Petters clawbacks target ex-CEO of Polaroid
- Article by: David Phelps
- Star Tribune
- March 28, 2013 - 9:10 PM
Former Polaroid CEO Lorence Harmer is the subject of two new clawback lawsuits filed Thursday seeking the recovery of more than $5 million for his role as an executive in the since-besmirched Tom Petters corporate empire.
Besides executive bonuses paid before the Petters organization collapsed, one of the lawsuits also seeks repayments of alleged bribes Harmer accepted from Chinese businessmen who were manufacturing consumer electronic goods for resale in the United States under the Polaroid logo.
The lawsuit filed by Polaroid bankruptcy trustee John Stoebner asserts that Harmer owes the estate nearly $5.1 million in kickback payments that he previously had agreed to repay the company before it fell into bankruptcy protection. That suit was filed in U.S. Bankruptcy Court in St. Paul.
A separate lawsuit filed by Doug Kelley, Petters’ court-appointed receiver, seeks the recovery of $470,000 that was paid to Harmer in the form of bonuses and fees by one of Petters’ companies and by Petters personally.
The Kelley lawsuit, filed in federal court in Minneapolis, said the bonuses were designed to make the Petters operation look legitimate and prosperous. Because of Harmer’s closeness to Petters, “he knew of the fraud or willingly ignored it and accepted these substantial payments and gifts from the scheme.”
An attorney for Harmer did not immediately return a call requesting a comment on the lawsuits.
Petters ran a $6.5 billion Ponzi scheme for more than a decade until it collapsed in September 2008. Petters took money from investors to purportedly buy consumer electronic goods at the wholesale level for resale to big-box retailers. However, there were no retail transactions, and funds from new investors were paid out with interest to older investors.
But Petters also used proceeds from the scheme to finance some of his legitimate businesses, which included Sun Country Airlines and Polaroid.
In addition to his Polaroid duties, Harmer held executive positions in Petters International, a wholly owned subsidiary of Petters Group Worldwide, and Petters Consumer Brands.
One of his duties was to find and oversee manufacturing facilities in China for the consumer brands division, which later merged with Polaroid.
According to the Stoebner lawsuit, Harmer collected nine kickback payments from a Chinese manufacturer in 2004 and 2005.
The Petters organization and Polaroid did not learn of the kickbacks until after Harmer left the company in 2007 over “certain disagreements” between Harmer and Polaroid.
When confronted with the kickback allegations, Harmer confessed and signed a promissory note for nearly $5.1 million but never made payments on the note, according to the lawsuit.
Stoebner and Kelley have previously filed clawback cases against Harmer in U.S. Bankruptcy Court for $2.9 million and $1.3 million, respectively, bringing total claims against the Salt Lake City resident to $9.7 million.
Petters is serving a 50-year prison sentence for his role in the Ponzi scheme.
David Phelps • 612-673-7269
© 2013 Star Tribune