Charges: Andover printer ran a Ponzi scheme

An Andover man who operates Minnesota Print Services faces 36 counts and owes investors at least $53 million, Hennepin County alleges.

By VINCE TUSS, Star Tribune

Last update: November 6, 2009 - 6:26 AM

In what Hennepin County authorities call one of the biggest Ponzi schemes they have dealt with, an Andover man who runs a printing company was charged Thursday with 36 counts of securities fraud.

Gerard Frank Cellette Jr., 44, owes at least $53 million to investors who backed printing contracts that authorities say are phony.

Hennepin County Attorney Mike Freeman said that more than 100 investors in Minnesota and elsewhere may be owed up to hundreds of millions of dollars. Cellette earned $14 million for himself, Freeman said.

"It's clear he's the ringleader," said Freeman, adding that the investigation is continuing. "He came up with the scheme, and he profited the most."

Cellette turned himself in and is cooperating with authorities, Freeman said. But the operator of Minnesota Print Services also is facing a civil lawsuit from investors seeking payment.

The criminal complaint, filed Thursday in Hennepin County District Court, outlines a scheme that started in 2005, shortly after Cellette began seeking investors "for additional capital for the continuation of his business." Later, Cellette began to supplement the business, run out of his Andover home, with the fictitious contracts, the complaint said.

Cellette was promising returns of 10 to 12 percent within just two or three months, half of the profits from the printing contracts, according to the complaint. But those returns were being paid with money from new investors and not legitimate business, the complaint said.

The initial investors were 10 relatives and acquaintances, all from Minnesota. The ranks grew to include investors from California, Georgia and Illinois, authorities said. Many have had their initial investments repaid, although the complaint notes that those Minnesotans who were the first to give Cellette money have not gotten their principal back, but were getting annual returns of 60 percent for several years.

"The only time a Ponzi scheme makes any sense is at the beginning, and this one had run its course," Freeman said.

The investments were marketed with the help of a California man named Steve Quarles, according to the complaint, which described Quarles as the brother of a friend of a Minnesota investor. Cellette and Quarles met with investors two to four times a year in downtown Minneapolis, sometimes at the Graves Hotel, the complaint said.

In interviews with authorities in September, Cellette described himself as a broker for printing contracts, buying paper for a job and then subcontracting the work.

Since September 2006, Cellette had given Quarles monthly lists of contracts that needed funding, according to the complaint. Up to 30 contracts requiring almost $8,000 were listed in one month, authorities said.

Quarles then gave Cellette names of investors who would put up money, according to the complaint, and Cellette would put together a deal sheet, listing the details of the job and the terms of the returns.

Freeman said that the case will depend on how much Cellette cooperates with authorities. He has turned over business records and a computer, all of which back up what he has told authorities.

Freeman said that Cellette owns several properties, which authorities are still working to inventory.

"What we're trying to do is to get as many of these dollars back as we can," Freeman said.

Vince Tuss • 612-673-7692

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