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Thomas Joseph Petters is a former American businessman and chairman and CEO of
Petters Group Worldwide Petters Group Worldwide was an American diversified company based in Minnetonka, Minnesota that was turned into a $3.65 billion Ponzi scheme by its founder and CEO, Tom Petters. It had 3,200 employees and investments or full ownership in 60 compani ...
, a company which stole over $2 billion in a
Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...
. He was convicted of massive business fraud in 2009 and was imprisoned at the
United States Penitentiary, Leavenworth The Federal Correctional Institution, Leavenworth is a medium-security federal prison for male inmates in northeast Kansas. It is operated by the Federal Bureau of Prisons, a division of the United States Department of Justice. It also includes ...
.Nicole Muehlhausen
BIO: Tom Petters
KSTP.com, September 24, 2008, Accessed October 8, 2008.
Amid mounting criminal investigations, Petters resigned as his company's CEO on September 29, 2008.
, WCCO.com, September 29, 2008, Accessed October 8, 2008.
He was convicted of numerous federal crimes for operating Petters Group Worldwide as a $3.65 billion
Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...
and received a 50-year federal sentence.


Early years

Petters was raised with six siblings in St. Cloud, Minnesota. He worked at the tailor, fur and fabric shop founded by his great-grandfather and operated by his family for over 100 years. In 1973, while still in high school, he started Ear Electronics, a mail-order stereo company aimed at college students. Petters completed only one semester of college before dropping out to pursue a career. In the early 1980s, Petters worked in
Colorado Colorado is a U.S. state, state in the Western United States. It is one of the Mountain states, sharing the Four Corners region with Arizona, New Mexico, and Utah. It is also bordered by Wyoming to the north, Nebraska to the northeast, Kansas ...
as a regional manager at an electronics store chain; when that business went bankrupt, he purchased five of its locations in Colorado and
Kansas Kansas ( ) is a landlocked U.S. state, state in the Midwestern United States, Midwestern region of the United States. It borders Nebraska to the north; Missouri to the east; Oklahoma to the south; and Colorado to the west. Kansas is named a ...
.Kari Petrie
The Petters File
''St. Cloud Times'', October 3, 2008, Accessed October 8, 2008.


Petters Group Worldwide

In 1988, Petters moved back to Minnesota and founded Amicus Trading, a wholesale brokerage; the name was later changed to The Petters Company, and it marketed consumer merchandise. In 1995 he started Petters Warehouse Direct to sell closeout, overstock and bankrupt company merchandise from a store in
Minnetonka, Minnesota Minnetonka ( ) is a city in Hennepin County, Minnesota, United States. A western suburb of the Minneapolis-Saint Paul, Twin Cities, Minnetonka is located about west of Minneapolis. At the 2020 United States census, 2020 census, the city's popu ...
, and later in the
Twin Cities Twin cities are a special case of two neighboring cities or urban centres that grow into a single conurbation – or narrowly separated urban areas – over time. There are no formal criteria, but twin cities are generally comparable in stat ...
and greater Minnesota. In 1998, he moved online to sell discounted merchandise through redtag.com, operated by RedTag Inc.; by 2000 he sold his Petters Warehouse Direct stores to focus on his online business, based in
Eden Prairie, Minnesota Eden Prairie is a city in Hennepin County, Minnesota, United States. It had a population of 64,198 at the 2020 census, making it the 16th-largest city in Minnesota. The city is adjacent to the north bank of the Minnesota River, upstream fro ...
. He teamed up with direct-mail merchandise company
Fingerhut Fingerhut is an American catalog/online retailer. Fingerhut is distinguished from other online retailers in that it incorporates a technique known as hire purchase, where customers can pay with credit, and make monthly payments until their ord ...
Companies Inc. in 2001 to start a new online store, Redtagbiz.com, which reported sales of $1 billion per year at one point. Between 1998 and 2008, Petters created a series of investment funds through which he raised in excess of $4 billion through a variety of
Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...
s. These fund family names included Arrowhead, Lancelot, Palm Beach and Stewardship. Through these funds, Petters perpetrated the third-largest
hedge fund A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...
fraud case in U.S. history. Petters used these funds to finance his big box and other acquisitions. He then fabricated retail orders from those acquisitions and used them as collateral to borrow more money through the funds. When Fingerhut's owner,
Federated Department Stores Macy's, Inc. (previously Federated Department Stores, Inc.) is an American holding company of department stores. Upon its establishment in 1929, Federated held ownership of the regional department store chains Abraham & Straus, Lazarus (departm ...
, decided to sell or close the company in 2002, Petters teamed with former Fingerhut chairman Ted Deikel to buy the Fingerhut name, customer list, and buildings in St. Cloud, Minnetonka, and
Plymouth, Minnesota Plymouth is a city in Hennepin County in the U.S. state of Minnesota. A suburb in the Minneapolis–Saint Paul metropolitan area, the city is about west of downtown Minneapolis. The population was 81,026 at the 2020 census, making it Minnes ...
and
Tennessee Tennessee (, ), officially the State of Tennessee, is a landlocked U.S. state, state in the Southeastern United States, Southeastern region of the United States. It borders Kentucky to the north, Virginia to the northeast, North Carolina t ...
. The acquisition closed in June 2002, and all of Petters's operations moved into Fingerhut's former headquarters in Minnetonka. Deikel assumed direction of Fingerhut Direct Marketing Inc., which created catalogs, and Petters operated Fingerhut Fulfillment, based at a St. Cloud distribution center. The new Fingerhut restarted with online and catalog sales in November 2002. In April 2003, The Petters Group, with two minority investors, purchased
uBid uBid.com was an online auction style and fixed-price shopping website offering goods sold directly by the company and items sold by pre-approved third-party merchants. The site specialized in excess new, refurbished, and overstock consumer elec ...
. The same month, Fingerhut Direct Inc. announced it had obtained a $100 million line of credit to finance inventory and receivables. In 2003, Petters invested in Nazca Solutions, whose CEO was Ted Mondale. Deikel sold his interest in Fingerhut in 2004. In January 2005, Petters Group Worldwide purchased the Polaroid brand for $426 million, with plans to use it on consumer electronics and new technologies. In 2006, Petters Group Worldwide acquired
Sun Country Airlines Sun Country Airlines is an ultra-low cost airline in the United States. Based at Minneapolis–Saint Paul International Airport with headquarters on airport property, Sun Country operates to about 140 destinations in the United States, Canad ...
. Petters Group Worldwide became a diverse holding company with 3,200 employees and investments or full ownership in 60 companies, of which it actively managed 20. With offices in North America, South America, Asia, and Europe, it had $2.3 billion in revenue in 2007.Liz Fedor
Sun Country files for bankruptcy
''Star Tribune'', October 6, 2008, Accessed October 8, 2008.


Prosecution, conviction and sentencing

''Circa'' 2008, the
FBI The Federal Bureau of Investigation (FBI) is the domestic Intelligence agency, intelligence and Security agency, security service of the United States and Federal law enforcement in the United States, its principal federal law enforcement ag ...
began investigating Petters for his role in a fraud scheme involving more than $100 million in investments.David Phelps and Dan Browning
Judge, citing flight risk, keeps Petters in jail
''Star Tribune'', October 8, 2008, Accessed October 8, 2008.
On September 24, 2008, federal investigators raided the Petters headquarters in Minnetonka and searched Tom Petters' Wayzata home. Documents released by the FBI,
IRS The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...
, and other federal agencies noted that they were seeking evidence of a scheme to lure investors into funding a company based on tens of millions of dollars in purchases and sales that never occurred. The documents noted that a witness associated with Petters and his company came forward with documents and other information, and later wore a hidden microphone and recorded several conversations involving Petters and others who carried out the fraud. The affidavit alleges that Petters repeatedly admitted to the fraud scheme of providing false information to investors in the tapes; in addition, Petters admitted to falsifying his tax returns. On September 29, he resigned as the head of Petters Group Worldwide.Martin Moylan
Warrant alleges fraud by Petters
Minnesota Public Radio, September 26, 2008, Accessed October 8, 2008.
On October 3, Petters was arrested at his home in Wayzata. He was denied
bail Bail is a set of pre-trial restrictions that are imposed on a suspect to ensure that they will not hamper the judicial process. Court bail may be offered to secure the conditional release of a defendant with the promise to appear in court when ...
after prosecutors produced documents that alleged Petters had encouraged another person involved with the case to leave the country, that Petters had stated that he regretted turning over his
passport A passport is an official travel document issued by a government that certifies a person's identity and nationality for international travel. A passport allows its bearer to enter and temporarily reside in a foreign country, access local aid ...
, and that he had previously spoken about fleeing the country if the fraudulent scheme were discovered. The
U.S. Attorney's Office United States attorneys are officials of the U.S. Department of Justice who serve as the chief federal law enforcement officers in each of the 94 U.S. federal judicial districts. Each U.S. attorney serves as the United States' chief federal ...
charged him with
mail fraud Mail fraud and wire fraud are terms used in the United States to describe the use of a physical (e.g., the U.S. Postal Service) or electronic (e.g., a phone, a telegram, a fax, or the Internet) mail system to defraud another, and are U.S. fede ...
,
wire fraud Mail fraud and wire fraud are terms used in the United States to describe the use of a physical (e.g., the U.S. Postal Service) or electronic (e.g., a phone, a telegram, a fax, or the Internet) mail system to defraud another, and are U.S. fede ...
,
money laundering Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...
and
obstruction of justice In United States jurisdictions, obstruction of justice refers to a number of offenses that involve unduly influencing, impeding, or otherwise interfering with the justice system, especially the legal and procedural tasks of prosecutors, investiga ...
.James Walsh and Liz Fedor
Petters jailed; court papers say he planned to flee the country
, ''Star Tribune'', October 4, 2008, Accessed October 8, 2008.
The U.S. Attorney staff noted that the government knew nothing about the scheme until Deanna Coleman, vice president of operations for Petters Co., approached them to confess and offered to help federal authorities investigate. This led to the prosecution of Robert Dean White, who admitted to being involved in creating false bank statements and other documents that were used to trick investors in what he described as a massive
Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...
. Both individuals made
plea bargain A plea bargain, also known as a plea agreement or plea deal, is a legal arrangement in criminal law where the defendant agrees to plead guilty or no contest to a charge in exchange for concessions from the prosecutor. These concessions can include a ...
s with federal prosecutors in exchange for providing the government information on how the scheme worked. Coleman and White related that, at the direction of Petters, they would fabricate documents for Petters and others to use in obtaining billions of dollars in loans. The phony records were used to show that Petters Co. was buying merchandise, generally electronic goods, from two suppliers (who were named as co-defendants). Petters Co. would tell lenders that it was selling the goods through
big-box store A big-box store, a hyperstore, a supercenter, a superstore, or a megastore is a physically large retail establishment, usually part of a chain of stores. The term sometimes also refers, by extension, to the company that operates the store. The ...
s and provided purchase orders to substantiate the deals, but the deals were phony and the documents were fakes. Most of the money lent to PCI was secured by
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of ...
s and sometimes
security agreement A security agreement, in the law of the United States, is a contract that governs the relationship between the parties to a kind of financial transaction known as a secured transaction. In a secured transaction, the Grantor (typically a borrower b ...
s; the lenders would wire the money to the two suppliers, which would pass it on to Petters Co., less a commission. As more lenders loaned to Petters Co., outstanding loans would be paid off or rolled into new loans from the same lender. Proceeds went to Petters Co. and to Petters himself, and were used to fund other Petters-owned companies, to pay others collaborating in the scheme and, according to court affidavits, for Petters' "extravagant lifestyle."Dan Browning
Longtime executive blew whistle on Petters fraud
''Star Tribune'', October 8, 2008, Accessed October 8, 2008.
Petters' legal troubles led to
Sun Country Airlines Sun Country Airlines is an ultra-low cost airline in the United States. Based at Minneapolis–Saint Paul International Airport with headquarters on airport property, Sun Country operates to about 140 destinations in the United States, Canad ...
filing for bankruptcy; the airline had been relying on an operating loan from Petters, who owned all the voting shares of Sun Country, to help the low-fare carrier pay its bills during the months of October and November 2008. In addition, Frank E. Vennes Jr., the CEO and sole shareholder of Metro Gem, under a plea agreement, was sentenced to 180 months in prison for aiding and abetting misrepresentations and omissions to investors related to the PCI notes. Metro Gem held 38 outstanding PCI notes with a total principal (face value) of $130.3 million The FBI Criminal Complaint identifies First Regional Bank, Los Angeles (Century City), California as the bank that moved more than 11 billion dollars through an account for Nationwide International Resources Inc. of Los Angeles. In a separate legal filing in February 2008, more than seven months before the Petters allegations surfaced, the
Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is a State-owned enterprises of the United States, United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was cr ...
(FDIC) issued a
cease and desist A cease and desist letter is a document sent by one party, often a business, to warn another party that they believe the other party is committing an unlawful act, such as copyright infringement, and that they will take legal action if the oth ...
order citing First Regional Bank for failing to comply with regulations regarding
money laundering Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...
with respect to
Individual Retirement Account An individual retirement account (IRA) in the United States is a form of pension provided by many financial institutions that provides tax advantages for retirement savings. It is a trust that holds investment assets purchased with a taxpayer's ...
s and violating rules regarding reporting suspicious activity.Federal Deposit Insurance Corporation
"Order to Cease and Desist"
Docket No. DIC-08-006b
On December 2, 2009, Tom Petters was found guilty in the U.S. District Court in St. Paul, Minnesota on 20 counts of conspiracy, wire and mail fraud. In April 2010, he was sentenced to 50 years in prison for his part in the fraud. Five other employees have pleaded guilty and are awaiting sentences. Petters' associate and primary fundraiser, Frank Vennes, has been charged with numerous counts of fraud and was sentenced to 15 years in prison. After more than three years of refusing to speak with the media, Petters spoke with ''Twin Cities Business'' magazine Editor in Chief Dale Kurschner, who spent several hours inside Leavenworth prison interviewing him. In the interview, which was published in the magazine's May 2012 issue, Petters maintained his innocence. It remains Petters' only interview since his arrest. In May 2012, Petters also filed a petition asking the U.S. Supreme Court to review his conviction and sentence. Petters is incarcerated at
United States Penitentiary, Leavenworth The Federal Correctional Institution, Leavenworth is a medium-security federal prison for male inmates in northeast Kansas. It is operated by the Federal Bureau of Prisons, a division of the United States Department of Justice. It also includes ...
in
Leavenworth, Kansas Leavenworth () is the county seat and largest city of Leavenworth County, Kansas, Leavenworth County, Kansas, United States. Part of the Kansas City metropolitan area, Leavenworth is located on the west bank of the Missouri River, on the site o ...
. His earliest possible release date is April 25, 2052, when he would be 94 years old.


Philanthropy

Petters was appointed to the
board of trustees A board of directors is a governing body that supervises the activities of a business, a nonprofit organization, or a government agency. The powers, duties, and responsibilities of a board of directors are determined by government regulatio ...
for the College of St. Benedict in 2002; his mother had attended the school. In 2006 he gave $2 million for improvements to St. John's Abbey on the campus of adjacent Saint John's University. In light of the criminal prosecution, St. John's Abbey arranged to return the $2 million gift to the court-appointed receiver for the Petters bankruptcy. In October 2007, Petters made a $5.3 million gift to the College of St. Benedict to create the Thomas J. Petters Center for Global Education. In 2006, he served as a co-chairman of a capital campaign at his high school, Cathedral High School, and offered to match donations up to $750,000. Petters formed the John T. Petters Foundation to provide gifts and endowments at select universities to benefit future college students. The foundation was formed to honor his son, John Thomas Petters, who was killed on a visit in 2004 to
Florence Florence ( ; ) is the capital city of the Italy, Italian region of Tuscany. It is also the most populated city in Tuscany, with 362,353 inhabitants, and 989,460 in Metropolitan City of Florence, its metropolitan province as of 2025. Florence ...
,
Italy Italy, officially the Italian Republic, is a country in Southern Europe, Southern and Western Europe, Western Europe. It consists of Italian Peninsula, a peninsula that extends into the Mediterranean Sea, with the Alps on its northern land b ...
. The college student inadvertently wandered onto private property where the owner, Alfio Raugei, mistook him for an intruder and stabbed him to death."Manslaughter Conviction In John Petters Slaying
, WCCO.com, July 1, 2005, Accessed October 8, 2008.
In response, in September 2004, Tom Petters pledged $10 million to his late son's college,
Miami University Miami University (informally Miami of Ohio or simply Miami) is a public university, public research university in Oxford, Ohio, United States. Founded in 1809, it is the second-oldest List of colleges and universities in Ohio, university in Ohi ...
.Tom Petters donates $10 million to his late son's college
''Minneapolis / St. Paul Business Journal'', September 17, 2004, Accessed October 8, 2008.
He later promised an additional $4 million, with the total to support two professorships and the John T. Petters Center for Leadership, Ethics and Skills Development within the Farmer School of Business.Dave Matthews
FBI raids MU donor's home, office
, ''Miami Student'', October 3, 2008, Accessed October 8, 2008.
Miami University has since returned Petters' donation following his conviction. Petters also donated $12 million to
Rollins College Rollins College is a Liberal arts college, private liberal arts college in Winter Park, Florida. It was founded in November 1885 and has about 30 undergraduate majors and several master's programs. Florida's fourth oldest post-secondary institut ...
in
Winter Park, Florida Winter Park is a city in Orange County, Florida, United States. The population was 29,795 according to the 2020 census. It is part of the Greater Orlando, Orlando–Kissimmee–Sanford, Florida Metropolitan Statistical Area. Winter Park was foun ...
, where he was a member of the Board of Trustees, to create two new faculty chairs in International Business.


References

{{DEFAULTSORT:Petters, Thomas 1957 births 2008 in economic history American businesspeople in retailing American people convicted of money laundering American prisoners and detainees American confidence tricksters Living people People from St. Cloud, Minnesota People from Wayzata, Minnesota Prisoners and detainees of the United States federal government Pyramid and Ponzi schemes American people convicted of fraud American businesspeople convicted of crimes People convicted of money laundering