Judge approves plan to give $172M to Petters' Ponzi scheme victims
A federal bankruptcy judge has approved a plan to provide $172 million to hedge funds and other creditors scammed by businessman Tom Petters.
Petters was arrested in 2008 and later convicted of running a multi-billion-dollar Ponzi scheme. He received a 50-year prison sentence.
His holdings included Sun Country Airlines, the Fingerhut catalog company and Polaroid. It turned out most of Petters' companies lost money, but he bilked investors out of billions of dollars. Investors thought they were financing the purchase of consumer electronics, but the goods didn't exist. The investors' money supported Petters' companies and his millionaire lifestyle for more than a decade.
To compensate victims, bankruptcy trustee Doug Kelley squeezed cash from Petters' personal holdings and some 150 companies, as well as from Petter's fellow fraudsters. Petter's stake in the Fingerhut mail order business yielded the most money — $140 million.
Create a More Connected Minnesota
MPR News is your trusted resource for the news you need. With your support, MPR News brings accessible, courageous journalism and authentic conversation to everyone - free of paywalls and barriers. Your gift makes a difference.
"The only really good investment that Tom Petters made was when he bought almost twenty percent of Fingerhut," Kelley said. "That has been the single biggest contributor to the estate."
Another $158 million had already been earmarked for other creditors. Among other Petters assets sold were Polaroid and Sun Country Airlines.
Professional fees for attorneys, accountants and others incurred in the effort to resolve the Petters' bankruptcy are expected to total about $100 million.
Kelley said it has taken much time and effort to unravel Petters' scam and assess who did what and determine the true losses parties suffered. He said the case fees and expenses passed muster with U.S. bankruptcy judge Gregory Kishel.
"Judge Kishell has said from the bench on several occasions they're high but they are necessarily so because of the complications of this case," Kelley said.
Kelley says other Ponzi schemes weren't as complex as Petters'. He said the Petters' case was even more complicated than Bernie Madoff's because of the 150 corporations Petters had.
Most parties ripped off by Petters are recovering 10 to 14 percent of their losses at this point. Kelley said he expects to recover additional money to compensate victims. How much is unclear.