Petters Scheme Blog – $36 Billion According to a report recently released by PricewaterhouseCoopers (the “PWC Report”), a total amount of $36 Billion flowed through the various entities that were the result of the Ponzi scheme run by former Minnesota business man Tom Petters (“Petters”). However, the total losses to investors as a result of the scheme totaled only $3.8 Billion, significantly less. It has been significantly reported that Doug Kelly, the Court-appointed receiver over the various entities owned and operated by Petters, has initiated numerous suits against individuals and entities that may have benefitted from this scheme despite being involved in its inner-workings. As a result, the Minnesota courts have been overwhelmed by lawsuits initiated by Kelly on behalf of these entities, seeking a claw back of funds received by third-parties as a result of this scheme. The most publicized claw back lawsuits are those against earlier investors who received significant returns on their investments, which have recently been determined to be the result of investments made by subsequent investors as a result of fraud. Less publicized but equally important are the lawsuits that will be initiated against service professionals who were hired and paid by the Petters entities for the services they provided.
For example, claims can be made against attorneys, accountants and other professional who provided various services for the Petters entities and were arguably paid for those services by way of funds solicited from investors as a result of fraud. If those professionals carried insurance for their services (such as errors and omissions insurance), it is even more likely that they will end up on the receiving end of a lawsuit initiated by Kelly on behalf of the Petters entities. Although these professionals may not have done anything wrong in performing their services and being paid for their time, Minnesota law arguably provides that they must refund the money they received if the source of that money was the fraudulent scheme involving the Petters entities. However, there are defenses that can be made in response to such complaints depending on the facts of the case. Regardless, any professionals who provided services to Petters or any of this entities can almost be assured that at some point they will be the subject of a claw back suit as part of the receiver’s efforts to collect funds to provide some compensation to those investors who collectively lost $3.8 Billion.