Legal News

Tom Petters is Not Osama bin Laden, But Legal Troubles Mount

By Ashby Jones

What with the meltdown of the financial system and the presidential campaign, the strange saga of Minnesota mogul Tom Petters has largely flown under the radar. But it’s clear his legal troubles aren’t going away soon. To wit: last week, Minnesota federal judge Ann Montgomery put a hold on the growing number of civil suits filed against Petters since his arrest earlier this month on fraud charges.

A brief recap: Petters is at the center of what the FBI alleges may have been a broad-reaching, $3 billion Ponzi scheme that defrauded hedge funds. Those involved claim they lent money to Petters to finance sales of electronic goods to discount retailers, which Petters used to enrich himself and pay off other lenders. Petters resigned earlier this month as chairman and CEO of the Minnetonka, Minn.-based Petters Group Worldwide, a holding company whose investments include Fingerhut, Polaroid and Sun Country Airlines. Click here for a WSJ story on his arrest; here for a previous LB post; here for the Minneapolis StarTribune’s extensive coverage; and here for the criminal complaint.

In Minneapolis last week, Judge Montgomery put a hold on the more than 30 civil suits pending against Petters after a court-appointed receiver argued that the suits were overwhelming his ability to preserve what he can of Petters’s many business entities — at least a dozen of which are now in bankruptcy. “We’re seeking some amount of breathing room to fulfill the receiver’s responsibilities,” a lawyer told Montgomery.

In St. Paul, U.S. Bankruptcy Judge Gregory Kishel has agreed to consolidate 10 bankruptcy petitions from Petters companies under a single case number. Not all of the companies are operating.

In the meantime, Petters remains in jail, awaiting indictment. A hearing on whether he’ll continue to be held pending indictment is scheduled for Friday. “Tom Petters is not Osama bin Laden,” said Jon Hopeman, Petters’s Minneapolis attorney, to the StarTribune earlier this month.

Several alleged associates of Petters have already pleaded guilty to money laundering and other charges.

Full post as published by Law Blog - WSJ.com on October 28, 2008 (boomark / email).