Sept. 24: Feds raid Petters' Minnetonka HQ

Federal agents descended on the Minnetonka headquarters of Petters Group Worldwide on Wednesday morning and spent the entire day searching and removing material from the offices. They also searched the Wayzata home of company founder Tom Petters.

Petters is the majority owner of Sun Country Airlines and has holdings in Polaroid and numerous other businesses. The 51-year-old chief executive was away during the searches, and he declined to comment about the matter.

FBI spokesman Paul McCabe didn't specify the nature of the investigation, but indicated that the comprehensive search involved the FBI, U.S. attorney's office, IRS criminal investigative division and the U.S. Postal Inspection Service.

By late afternoon, nearly 50 law enforcement vehicles choked the Petters headquarters parking lot. Agents began hauling boxes and other objects out the back entrance about 5 p.m., loading them into two sport-utility vehicles and the back of a pickup.

Agents completed the search late Wednesday night and returned control of the building to Petters officials.

The search warrant materials remain under seal in U.S. District Court.

A company spokeswoman said the investigation does not involve Sun Country, Polaroid, uBid, Fingerhut or Great Waters Media, the magazine group Petters recently acquired.

"The investigation pertains to one financial entity that Petters is involved with," Petters spokeswoman Andrea Miller said.

Attorneys on the scene

Prominent white-collar criminal defense attorneys Andy Luger of Greene Espel in Minneapolis and John Lundquist of Fredrikson & Byron in Minneapolis were seen at the Petters building during the morning raid.

"No charges have been filed. No one has been arrested," said Lundquist, who is representing Petters Co. Inc. and related entities. "Petters Co. is cooperating."

Lundquist confirmed that the focus of the investigation is Petters Co. Inc. He said the Petters Co. has "a number of operations," but he declined to describe them.

Neither Sun Country nor Polaroid, another major holding of Petters Group, was searched Wednesday.

"It is business as usual at Sun Country and we do not anticipate any impact from these events," Sun Country CEO Stan Gadek said.

Sun Country said late Wednesday that it would continue to fly its regular scheduled and charter service flights. Gadek said Sun Country is owned by a Petters entity that is not affected by the investigation.

After federal agents swarmed the Petters headquarters Wednesday morning, the company's employees were sent home.

An FBI agent answered the front door Wednesday afternoon at Petters' Wayzata home on Bushaway Road.

"This is a search warrant situation," he told a reporter, referring questions to McCabe.

Miller said Wednesday night that she hoped the 165 people who work in the Petters headquarters could be back at work today if the search was completed.

Petters, an energetic and high-profile businessman, has made his mark buying and attempting to turn around struggling businesses.

Former Fingerhut CEO Ted Deikel said Wednesday that he was confounded by the raid on Petters' home and business. He said he had no idea what might be going on.

"I know nothing of the status of Mr. Petters," he said.

Petters and Deikel acquired some of Fingerhut's assets in 2002 in a fire sale by Federated Department Stores. Petters later bought out Deikel's minority stake.

A month ago, Petters and Deikel teamed to buy 1.5 million shares of common stock in Enable Holdings Inc., an online firm that sells excess, refurbished or close-out inventory.

Andrew Redleaf of Whitebox Advisors, a Twin Cities-based hedge fund, joined with Petters two years ago to acquire Sun Country. Whitebox later sold its interest to Petters.

"We've been aware that he's leveraged," Redleaf said, but said that news of the investigation caught him off-guard. "We're a lender to Sun Country and have no other relationship. But I have a high opinion of lots of their [Petters Group] senior management."

Petters is chairman of the Sun Country board of directors. The carrier has struggled financially and the airline's management has approached the Metropolitan Airports Commission (MAC) for financial help. Although Sun Country has not made a specific request to the MAC, Gadek said in June that the carrier might need $50 million in some form of public aid.

Operated at a loss

Sun Country had a net loss of $47 million on operating revenue of $251 million for the year that ended in June.

In August, Gadek told the MAC's finance committee that Petters had lent Sun Country more than $25 million from his parent company.

In April, Jay Salmen, vice chairman of the Sun Country board, said that Petters was "firmly committed to financially supporting" the airline as it copes with higher fuel costs.

On Wednesday, Salmen said he had not been interviewed by investigators. He also said that Petters Aviation, which is housed at Minneapolis-St. Paul International Airport, would be open for business.

Salmen, a friend and employee of Petters, lauded him for his philanthropy. Petters has a foundation that is named after his son -- who was stabbed to death in Italy -- and he contributes to educational and other institutions.

Salmen described Petters as showing "benevolence to the community and to many, many social and charitable causes."

Petters has an exuberant personality and enjoys marketing and extravaganzas. When Petters and Whitebox acquired Sun Country on Halloween two years ago, Petters distributed baseball caps to the employees. "This is who you are," Petters said. "Most valuable players."

In recent months, Sun Country has been marketing itself as the "hometown" airline, including ads featuring Minnesota Twins catcher Joe Mauer.

With the pending acquisition of Northwest Airlines by Atlanta-based Delta Air Lines, Petters had hoped to attract greater interest and loyalty from local travelers.

Staff writer Paul Walsh contributed to this report. Liz Fedor • 612-673-7709 • lfedor@startribune.com Dave Phelps • 612-673-7269 dphelps@startribune.com Jenna Ross • 612-673-7168 jross@startribune.com