex
parte, meaning that the other side—Petters’ creditors—were not given
the opportunity to make their case against the asset freeze. On the
following Monday, Montgomery gave Kelley sweeping powers as
receiver over Petters’ assets—all of them this time, not just the ones
implicated in the Ponzi.
Meanwhile, numerous creditors were suing Petters in different states.
Montgomery was asked to halt all those lawsuits in their tracks, which she
did with an indefinite “stay on litigation.” That wasn’t all. She gave Kelley
“judicial immunity,” the same protection from lawsuits that judges enjoy.
As one national bankruptcy law expert has said, “To be given absolute
immunity, judicial immunity, so far as I know, is unprecedented in the