Frank Vennes Jr., a convicted felon-turned-evangelical who allegedly steered investors to the $3.65 billion Ponzi scheme of Wayzata businessman Tom Petters, was indicted Wednesday, more than 2 1/2 years after his name first appeared in an FBI search warrant affidavit.

Investors, including faith-based organizations, put billions of dollars into Petters' company on Vennes' advice. For his work, the government says he collected more than $105 million in commissions from investment funds.

Vennes, 53 -- now living in Stuart, Fla. -- was indicted along with two Florida fund managers, David W. Harrold, 51, of Del Ray Beach, and Bruce F. Prevost, 51, of Palm Beach Gardens. Each faces four counts of securities fraud related to the scheme. Vennes also faces a money laundering charge. The charges were filed in U.S. District Court in Minneapolis.

It is the most recent development in a case that riveted the attention of Minnesotans, involved dozens of federal agents and was a priority case for the Financial Fraud Enforcement Task Force that targets significant white collar crimes nationwide.

Recent regulatory actions against a Connecticut-based hedge fund and its manager, together with a guilty plea earlier this month by an executive with a Minnetonka hedge fund, indicate the investigation continues.

Michelle Webster Palm, an Edina woman who formerly worked for Arrowhead Capital Management in Minnetonka, pleaded guilty to one count of securities fraud related to the scheme and one count of making a false statement to authorities. She awaits sentencing and is cooperating with authorities.

U.S. Attorney B. Todd Jones, who co-chairs the enforcement committee of the Obama Administration's financial fraud task force, did not comment on the most recent indictments. But throughout the Petters case he has underscored his office's intent to prosecute financial crimes.

Jones and his assistants also have said repeatedly the Petters investigation was ongoing. "We are in the fraud business, however you want to characterize it, for the long haul," Jones said in an earlier interview. "We're being very aggressive."

Harrold and Prevost founded Palm Beach Capital Management, which served as the investment adviser for four hedge funds: Palm Beach Finance Partners, Palm Beach Finance II, Palm Beach Offshore and Palm Beach Offshore II. The indictment says their investors included individuals, foundations, trusts and other hedge funds.

The indictment says Vennes directed Harrold and Prevost to communicate exclusively through him when dealing with Petters and his company, Petters Co. Inc. (PCI), the primary vehicle for the investment fraud.

The hedge funds began investing with Petters in 2002 and eventually rolled about $8 billion into PCI notes -- substantially all of their investors' funds, the indictment says. More than $1 billion was in PCI when the scheme collapsed in September 2008. Meantime, Harrold and Prevost allegedly grossed more than $58 million in management fees on the transactions.

The government says Vennes collected more than $60 million in commissions from the Palm Beach funds and an additional $45 million from another, unidentified fund.

Petters was convicted of fraud and conspiracy in December 2009 and is serving a 50-year sentence in Leavenworth, Kan. He and his associates allegedly solicited investors with the promise of buying electronic consumer goods at a discount and then selling them to mainstream retailers at a profit. The investments were to be secured by the electronic devices, but none existed.

In one undercover tape recording set up by prosecutors, Vennes allegedly tells Petters and others the scheme will "implode" if investors and auditors attempt to visit warehouses where the merchandise was supposedly stored. The tape transcripts, from a recorder worn by Petters lieutenant Deanna Coleman, also quote Vennes as telling Petters the operation is "a little paper manufacturing plant."

On one occasion Petters is quoted as saying he and Vennes would be jointly implicated if the scheme were uncovered.

By all outward appearances, Vennes was a successful businessman who traded his North Dakota roots for multimillion-dollar homes in the Twin Cities and Florida and a successful career in corporate finance, rare coins and commercial real estate. According to public records, Vennes was chief executive of Metro Gem Inc., Metro Gold Inc., Metro Capital and Resort Ventures.

His assets have been in the control of a court-appointed trustee since shortly after federal authorities raided the homes of Petters and his associates and some Petters companies in late September 2008.

In the years before the Petters scheme became public, Vennes sat on the board of Teen Challenge, an organization that serves teens and adults who have addictions, when it invested $5.7 million with Petters. That investment is believed to be worthless today.

Petters also supported Teen Challenge and contributed $250,000 to the organization through the John T. Petters Foundation in 2006. Vennes donated $60,000 the same year to the Petters foundation, named after Petters' late son.

Until the Petters scheme imploded, Vennes spent years attempting to clear his name and his criminal record from a 1987 sentence on money laundering, drug and firearms charges.

In 2006 and 2008, Vennes and his family contributed significantly to the campaign of U.S. Rep. Michele Bachmann, R-Minn., who wrote a letter to then-President George Bush in 2007 recommending Vennes for a pardon. Bachmann withdrew the letter after the involvement of Vennes in the Petters operation became public.

Similarly, then-Sen. Norm Coleman, R-Minn., wrote letters to the Bush Administration in 2002 and 2004 seeking a pardon for Vennes. "I assure you that Mr. Vennes' moral and ethical standards more than justify your consideration of his pardon application," Coleman wrote.

If convicted, the defendants face up to five years in prison on each securities fraud count, while Vennes could face an additional 10 years on the money laundering charge.

Dan Browning • 612-673-4493 David Phelps • 612-673-7269