Legal News

The Investigation that Drove Sun Country into Bankruptcy

By Dan Slater

Rising fuel costs and a credit crunch can drive an airline into bankruptcy — if your owner’s legal troubles don’t bring you down first.

Shaun Nugent, right, Sun Country Airlines CEO, appears with businessman Tom Petters at a news conference which it was announced Petters investment group had completed the acquisition of Sun Country, October 31, 2006. (AP/StarTribune, David Joles)

On Friday, Thomas Petters, founder of Minnetonka, Minn.-based Petters Group Worldwide — which owns Fingerhut, Poloroid, Sun Country and other investments — was arrested on charges of mail and wire fraud, money laundering and obstruction of justice. He’d resigned as chairman and CEO of the company earlier in the week. Petters Group is now the target of a federal probe for allegedly defrauding hedge funds.

Then, on Monday, Sun Country filed for bankruptcy protection, though it will reportedly continue to fly. The airline, according to this WSJ story, had planned on a short-term bridge loan from its owner to get through the slow autumn period and into its heavy winter travel season. But that plan fell through after news of Petters’ legal troubles.

Victims, according to the WSJ, say they lent money to Petters’s company to finance sales of electronic goods to discount retailers, which Petters used to enrich himself and pay off other lenders. Jon Hopeman, a lawyer representing Petters, told the WSJ on Monday that he was too busy to comment.

Yesterday, according to the Minneapolis StarTribune, Petters appeared in federal court in Minnesota for a three-hour bail hearing. Prosecutors, led by AUSA John Marti, want Petters to remain in jail pending trial, while his attorney, Hopeman, reportedly asked for the equivalent of home detention and a drug and alcohol evaluation. U.S. Magistrate Judge Jeffrey Keyes said he will announce his decision this morning.

Full post as published by Law Blog - WSJ.com on October 08, 2008 (boomark / email).