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J.P. Morgan wants to liquidate Petters assets
J.P. Morgan says he owes $3.8 million. The receiver in charge of his estate filed court documents ordering the bank to turn over the jailed businessman's assets.
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The wrangling over the assets of accused swindler Tom Petters cranked up a notch Friday when the court-appointed receiver managing his estate filed documents to block J.P. Morgan Chase Bank from liquidating millions of dollars worth of Petters' assets.
Attorneys representing receiver Doug Kelley asked U.S. District Judge Ann Montgomery to order the bank to turn over the assets and the documents that the bank has "improperly withheld to date."
The New York bank and its affiliate, Chase Equipment Finance Inc., said in filings last month that they are secured creditors and simply want to liquidate some of Petters' assets to recoup $3.8 million it contends he owes the bank. The bank said it has cooperated with Kelley, but also insisted it has the right to be paid.
Petters, who was charged last fall in connection with what authorities have described as a $3.5 billion Ponzi scheme, has had personal investment accounts at the bank since 2002 or earlier, according to court records. In 2006, he executed a personal guaranty to secure credit extensions and financial accommodations for his company, Petters Group Worldwide (PGW), and he later signed a note for a $40 million line of credit for the company. The bank says Petters pledged his accounts as collateral in March 2008, but Kelley says it has failed to provide him with proof of that agreement.
Federal investigators raided Petters' Wayzata home and his Minnetonka business headquarters on Sept. 24. Six days later, the bank notified PGW that it wanted Petters to cover an under-margin stock position of $403,269. Kelley said the bank "apparently suspected that the Petters assets would be placed into a receivership and frozen," because later that day it demanded payment of the outstanding debt on PGW's line of credit.
Kelley said in court filings that the bank has thwarted his efforts to "fully understand and unwind the facts and transactions" related to Petters' assets. And it failed to provide requested documentation to explain loan activity one day after the federal searches, when $9 million was transferred from PGW's line of credit into an investment account and then out of that account on the same day.
The bank says in its filings that it financed the purchase of an aircraft for Petters Aviation. After that company filed for Chapter 11 bankruptcy in October, the bank got approval to conduct a distressed sale of the aircraft in which it lost $2.3 million. Most of Petters' collateral is in hedge funds redeemable on a quarterly basis, the bank says. It has been liquidating the accounts when possible. As of April 17, bank records show the collateral amounted to $4,148,057, while his debt to the bank totaled $3.8 million.
On separate and less contentious matters, Kelley got court approval Friday to sell some of Petters' property. Platinum Advantage Cars in Plymouth will pay $356,500 for his five Mercedes, a Lexus and a Bentley, all with low miles. And Bruce and Sandra Von Reidel of Knife River, Minn., will pay $916,500 for the Tam O'Shanter Lodge, a bed and breakfast/conference center on Lake Superior in Cornucopia, Wis. Some adjacent land will be sold separately.
Dan Browning • 612-673-4493
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