File photo of Tom Petters in 2008 before his arrest and the collapse of his business.
Glen Stubbe, Star Tribune
Petters bankruptcy estate collects $85 million
- Article by: David Phelps
- Star Tribune
- December 13, 2013 - 8:55 PM
Tom Petters’ 2002 investment in Fingerhut Direct Marketing is finally paying off.
On Friday, the trustee of the Petters corporate bankruptcy estate said he received nearly $85 million in deferred dividends from the parent of Fingerhut, Eden Prairie-based Bluestem Brands.
The payment is the single largest cash recovery in the five-year bankruptcy proceeding.
Bankruptcy trustee Doug Kelley called the payment “a significant step” in efforts to recover assets for creditors and investors affected by Petters’ corporate collapse in 2008 when a $3.65 billion Ponzi scheme that he had engineered imploded.
“This is one of the very few investments that Tom Petters made that has come to fruition,” Kelley said in an interview. “We’re glad we had the opportunity to give Bluestem management time to get out of the recession and make a recovery.”
Kelley said he expects Bluestem to be a “significant asset” in the Petters bankruptcy estate over time.
With Friday’s cash infusion, close to $400 million has been collected in bankruptcy proceedings to date. Significant recoveries include the sale of Polaroid for $85.9 million, which included a stock and cash component, and $19 million from GE Capital in the settlement of a clawback lawsuit.
Pending clawback lawsuits seeking the return of so-called phantom profits from investors and lenders total $1.7 billion.
Petters acquired a 20 percent stake in Fingerhut for an undisclosed amount more than a decade ago to save jobs in his hometown of St. Cloud, where Fingerhut’s catalog distribution center was located. Nearly 2,000 jobs were at stake at the time.
Petters later turned Fingerhut’s Minnetonka headquarters into the headquarters for his larger company, Petters Group Worldwide.
Fingerhut eventually was renamed Bluestem and includes Gettington.com and PayCheck Direct. The three divisions are part of an online retail business that provides installment paying options to low- to middle-income consumers.
The $84.5 million dividend includes $6 million earmarked for Petters’ personal receivership, part of which will be turned over to the Justice Department for distribution to victims; the rest goes to the bankruptcy estate.
The bankruptcy estate remains a preferred and common stockholder in privately held Bluestem, whose major investors include Bain Capital Ventures and Battery Ventures.
In a statement, Bluestem spokeswoman Kim Paone said, “We are pleased that our company’s business performance has enabled us to pay a dividend to all Bluestem Brands Inc. shareholders, which includes ... Petters-related entities.”
David Phelps • 612-673-7269
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