business

The Gerard Cellette Jr. fraud paled next to the multibillion-dollar scams of Tom Petters and Bernie Madoff.

But $53 million is still a lot of money -- enough to enable Cellette to buy multiple residences in the northern suburbs, acquire vacation homes, lease executive suites for Minnesota Vikings games and fly family and friends by private jet to Florida and Hawaii.

A tearful Cellette, 47, pleaded guilty in late 2010 to securities fraud in the scheme linked to phony contracts for his printing business. He was sentenced to eight years in prison plus restitution.

There has been something of a happy ending to the scam.

Tim Becker of Lighthouse Management, a veteran CPA and distressed company turnaround expert, was appointed by Hennepin County Judge Gary Larson to find the assets after California investors sued Cellette in 2009 and Hennepin County commenced criminal proceedings. Becker, assisted by Ryan Murphy, an attorney with Fredrikson & Byron, so far has recovered about $10 million by tracking down homes, boats, dune buggies as well as gifts made by Cellette, the former owner of Minnesota Print Services.

For their efforts, the Upper Midwest Turnaround Management Association cited Becker and Murphy's work as its 2011 "transaction of the year" for recovering a "substantial amount of assets." The association has scheduled a January program where Becker and Murphy will explain how they did it.

In an interview last week, Becker and Murphy said they determined that up to 70 investors loaned Cellette a total of $26 million over several years beginning in 2005. The remaining money was accrued interest on 30- to 90-day loans of up to 50 percent interest. Most of the investors were from Orange County, Calif., and brought to Cellette by so-called "feeder firms" who lured investors with high interest rates.

"There wasn't really a plan to repay the obligations from [Cellette's] business," Murphy said. "The scheme was to keep borrowing more funds to pay off past investors. There was no tangible business."

Cellette's original business was lining up printers for large companies. He would take a fee or percentage of the deal. The money he took from outside investors primarily was blown on large homes in Blaine and Andover and vacation homes around Bay Lake in Deerwood, Minn., as well as numerous vehicles, boats, vacations and entertainment.

Living Word Christian Center, a Brooklyn Park church operated by TV evangelist Mac Hammond, has returned a $2.5 million gift from Cellette, Becker said.

The scheme started to unravel in 2009 when worried California investors started legal action. Cellette turned himself in to Hennepin County prosecutors.

REIDY'S MARKET INVESTS IN BRIGHTER FUTURE

Terry and Cheri Reidy, 37-year owners of Reidy's Market at 3904 42nd Av. S. in Minneapolis, have found a brighter, lower-carbon way to profits thanks to an $8,000 no-interest city loan program targeted at cutting energy and costs for small businesses.

"Environmentally it's good, financially it's good and the energy-efficient lights are brighter," Reidy said the other day. "They make the products in the coolers and the store look better."

Reidy will pay back less than the $8,000 he borrowed thanks largely to up to $4,000 in rebates offered by Xcel Energy. The project will pay for itself by 2014.

The Minneapolis program was launched last year with $780,000 in federal economic stimulus funds to spur industrial and construction jobs through conservation investments that benefit small businesses. The nonprofit Center for Energy and the Environment still has $600,000 available.

Repayment terms of up to 10 years are paired with rebates from Xcel and CenterPoint Energy. More information: 612.335.5885, or jhasnik@mncee.org.

THE PILGRIM INDICATOR

We've got a new economic indicator to throw into the wash.

Bonnie Engler, president of family-owned Pilgrim Dry Cleaners, reports that the number of incoming dress shirts increased by 4 percent in the third quarter of 2011, after string of quarterly declines that date to 2009. Overall, shirts and the "wash-dry-and-fold'' category (laundry) are up 5 percent.

Meanwhile, the home-and-office delivery service of shirts and laundry has doubled over the last year, she said.

During hard economic times, fearful or out-of-work consumers are less likely to spend on dry cleaning and laundry, particularly when they have time to do the work at home with a washing machine and iron.

Engler, a veteran of the trade, thinks more Pilgrim customers are working now and have less time on their hands and more money to spend on laundry services.

"Consumer confidence has gotten better and we can do it better for them," Engler said. "We're excited about these indicators."

I'm buying into the Pilgrim Indicator.