Minnesota Businessman Petters Implicated In $2 Billion-Plus Fraud Scheme

Twin Cities businessman Tom Petters is well known in the region as the founder of Petters Warehouse Direct and the owner of Sun Country Airlines. His Petters Worldwide group also includes Polaroid and Fingerhut among its holdings. But his future is now in doubt after the FBI executed nine search warrants last week. According to the affidavit for the search warrants, Petters is accused of using capital raised by his equity company, Petters Co. Inc. (PCI), “for his other business ventures and to support his extravagant lifestyle.” At least four other associates are involved.

The affidavit, which was unsealed on Friday, reveals that an unnamed cooperating witness wore a wire in meetings with Petters and his associates; the witness will plead guilty to conspiracy. On one recording Petters allegedly “talks about fleeing the country and creating fabricated defenses if the fraud scheme is discovered.” One of his associates is allegedly on tape as saying that the amount of the fraud could exceed $2 billion.

The alleged fraud scheme lured investors by claiming that their money was secured by merchandise purchased from certain wholesale vendors and sold to Wal-Mart, Sam’s club and other retailers. According to the FBI, these were all sham transactions; the purchase and sales orders were fictitious, and the wholesale vendors were shell companies allegedly used to launder funds to PCI. The Star Tribune has an extensive story here.