Judge Closes Receivership in Petters Ponzi Scheme Case

Federal Judge Closes Receivership in Petters Ponzi Scheme Case; More Than $722 Million Distributed to Victim Investors

MINNEAPOLIS (STL.News) United States District Judge Ann D. Montgomery has issued an order closing the receivership of Thomas J. Petters and discharging the Receiver in one of the nation’s largest and most complex Ponzi schemes.  Through the efforts of the Receiver, the United States, and related bankruptcy trustees more than $722 million was distributed to victims and creditors.

In issuing the order, Judge Montgomery remarked that the receivership was “prompted by one of the largest and most complex Ponzi schemes in U.S. history.” Judge Montgomery went on to state that “the primary objective of the Receivership was to preserve assets for victims and creditors…After more than 120 public [court] hearings and nearly 3,300 [case] docket entries, the work of the Receiver has concluded.”

The United States commenced the receivership case in October of 2008 to enjoin the ongoing fraud by Petters and the other named defendants and to preserve all assets owned by the defendants for ultimate restitution and forfeiture in the criminal investigations of the defendants, which were pending at the time.

The United States immediately moved to freeze the assets of the named defendants, including all assets owned by Petters.  On October 14, 2008, the Court issued the injunction against Petters and appointed Douglas A. Kelley as the Receiver of the assets of Petters and the other named defendants.  At the time none of the defendants had yet been indicted.

The Receiver immediately began taking control of the assets and property owned by Petters and the other named defendants.  Petters and the other defendants had created a vast web of more than 150 entities over the course of thirteen years – entities that were all propped up by fraud.  Some of the entities, however, were legitimate businesses that employed innocent persons.

The Receiver placed several of the major entities into bankruptcy, including Sun Country Airlines and Polaroid Corporation, for the protection of innocent employees and creditors.  Throughout the receivership, the Receiver also managed real estate, categorized assets, liquidated property, paid employees, commenced claw-back litigation, entered into settlement agreements, and worked in coordination with the bankruptcy and government forfeiture process to achieve an orderly disentanglement of the fraud.

“Following the criminal conviction of Tom Petters in 2009 for orchestrating a $1.9 billion Ponzi scheme, the work of recovering assets on behalf of victim investors and creditors had just begun,” said Acting U.S. Attorney W. Anders Folk.  “Throughout this case the U.S. Attorney’s Office sought to remain transparent, thorough, and persistent in our pursuit of justice.  I commend the work of the Receiver and all parties involved in recovering more than $722 million on behalf of victims.”

On December 1, 2008, Petters was indicted on multiple counts of mail fraud, wire fraud, money laundering, and conspiracy for orchestrating a $1.9 billion Ponzi scheme.  On December 2, 2009, a federal jury found Petters guilty of all 20 counts against him, and he was later sentenced by U.S. District Judge Richard H. Kyle to 50 years in federal prison.  Other defendants were convicted in related criminal proceedings.

As part of their sentencing judgments, Petters and other defendants were ordered to forfeit assets obtained through their criminal activity, including real estate, bank, and investment accounts, vehicles, and other assets.  Under federal law, the Department of Justice has the authority to distribute the proceeds of forfeited assets through the remission process to victim investors who lost money in connection with the scheme.  The proceeds of all forfeited assets are being distributed to victim investors.

SOURCE: USDOJ.Today