By PAUL THARP
Posted: 3:50 am
October 2, 2008
Billionaire Tom Petters fancied himself the next Warren Buffett - that is until his empire starting crashing down like a house of cards.
The feds accuse Petters, one of Minneapolis' fastest rising business stars, of secretly being at the center of an elaborate $2 billion corporate ruse, stretching over the past decade, while he hobnobbed with billionaires and movie stars.
Petters stepped down from his Minneapolis-based Petters Group Worldwide after federal agents raided his offices in several cities, acting on a tip from a disgruntled insider.
The first person to be charged in the scandal was one of his top executives, Robert Dean White, 37, who was charged Tuesday with mail fraud and money-laundering violations in the alleged Ponzi-style scheme.
The feds said in court documents that the Petters holding company would take money from investors and then buy unsold goods in liquidation sales, with the intent to sell them to national retailers. However, the FBI said the purchases were never made.
In one subsidiary alone, investors were bilked out of more than $100 million, investigators allege.
Petters, whose collection of brands include Polaroid, Sun Country Airlines and catalog giant Fingerhut, stunned colleagues and even raised questions about a surprise $120,000 cash gift he made to actress Elizabeth Hurley for her breast cancer awareness project.
Petters Group also may have burned a Toronto-based hedge fund, Northwater Capital Management, in the schemes.
Federal search warrants said as many as 20 investors in Petters' company, including Gottex Fund and Acorn Capital, could be out as much as $2 billion.
Court documents said an insider blew the whistle on the schemes, and had taped recordings in which Tom Petters "repeatedly admits executing the fraud scheme by providing fraudulent information to investors." The documents said he also "talks about fleeing the country and creating fabricated defenses if the fraud scheme is discovered."
A Petters spokeswoman said last week that the allegations do not involve Polaroid or Fingerhut. Petters' attorney has said that his client has done nothing wrong and will fight the allegations.
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