Frank Vennes Jr., a Shoreview businessman who recruited investors for Tom Petters, learned that the operation might be a fraud scheme in December 2007 -- nine months before federal authorities shut Petters down, according to newly unsealed court documents.
Vennes previously told federal investigators that he had earned nearly all of his income in the form of referral fees on investors he routed to Petters, according to court documents filed last year. Petters allegedly told investors that he would buy high-end electronics gear with the money and then sell it for high returns through big-box retailers. The government alleges no such merchandise existed.
In a search warrant affidavit filed in U.S. District Court in St. Paul late Thursday, investigators said Vennes sensed that something was amiss when Petters Co. Inc. -- Petters' investment vehicle -- began having difficulty paying off promissory notes to the investors near the end of 2007. The affidavit says Vennes asked Petters whether the purchase orders for electronics goods that he used to substantiate the collateral for the notes "were real."
"Petters informed Vennes that the notes may be compromised," according to the affidavit filed by U.S. Postal Inspector Rachel Williams to obtain a search warrant. "Upon further inquiries of Petters, Vennes learned that there was possible fraud occurring," Williams said. "Vennes contacted his attorney, but reported it to no one else."
Vennes' attorney at the time, Craig Howse, declined to comment on the assertions in the search warrant affidavit, citing rules governing attorney-client confidentiality.
Federal agents raided Petters' businesses and the homes of Petters and several associates involved in the alleged investment fraud in late September after one of Petters' executives told federal agents about the $3.5 billion operation.
Searching e-mail accounts
In the new search warrant filed this week, the government sought access to two Yahoo e-mail accounts used by Vennes, 51, and his son Denley, 27.
Williams said Frank Vennes used the accounts to send documents to investors that did business with Petters Co. Inc.
Vennes, who was convicted in the mid-1980s on drug, firearms and money-laundering charges, has not been charged in the Petters case. But in earlier search warrants, Vennes was quoted as saying that the investment scheme would "implode" if investors or their auditors attempted to visit the warehouses where nonexistent electronic goods were said to be stored.
Petters, 51, of Wayzata, has maintained his innocence throughout the past 3 1/2 months. He remains jailed without bond. Five other participants in the business have pleaded guilty to fraud, conspiracy, money-laundering or tax code violations.
David Phelps • 612-673-7269