Tom Petters jailed but Lancelot Investment Lent About $1 Billion to Petters Affiliates: Sun Country warns of possible shutdown

In my view, No he didn’t ‘steal’ the money. There is no report of him ‘stealing’ any money. He and his associates fraudulently induced wealthy people and hedge funds to loan his company money. Most of this 2 billion has been repaid. It appears that there is over 100 million in current notes that have not been repaid. Since this thing has now blown up, these people will likely get pennies on the dollar for their notes. And, even if these people had been repaid, he likely would have gottent the money to repay them from convincing other people to loan his company, which is a classic ponzi scheme system. I am not saying that he is any better because he didn’t steal it, I am just trying to help people understand exactly what this scheme was about, and it was not about ‘stealing’ money.

Petters Group Worldwide, a global holding company that is invested in Petters, said the firm and its employees “are committed to preserving the assets.” “Those of us who have worked with Tom Petters” are “shocked by the events which have transpired during the last two weeks,” Petters Group said.

In another news, Lancelot Investment Management LLC, a hedge-fund firm in Northbrook, Illinois, lent about $1 billion to a company whose former chief executive officer Thomas Joseph Petters has been arrested on charges of mail and wire fraud, money laundering and obstructing justice, he ran a fraudulent investment scheme.

The loans to Petters Group Worldwide and affiliates represented “nearly all” of the assets managed by Lancelot, Gregory Bell, the firm’s president, said in a Sept. 30 e-mail to investors. While the e-mail didn’t disclose the amount, three people with knowledge of the firm said it was about $1 billion.

At least 20 investors may have been victimized by a lending scam run by Thomas Petters, the founder of closely held Petters Group, according to the U.S. Federal Bureau of Investigation. Officials at one of Petters Group’s units allegedly used fake documents to entice them into phony deals, the FBI said in court papers. Damages from the transactions may exceed $2 billion, FBI agent Dan Harris said in an Oct. 1 affidavit filed in U.S. District Court in Minneapolis.

Petters,  had been running the scheme since at least the mid-1990s, siphoning off money for his own use, according to a separate affidavit by FBI Special Agent Timothy Bisswurm , resigned Monday as chairman and chief executive of the Minnetonka, Minn., private holding company whose investments include Fingerhut, Polaroid and Sun Country Airlines. Petters told investors their money would be used to buy merchandise that would then be resold to retailers including Costco Wholesale Corp. and Sam’s Clubs, a unit of Wal-Mart Stores Inc.

The hearing came just five hours after Petters was arrested without incident at 10 a.m. Friday at his Wayzata home. Agents from the FBI, IRS and U.S. Postal Inspector participated, FBI Special Agent E.K. Wilson said. Neighbor Ron Anderson told the Times he saw police surround Petters’ house with their weapons drawn. Anderson didn’t see Petters and said the incident lasted only a few minutes.

The appointment was made in circuit court of Cook County, Ill. Named receiver was Billy Procida of William Procida, Inc., a New Jersey management consulting firm. A spokesman for Procida said lenders representing more than $3 billion in loans to various Petters companies petitioned for Pocida’s appointment.

It was not immediately clear how many Petters’ companies or which interests would be under Procida’s control. Doug Kelley, the attorney retained by Petters Group to assemble a new management team to run the company, said he questioned the validity of the Illinois court order.

“Clearly that issue will have to be sorted out in court,” Kelley said. “I’d like all employees and others who are part of the Petters company to know that steps have been taken to ensure an orderly process for the ongoing operation of these businesses and to ensure that the interests of no creditors are preferred over the interests of other parties. That’s all that I can say about that at this time.”

Petters has been charged with mail fraud, wire fraud, money laundering and obstruction of justice. A criminal complaint filed Thursday says 20 investors and investment groups have provided more than $1 billion to Petters Co. Inc. based on a fraudulent scheme. Petters associate Larry Reynolds estimated the amount of the fraud is in excess of $2 billion, according to the criminal complaint.

Sun Country Airlines faces an uncertain future following last week’s resignation and arrest of its former chairman, warning employees that a shutdown by Dec. 1 is “a distinct possibility.” The Minneapolis/St. Paul-based carrier that operates a fleet of nine 737-800s on scheduled services and charters to points in the US, Mexico and the Caribbean was rocked last week when parent company Petters Group Worldwide’s headquarters offices were raided by the FBI and Internal Revenue Service. Tom Petters, chairman of the company and also of SCA, abruptly resigned his posts after his home was raided. He was arrested Friday by the FBI and charged with mail fraud, wire fraud, money laundering and obstruction of justice.

Sun Country was not implicated in the federal probe, but it faces a credit crunch as a result of the scandal. President and CEO Stan Gadek assumed the role of chairman and said the airline must gain its financial independence from PGW, proposing that its 850 employees take a temporary 50% pay cut for the remainder of the year.

How could anyone could say with a straight face that someone who stole up to $2 BILLION dollars could better serve society by going free AND get back into business?

His investors are not guilt free. Petters was paying interest rates on loans that were higher than what one can get on a credit card! How stupid were they? Obviously Petters could not get good rates from mainstream sources, and should have been the wake-up call as to why he was willing to pay such high rates. Oh well.

As for Petters generosity….what a joke. It is easy to spend other peoples money.

I have wondered for years…how does this guy make money? Now we know. He doesn’t.

Thomas Joseph Petters Profile:

Timeline
Times staff report
1957: Thomas J. Petters is born. He grows up in St. Cloud with six siblings and works at the family’s tailor, fur and fabric shop on Fifth Avenue — a business started by their great-grandfather that operated more than 100 years.
About 1973: Starts Ear Electronics, a mail-order stereo company.
1975: Graduates from Cathedral High School, St. Cloud.
1980s: In Colorado, works as regional manager for a consumer electronics chain. When the business goes bankrupt, he buys five of the stores in Colorado and Kansas.
1988: Petters forms The Petters Co. to market consumer merchandise.
1995: Petters starts Petters Warehouse Direct, opening a store in Minnetonka that specializes in closeout, manufacturer’s overstock and bankrupt company merchandise. Stores later open in St. Paul and two suburbs.
1997: Petters store opens in Waite Park.
1998: Petters starts selling discounted merchandise online through redtag.com, operated by RedTag Inc.
2000: Petters sells all four Petters Warehouse Direct stores to focus on his redtagbiz.com and redtag.com.
2001: Petters, whose businesses are based in Eden Prairie, teams with former Fingerhut Companies Inc. chairman Ted Deikel to launch a business-to-consumer Web operation through redtag.com. Redtagbiz.com reports $1 billion in sales in 2000.
Jan. 18, 2002: Petters calls St. Cloud officials to indicate interest in Fingerhut Companies Inc., which is due to be sold or closed under Federated Department Stores Inc. ownership.
Feb. 21, 2002: Petters and Deikel, the notable former Fingerhut CEO, make an offer for Fingerhut.
June 2002: Petters and Deikel (through FAC Acquisitions Inc.) buy the Fingerhut name and customer list, as well as buildings in St. Cloud, Tennessee, Plymouth and Minnetonka. Petters’ other operations eventually move into the former Fingerhut headquarters at 4400 Baker Road, Minnetonka. Eventually, Deikel heads Fingerhut Direct Marketing Inc., which creates the catalogs, and Petters works with Fingerhut Fulfillment, based at a St. Cloud distribution center.
November 2002: The new Fingerhut restarts online and catalog sales.
2002: Petters is appointed to the board of trustees for the College of St. Benedict, where his mother attended college.
February 2003: Petters donates $3 million to the College of St. Benedict for the renovation of the Benedicta Arts Center.
April 2003: The Petters Group, with two minority investors, buys uBid.com.
April 2003: Fingerhut Direct Inc. announces it has obtained a $100 million line of credit to finance inventory and receivables.
2003: Petters invests in Ted Mondale’s Nazca Solutions, which contracted with local governments to put land records online. Three years later, Stearns County is among the Nazca clients having problems with the system.
March 2004: Petters’ son, John Thomas Petters, is stabbed to death in Florence, Italy, during a study-abroad trip.
September 2004: Petters donates $10 million to Miami University in Ohio. John Petters attended school there.
2004: Deikel sells his interest in Fingerhut.
January 2005: Petters Group Worldwide agrees to buy Polaroid Holding Co. for $426 million, with plans of using the well-known brand on consumer electronics and new technologies.
April 2005: Petters says he is considering offers from investors interested in the St. Cloud Fingerhut distribution center and the group’s Minnetonka headquarters.
Jan. 31, 2006: St. John’s Abbey announces that Petters has given $2 million for a pavilion to link the abbey church to the abbey guesthouse.
2006: Petters Group Worldwide acquires Sun Country Airlines, one of more than 20 businesses in its stable.
April 2006: Cathedral High School announces that Petters will serve as co-chairman for its capital campaign and he will match donations up to $750,000.
October 2007: The College of St. Benedict recognizes Petters for a $5.3 million gift to create the Thomas J. Petters Center for Global Education.
February 2008: Petters speaks at Anderson Entrepreneurial Center Luncheon Series.
July 2008: Petters Group Worldwide acquires assets of Metropolitan Media Group, the publisher of Minnesota Business magazine and the Business Central, a magazine created by the St. Cloud Area Chamber of Commerce. Business Central magazine is subsequently published in cooperation with Great Water Media LLC, which shares the Petters headquarters address in Minnetonka.
Sept. 24, 2008: Federal investigators raid the Petters headquarters in Minnetonka and search Tom Petters’ Wayzata home.
Sept. 29, 2008: Petters resigns as head of Petters Group Worldwide.
Oct. 3, 2008: Petters is arrested at his Wayzata home. The College of St. Benedict announces Petters no longer will serve on its board of trustees.