It was a September day a lot like today, sunny and warm. About 11:30 an editor came up to me and said there was something going on with the FBI at the Petters corporate headquarters and could I check into it. Meanwhile reporters were dispatched to the scene. Soon, phone calls started coming in from employees and friends of employees who described a large number of federal agents descending on the headquarters, gathering employees into the cafeteria, telling them to turn off their cell phones and then dismissing them for the day. But we still had no clue what was behind the raid. Colleague Jenna Ross went to Petters home in Wayzata where she encountered an FBI agent who told her "this is a search warrant situation" and said no more. By the end of the day, all we knew was that the government was interested in "one financial entitiy" in which Tom Petters had an interest. Business associates were likewise unsure of what was going on.
Two days later federal authorities filed an affidavit with the search warrant outlining the reason for the raid and it was eye popping. According to the government Petters and associates were involved in a multi-billion fraud scheme involving the purported sale of retail goods that did not exist.
So he was arrested on the first day, but it wasn't clear for a couple of days why, is that right?
Petters was arrested on Oct. 3 and a week later was ordered to be detained without bail as a flight risk. Petters's family denied he had any intention of leaving the country to no avail. The scope of the Ponzi scheme was beginning to take shape.
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This case kept unfolding through 2008 and 2009 and eventually involved about a dozen defendants and a Ponzi scheme that bilked more than $3 billion from investors. What are some of the repercussions that are still echoing today?
Gathering compensation for victims has been a tedious process. Court-appointed receivers have sold various assests of the parties in the case, including luxury vehicle, expensive homes and art collections, but the amount is still a fraction of what was lost in the overall scheme. In the corproate bankruptcy of the Petters business operations, attempts to "clawback" so-called false profits from investors is still years from being complete.
No, but there is an address on the webpage of the U.S. Attorney's office for Minnesota where victims can file a claim.
The identity of Larry Raynolds was actually first uncovered by the Petters defense team and then investigated by a team of Star Tribune reporters who determined he had a criminal record under another name and had been placed in the government's witness protection program after helping authorities in several East Coast crminal prosecutions.
Some people may need a quick refresher of the state of Petters' businesses at the time of the fraud. In 2008, he was most active in developing a consumer electronics business around the Polaroid brand, which he had acquired. What else did he have going?
He had invested in Fingerhut, the St. Cloud-based catalogue company and owned Sun Country Airlines, which was heavily losing money at the time. Polaroid was going to be his home run investment but the scheme collapsed before that could happen. Indeed, most of the money used to fund these investments came from individuals who thought they were investing in something else.
That's an interesting thought. A lot of the plot lines in this story were Hollywood worthy!
You may be starting a whole new discussion about who could play Tom Petters in a movie!
Before we wrap up, describe what's coming up next and when. Is it the appeals hearing itself or are there some other events?
There are about five sentences yet to be handed down for others in the scheme, mainly those on the investment side who provided Petters with financial resources, wittingly or unwittingly. Also, Petters himself will have a hearing in the middle of October regarding a 30-year plea offer that he says was never clearly outlined to him. Petters is expected to testify at that hearing, as are member of his defense team who dispute his version of the plea offer.
Thanks David and thanks to everyone who participated this afternoon. And if you're in listening range, David will be on WCCO Radio (AM 830) in about 30 minutes to discuss the Petters saga further.