Nearly three years after the $3.65 billion Ponzi scheme of Tom Petters shocked Minnesotans, the net of alleged co-conspirators continues to grow.

On Tuesday a federal grand jury in Minneapolis indicted hedge fund manager James N. Fry of Minnetonka-based Arrowhead Capital Management, and it added charges to the previous indictment of another Petters collaborator, Frank Vennes Jr., who was previously indicted in April on four counts of securities fraud and one count of money laundering. Vennes has a February trial date.

The new indictment charges Vennes with eight counts of securities fraud, two counts of mail fraud, six counts of wire fraud, three counts of money laundering, three counts of bank fraud and two counts of making false statements on credit applications.

Fry, 57, of Orono, faces five counts of securities fraud, four counts of wire fraud and three counts of making a false statement to the Securities and Exchange Commission during its investigation of Arrowhead.

Fry, reached at home, had no comment.

Vennes' attorney, James Volling, said he hadn't had time to analyze the indictment but said "we intend to vigorously defend against these charges."

The indictment alleges that Vennes and Fry knew that the operation of Petters Companies Inc. (PCI) was a fraud but did not tell investors what they knew as they together collected $229 million in fees and commissions.

PCI attracted investors on the grounds that it bought and sold consumer electronics to big-box retailers when in fact there were no purchases and sales and the proceeds from new investors was used to pay off debts to old investors.

Vennes, 53, of Stuart, Fla., had a financial relationship with Petters that dated to 1995 through his company Metro Gem.

From 1999 through 2008, when the scheme collapsed, Vennes had committed 748 transactions with PCI worth "hundreds of millions" of dollars, according to the indictment.

But a previous conviction on gun, drug and money-laundering charges made it difficult for the one-time North Dakota and Minnesota resident to attract larger institutional investors, the indictment said.

Vennes, an ex-convict who became a born-again Christian, found many of his smaller investors in the Minnesota's faith community.

Because of his criminal record, the indictment said, Vennes and Fry collaborated to raise money through Fry's Arrowhead Capital Management firm.

Between 1999 and 2008, Arrowhead invested more than $500 million with PCI and had $130 million with PCI at the time of its demise.

The indictment says Vennes made as much as $188 million in commissions for steering funds to PCI through Metro Gem, Arrowhead and a third hedge fund called Palm Beach Funds, whose managers previously pleaded guilty to securities fraud.

Fry received $41 million in fees for the Arrowhead PCI investments.

As PCI neared default in 2007, Vennes and Fry began changing terms of the notes they held from PCI, extending them past the 90-day due date without telling investors, the indictment said.

The indictment said both men continued to seek new investors and more money from existing investors despite their knowledge of the financial troubles facing Petters and PCI.

Vennes faces a maximum prison sentence of 20 years on each of his mail, wire and bank fraud counts and the false statement count, 10 years on each money-laundering count and five years on each securities fraud count. Fry faces a maximum jail sentence of five years on each of his counts.

David Phelps • 612-673-7269