A year after its last major fundraising event, the John T. Petters Foundation remains in the business of awarding scholarships for studies abroad, even as its co-founder and chief promoter, Wayzata businessman Tom Petters, sits in jail awaiting trial on fraud charges.
The foundation -- named in honor of Petters' college student son, who was murdered in Italy in 2004 -- is accepting scholarship applications for 2010 after providing stipends for 19 college students this year.
"We're continuing our mission," said foundation president Joe Schmit, the former television sports anchor who went to work for a Petters subsidiary three years ago.
The foundation is living off of its endowment this year in light of a bad economy and the high-profile prosecution of Petters, who is alleged to have run a $3.65 billion Ponzi scheme.
"We're not actively fundraising in this climate," Schmit said.
Because of its independent and privately funded status, the foundation escaped the legal mess that engulfed Petters and his businesses, including Petters Group Worldwide and Petters Co. Inc. The foundation is not under the purview of court-appointed receiver Doug Kelley, as are other Petters entities.
"We are completely separate from the investigation, from Petters Group Worldwide," Schmit said. "The only thing we're not doing is fundraising. We're squeaky clean."
But the foundation still hasn't filed its 2008 charitable trust income tax form, so it is difficult to determine its financial health or the level of donations since the demise of the Petters business empire. Schmit said the foundation has obtained extensions from the Internal Revenue Service to file the tax return at a later date and will make its financial condition as "transparent" as possible.
At the end of 2007, the foundation listed assets of $3.1 million, including contributions from some individuals and organizations that lost money in the alleged Petters fraud.
By law, the private foundation needs to distribute 5 percent of its assets each year, which Schmit said it has done, "plus more."
A quiet year
With no major fundraising events, it has been a quiet year for the foundation, which focuses on the types of international business courses that John Petters was studying at the time of his death. That's in contrast with the three previous years, when lavish parties on behalf of the organization annually marked the Minneapolis summer social scene.
Last August, Tom Petters was in black tie as he greeted throngs of well-dressed guests at the third annual John T. Petters Foundation fundraiser. There was not a hint of scandal, as the well-to-do crowd mingled in a Barcelona-themed ballroom in downtown Minneapolis.
But six weeks later, Petters would be in jail, his business empire in shambles, as government agents moved swiftly to shut him down after a trusted employee told prosecutors about the existence of an alleged massive fraud operation.
Among the honorary co-hosts for the 2008 fundraiser at the Minneapolis Marriott City Center Hotel was Gregory Bell, the head of a Chicago-area hedge fund that invested with Petters and went out of business after federal prosecutors arrested and charged Petters with mail and wire fraud and money laundering.
Bell subsequently was charged as well, as an accomplice of Petters in the complicated scheme that got investors to put up funds for the purchase and sale of consumer electronic goods that never existed.
Created in kindness
But despite the notoriety that became associated with the Petters name, the foundation has continued to operate during the 11 months since Petters' arrest, handing out semester-long scholarships of $1,500 to $8,000 for students to study international business all over the world.
The foundation also awards shorter-duration scholarships to support students who provide volunteer services in foreign countries.
Jennifer Petters, John's sister and chairwoman of the foundation, said the organization is dedicated to providing global education opportunities.
"We have taken the direction and advice of those more experienced than we are to secure and protect the integrity and good name of the JTP Foundation and the people behind it," Jennifer Petters said in an e-mailed statement.
"The JTP Foundation was established as a splendid act of good will and kindness."
Schmit said that the foundation has received 200 applications for scholarships in 2010, although the deadline for applying is still a month away. He said the Petters criminal case hasn't overshadowed interest in the foundation.
"It's only come up a couple of times in interviews [with students], and in those cases it was with students from Minnesota," Schmit said.
David Phelps • 612-673-7269