A new filing says Tom Petters and two associates evaded a court-ordered freeze of their money and property.
Old lifestyle habits must be hard to break.
Tom Petters and two of his associates convicted in a mammoth investment fraud scheme allegedly have been hiding or obtaining cash and other valuable assets despite a court-ordered freeze on their property, according to documents filed Thursday in a Minneapolis federal court.
A "special report" by receiver Doug Kelley said Petters diverted $50,000 from a lodge he owns in northern Wisconsin to an account through which he could direct payments to himself and others. Michael Catain skimmed nearly $14,000 in proceeds from the Bay Car Wash he owned in Excelsior, Kelley said. And the government's key witness and informant, former Petters executive Deanna Coleman, tried to keep her $800 courtside season tickets to the Minnesota Timberwolves, plus two cashier's checks totaling $88,000.
The report was sent to U.S. District Judge Ann Mongtomery, who has jurisdiction over the civil elements of the Petters case. The case also involves federal criminal charges that Petters and a small group of business associates operated a $3.5 billion Ponzi scheme until last fall.
Petters, 51, of Wayzata, maintains he is innocent. Coleman and Catain both have pleaded guilty to their roles in the alleged operation.
Montgomery appointed Kelley as receiver to oversee the assets of a number of Petters' companies, including Petters Group Worldwide and Petters Company Inc., which allegedly served as was the vehicle for the alleged fraud. Investors thought they were financing the trade of high-end electronic goods through big box retailers when, in reality, no goods existed, the government says. Kelley put the two Petters companies and several related entities into bankruptcy, and has been nominated as the trustee overseeing those cases.
Kelley also oversees the monthly living expenses of those involved in the alleged fraud as he tries to collect assets to be used to help repay lenders and other creditors.
In his report, Kelley said that Petters, through an unnamed brother-in-law, had $50,000 transferred from the Tam O'Shanter Lodge that Petters owns on Lake Superior to a personal account held by the lodge's manager just one day before a temporary restraining order was imposed on Petters' personal assets in early October.
Kelley said Petters used proceeds from the transferred funds to cover personal expenses in jail, including telephone time, and to provide $8,500 to girlfriend Tracy Mixon. Kelley previously had denied a monthly living stipend for Mixon. He said the money from Petters "appears to be affirmatively attempting to circumvent" his previous decision, which was approved by Montgomery. The lodge manager agreed to transfer the remaining funds to Kelley.
A tip led Kelley to send an investigator to Catain's car wash where he reviewed bank deposits against sales receipts and discovered that $13,860 was missing.
"When the investigator contacted Catain to confront him about the missing money, Catain checked himself into a hospital, complaining of a stroke," Kelley said in his report to the judge. He said that Catain, through his attorney, eventually admitted that he took the cash to pay bills and buy personal items. Catain returned $4,167 to Kelley.
The car wash skim was the second run-in that Kelley and his investigators have had with Catain over his assets. After making an inventory of the household goods in Catain's Lake Minnetonka home, an investigator returned to find that several fixtures -- "including expensive chandeliers" -- had been removed. Several large televisions and a home gym also were missing. Catain has returned some of the items, Kelley's report said.
Coleman's use of her Timberwolves tickets came to an abrupt end after another tipster told Kelley that she had been seen in the hard-to-get courtside seats. Coleman promptly complied with the request to turn the tickets over to Kelley, his report said.
Coleman also agreed to turn over a diamond pendant, a bracelet and most of the $88,000 from two cashiers checks that she hadn't declared as an asset. Coleman said she "just forgot" to list the items for the receivers.
Attorneys for Petters and Catain could not be reached Thursday for comment.
Some of the items will likely be sold, with the money going to victims. Montgomery issued three orders Thursday approving the sale of similar items. A 4-carat diamond ring and two Piaget watches belonging to Catain were sold to R.F. Moeller Jewelers for $32,100, while his 2007 Bentley Azure went to Donnybrooke Motorsports for $175,000. Donnybrooke also paid $225,000 for two cars belonging to convicted defendant Larry Reynolds of Los Angeles: a 2002 Ferrari 360 Spider F1 and a 2007 Bentley GTC.
Petters remains jailed without bond pending trial. Catain and Coleman are free on bond pending sentencing.
David Phelps • 612-673-7269