Warrant alleges fraud by Petters

Petters World Headquarters
The exterior of Petters World Headquarters that federal agents from the FBI, IRS and U.S. Postal Service searched earlier Wednesday. Later in the afternoon, officials confirmed they were searching Tom Petters personal residence.
MPR Photo/Brandt Williams

Late Friday afternoon the federal government revealed what FBI, IRS and other federal agents were looking for Wednesday when they raided the Petters Group headquarters and Tom Petters' home.

Tom Petters
Tom Petters is chairman and CEO of Petters Group Worldwide.
Photo courtesy of Petters Group Worldwide

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 unsealed documents say a witness, a woman, associated with Petters and his company came forward with documents and other information. She later wore a wire and recorded several conversations involving Petters and others who allegedly carried out the fraud.

The affidavit alleges Petters is caught on tape repeatedly admitting to the fraud scheme by providing false information to investors. He allegedly talks about fleeing the country if the scheme is discovered. The affidavit also said Petters admits to cheating on his taxes.

One alleged participant estimates the total fraud on investors exceeds $2 billion.

Special agent Paul McCabe
FBI special agent Paul McCabe talks on a cell phone outside of the Petters Group headquarters in Minnetonka, Minn. FBI, IRS and U.S. Postal agents executed a search warrant at Petters World Headquarters earlier this morning.
MPR Photo/Brandt Williams

The goal of the alleged scheme was to get the investors to provide money and financing for Petters Co. Inc.

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That's the venture capital arm for several Petters enterprises. PCI is one of some 60 companies that are part of the Petters Group.

The filing said Petters used money raised through PCI for other business ventures and to support an extravagant lifestyle.

According to the affidavit, investors were given false documents that showed PCI was purchasing electronics and other merchandise from suppliers. Meanwhile, fake purchase orders showed the same merchandise was sold to stores such as Sam's Club.

Petters attorney Jon Hopeman said Petters maintains he is not guilty, and he intends to fight any charges.

An FBI spokesman said Friday night that his agency and other law enforcement authorities had no comment on the case. No arrests or charges had been filed as of last night.

Sun Country Airlines said after the raid that the investigation would have no effect on the carriers' operations.