A federal judge in Minnesota today ruled that Thomas J. Petters, the multi-millionaire businessman and philanthropist arrested last week on investment fraud charges, could not be released on bail.
U.S. Magistrate Judge Jeffrey Keyes declared this morning in St. Paul that Petters, 51, the founder and former CEO of Petters Group Worldwide, posed a flight risk.
“There are no conditions or set of conditions that can reasonably assure his appearance at trial,” said Keyes, as reported by the Star Tribune of Minneapolis and St. Paul.
The name of the whistleblower who had alerted authorities to possible fraud at Petters Group also emerged today when Deanna Coleman, the vice president for operations at Petters Company. Inc., a unit of Petters Group, pleaded guilty to conspiracy to commit fraud.
It was revealed in court that she approached authorities early in September with information and agreed to cooperate in an investigation.
Petters was arrested Friday and charged with mail fraud, money fraud and money laundering in what has been described as a Ponzi scheme.
Authorities say that he and his associates lured investors by creating false assets. They then used the investment money for their own purposes, authorities say.
The FBI has alleged that Petters reportedly had $10 million in gambling losses. It also has tracked large payments to Petters associates.
Petters Group owns a variety of companies including Polaroid Corporation. All of the companies, with the exception of Sun Country Airlines, which has declared bankruptcy, have been placed in receivership.
As Petters awaits trial, the potential victims in what could be a scam involving billions of dollars are beginning to surface.
Bloomberg News has reported that Lancelot Investment Management LLC of Northbrook, Ill., had loaned Petters Group and its affiliates $1 billion, nearly all of its assets.
Gregory Bell, Lancelot’s president, told his investors in an e-mail that “it is impossible to determine the extent to which any assets will be recovered.”
Bloomberg also reported that investors in another hedge fund, Palm Beach Finance Holdings Inc., have hired a law firm to investigate Palm Beach’s activities with Petters.
An affidavit filed by the FBI describes Palm Beach as one of several “affiliated entities” connected to Petters Group.
One of the Palm Beach investors told Bloomberg that Palm Beach had loaned $1.1 billion to Petters concerns.
Interlachen Harriett Investments Limited, a hedge fund unit of the Minneapolis-based Interlachen Capital Group, has filed suit against Petters Group, saying it was scammed out of $60 million by Petters Group its affiliates.
Two Twin Cities nonprofits also have money at risk in investments with Petters Group or its subsidiaries.
The Fidelis Foundation had invested $27.6 million on behalf of Minnesota Teen Challenge, a faith-based group that helps youths with addiction problems.
Frank E. Vennes Jr., who had been a board member of Minnesota Teen challenge, is one of several people connected to Petters Group whose homes were searched last month by federal agents.
In an affidavit seeking authorization for the searches, Vennes is described as a broker who found investors for Petters Group. According to the affidavit, Vennes has received $28 million in commissions from Petters companies.
In 1987, Vennes pleaded guilty to money laundering and drug charges and then served time in prison. After his release, he unsuccessfully sued the FBI for coercing him into committing crimes.
According to the Star Tribune, Vennes found religion in prison.
He now runs several companies and is, according to the newspaper, a multimillionaire.
Vennes also goes back to prison to give inspirational talks. He has not been charged with any crimes in connection with the Petters group investigation.
Two of Petters’ business associates, Michael Catain, 52, and Larry Reynolds, 65, have been charged. Catain is scheduled to plead guilty today to money laundering and other charges.