An alleged money launderer is given a new charge hinting of a plea bargain. Seven more Petters entities filed for bankruptcy.
Larry Reynolds, alleged to be Tom Petters' money-laundering connection in Las Vegas and California, appears to be heading for a plea bargain in what authorities have described as a $3 billion investment fraud scheme.
Two weeks ago, federal prosecutors charged Reynolds and Petters with mail and wire fraud, money laundering and obstruction of justice. But late Thursday, they recharged Reynolds in a "felony information" with a single count of money-laundering conspiracy.
That process generally means a plea bargain will follow. Three other defendants in the alleged fraud scheme were charged that way before they entered guilty pleas and agreed to cooperate with the government.
Reynolds' attorney, Fred Bruno of Minneapolis, confirmed this week that plea discussions were taking place with the U.S. Attorney's office handling the case.
The maximum statutory penalty for money-laundering conspiracy is 20 years in prison, but Reynolds might be able to reduce the term by helping the prosecution. He also could be fined up to twice the loss amount, but that's rarely applied in cases such as this, where the government requires defendants to pay substantial restitution amounts.
Reynolds, 67, lives in Las Vegas and owned and operated Nationwide International Resources (NIR), a California corporation. Bruno said Reynolds has no criminal record. According to government documents, Reynolds helped Petters convince investors that he was buying and selling large lots of electronic merchandise with their money, when in fact there was no such merchandise.
From 2002 until last month, records show, about $12 billion in investor funds were routed through NIR accounts and redirected to Petters Co. Inc., a financing entity owned by Petters. NIR got paid a commission of about 0.05 percent, the government said, which amounted to about $6 million for Reynolds.
The government alleges that Petters used the money to fund other businesses, to pay those assisting in the fraud scheme and for his lavish lifestyle.
Reynolds hasn't appeared in federal court in Minnesota. No appearance is scheduled yet.
He was arrested Oct. 3 in California. A judge agreed to release him on a $2.5 million bond, but Reynolds asked to be taken to Minnesota. He has been held in the Sherburne County jail since Friday.
Petters -- whose holdings include Polaroid, Fingerhut and Sun Country Airlines -- has been held without bond at the same jail since Oct. 3.
Also on Thursday, Minneapolis attorney Gary Hansen was appointed a receiver by a federal judge to take charge of the assets of Frank Vennes Jr. and his companies.
Vennes, of Shorewood, has not been criminally charged in the Petters fraud case, but federal agents raided his home last month and the court has frozen his assets.
"We don't know where this case is going quite yet, and so the attorneys for Vennes wanted a separate receiver to control his very unique assets, including real estate outside the country and within the United States," said Greg Brooker, an assistant U.S. attorney.
In a federal search warrant, Vennes is characterized as a facilitator who enticed major investors to transfer $1.2 billion to companies controlled by Petters.
Attorney Doug Kelley has been acting as a court-appointed receiver for the companies owned by Petters. On Tuesday, Kelley's authority was broadened by U.S. District Judge Ann Montgomery to cover the individual assets of three people who've entered guilty pleas in the fraud case: Deanna Coleman, Robert White and Michael Catain.
Kelley's purview also includes control of the personal assets of Petters, Reynolds and James Wehmhoff, who worked as a financial executive at Petters Group Worldwide.
"They appear to be single-purpose entities to receive funds from investors," Kelley said. For example, Thousand Lakes LLC received $1.5 billion from the Lancelot Investor Fund in Illinois, and another Petters entity, PL Ltd. Inc., lists a fund in the Cayman Islands as its largest creditor at $35.6 million.
"By filing the bankruptcy petitions, we are able to preserve certain claims and maximize our ability to reach back and set aside any improper transfers," Kelley said.
He also has been making decisions about the future of Petters' companies.
On Thursday, Kelley said, Montgomery approved the sale of Great Water Media, a magazine business Petters acquired in July that included Edina Magazine and Sun Country's Escape. Minneapolis-based Tiger Oak Media, which publishes Minnesota Bride and Twin Cities Metro, among other publications, paid $275,000.