Doug Kelley has worked since 2008 to help organizations and individuals who lost billions in the Ponzi scheme of Twin Cities businessman Tom Petters, the biggest financial crime in Minnesota history.
The bankruptcy trustee’s search to collect assets related to Petters’ $ 1.925 billion program covered 26 countries, including the Cayman Islands, Luxembourg, Germany, Switzerland, the Netherlands and the British Virgin Islands.
Now, after 13 years, he says his job is almost done.
As of last week, $ 722 million has been recovered and returned to victims and creditors, according to a petition filed last week in U.S. District Court in Minneapolis to approve final costs and expenses and terminate receivership.
Only four or five cases remain, including one filed against the Bank of Montreal in Canada, which could bring in a “significant amount” more, Kelley said Monday.
“We can see the light at the end of the tunnel here,” Kelley said. “It has been a long, arduous process that has been bumpy at times, but I’m quite happy with the collective return of $ 722 million.”
Petters, 63, formerly of Wayzata, was indicted in 2008 on several counts of postal fraud, wire fraud, money laundering and conspiracy to exploit a Ponzi scheme. A year later, a federal jury found him guilty on all counts and he was sentenced by U.S. District Judge Richard Kyle to 50 years in prison.
He is being held at Federal Prison in Leavenworth, Kan .; his release date is May 13, 2051, according to the US Bureau of Prisons.
At the time of Petters’ conviction, Kyle said he did not believe Petters, the former owner of Polaroid and Sun Country Airlines, was unaware of the fraud. Petters, he said, “was the captain of the ship.”
Others involved in the business were also convicted. As part of their sentences, Petters and others were ordered to confiscate assets acquired through the Ponzi scheme, including bank and investment accounts, vehicles and real estate.
Kelley initiated more than 300 lawsuits, the majority of which were “claw-backs” or bankruptcy proceedings, to recover other employee benefits and bonuses received by Petters’ original investors or executives.
“Unraveling the scheme was complicated by the complexity and extent of the Petters fraud,” he wrote in the motion filed Wednesday. “While most Ponzi schemes involve a single individual or company at the epicenter of the scheme, Thomas Petters and his associates have employed dozens of companies, subsidiaries, affiliates and special purpose entities to carry out their fraud. In total, more than 150 of these entities were involved … On several occasions, government lawyers have compared the process of finding the required assets to an attempt to unravel a bowl of spaghetti.
The court file “confirms the scale of the task”, according to the petition, currently containing 3,230 entries.
The total amount distributed to date – $ 722,150,400 – includes creditors settlements and distributions; settlement distributions from lenders; payments to bankrupt assets and funds confiscated by the US government for distribution to victims, Kelley said. “It was teamwork,” he said.
The Petters case broke new ground in Ponzi scheme case law, according to Kelley.
“In 2008, Ponzi schemes like this had never been discovered before. That was before Madoff, ”he said, referring to Bernie Madoff, the mastermind of the biggest investment fraud in US history. “We went to the Eighth Circuit Court of Appeals, and we went to the Minnesota Court of Appeals. We went to the highest court in the land in England in cases originating from the Caribbean, and each time there was an unresolved law on the exact rules of collection. Many of these rules were established by the lawyers who represented me. “
According to the petition, the receivership fees and expenses – including Kelley’s fees, her attorneys’ fees, accounting fees and other fees and expenses – have not been paid since June 30, 2020. Kelley said that he had filed a separate petition asking for fees. and the costs of exceptional professional services provided.