Vlahos: Petters owes us $16 million

  • Article by: JON TEVLIN
  • Star Tribune
  • January 27, 2009 - 5:25 AM

The ripple effects of the $50 million Ponzi scheme that authorities say was orchestrated by Tom Petters continue.

A bank that loaned Dean Vlahos millions of dollars has moved to foreclose on his lakeside Deephaven mansion. Vlahos, owner of Redstone American Grill, has said that he and his estranged wife, Michelle, were among the largest individual victims in the alleged scam.

Home Federal Savings Bank of Rochester initiated foreclosure on a first mortgage of $4 million, plus subsequent mortgages of $1.5 million and $6 million, according to complaints filed Monday in Hennepin County District Court in Minneapolis. The total owed to the bank by the Vlahoses is $11.5 million.

Their 13,000-square-foot house on Northome Road has seven bedrooms and nine bathrooms and is listed for sale at $10.9 million. Vlahos also has two homes in Florida for sale. He's asking $33.6 million for the three properties.

In a separate complaint, the bank is suing Dean Vlahos for unsecured loans of $500,000 in 2003 and $1 million in 2007.

According to the complaint filed Monday, in each case the Vlahoses executed promissory notes for one year on their home, which were then repeatedly extended each year until 2008 or 2009. In each case, they failed to pay off the notes. The Vlahoses stopped making payments on the loan that was due in 2009 in October, shortly after authorities arrested Petters on charges of orchestrating a $3.5 billion Ponzi scheme over the past decade. Petters, 51, of Wayzata, denies the charges.

Together, the Vlahoses say they are owed more than $16 million that they invested with Petters.

The government says Petters sought money to buy and sell electronics equipment, but instead paid new investors with money from previous investors, used the money for other investments, and lived a lavish lifestyle until the pyramid collapsed after a longtime employee became a government informant in September.

Vlahos made his fortune by founding the sports bar Champps in the 1990s. He currently owns Redstone American Grill, which he had hoped to turn into a nationwide chain. But that dream has stalled with the faltering economy and the collapse of the Petters businesses. Petters, a close friend to Vlahos, owned 16 percent of Redstone, though the current status could not be determined.

Jon Tevlin • 612-673-1702

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