Convicted Ponzi schemer Petters secures hearing over plea deal

  • Article by: DAVID PHELPS , Star Tribune
  • Updated: August 11, 2013 - 10:46 PM

Ponzi schemer says he didn’t know about potential offer for plea bargain and shorter sentence.

It is the case that will not rest.

While the criminal and business story of Tom Petters already has its own well-read chapter in Minnesota’s corporate history book, the former Wayzata businessman is not going away quietly.

Nearly four years after a conviction that put him in prison for 50 years, Petters will get an unexpected hearing later this fall in an attempt to reduce that sentence.

His corporate bankruptcy, meanwhile, continues to stumble on as it approaches its fifth anniversary, with attorneys fees now exceeding $76 million and a payoff for creditors and victims of the $3.65 billion Ponzi scheme nowhere immediately in sight.

Bankruptcy trustee Doug Kelley said there’s a potential $1 billion that he could collect on top of the $310 million in assets he’s already marshaled if he gets favorable rulings from the bankruptcy judge overseeing the matter on the subject of so-called “clawbacks.”

But it’s been nearly two years since Kelley filed the original clawback lawsuits seeking to recover “false profits” from investors who lent money to Petters and were repaid with interest for businesses deals that turned out to be bogus.

“Once those rulings are in places, these cases will start to move quickly,” Kelley said in an interview.

But Professor Ann Graham, director of the business law institute for Hamline University School of Law is not so sure.

“Clawbacks are extremely difficult to prove,” she said. “You have to look back and show conclusively that investors knew” that the deals were flawed.

Most immediate on the Petters docket, however, is the subject of his prison sentence.

Petters argues that he was denied the opportunity to consider a plea bargain with a maximum of 30 years in prison.

That argument may be his last swing in an attempt to mitigate the results of a 20-count conviction on fraud, conspiracy and money laundering charges that put him in the Leavenworth federal penitentiary.

“It’s a Hail Mary pass,” said former federal prosecutor Bill Michael, who currently chairs the white-collar crime group for the Chicago law firm Mayer Brown.

Appeals to set aside Petters’s 2009 conviction and/or reduce his sentence have already been denied by the Eighth Circuit Court of Appeals and the U.S. Supreme Court.

But that does not mean that drama is lacking.

Petters to testify

A two-day evidentiary hearing scheduled in October before U.S. District Judge Richard Kyle will feature Petters himself as a witness in a starring role.

Also expected to appear on the stand: his now-estranged defense team and a young lawyer whose research helped set the stage for the upcoming hearing.

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