Tom Petter Scandal

1043 Words May 11th, 2009 5 Pages
Petters Company International Scandal: The big hurt….

In 1988, Thomas Petters moved back to Minnesota and founded Amicus Trading, a wholesale brokerage; the name was later changed to The Petters Company, and it marketed consumer merchandise. In 1995 he started Petters Warehouse Direct to sell closeout, overstock and bankrupt company merchandise from a store in Minnetonka, Minnesota, additional locations followed in the Twin Cities and greater Minnesota. In 1998 he went online to sell discounted merchandise through redtag.com, operated by RedTag Inc.; by 2000 he sold his Petters Warehouse Direct stores to focus on his online business, based in Eden Prairie, Minnesota. He teamed up with direct-mail merchandise company, Fingerhut Companies
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Both individuals made plea bargains with prosecutors in exchange for information on how the alleged scheme worked. They noted that, at the direction of Petters, Coleman and White would fabricate documents for Petters and others to use to obtain billions of dollars in loans. The phony records were used as proof that Petters Co. was buying merchandise, generally electronic goods, from two suppliers (who were named as co-defendants). Petters Co. would tell lenders that it was selling the goods through big-box stores and provided purchase orders to substantiate the deals; however the deals were phony and the documents were fakes. Most of the money lent to PCI was secured by promissory notes and sometimes security agreements; the lenders would wire the money to the two suppliers, which would pass it on to Petters Co., less a commission. As more lenders loaned to Petters Co., outstanding loans would be paid off or rolled into new loans from the same lender. Proceeds allegedly went to Petters Co. and to Petters himself, and were used to fund other Petters-owned companies, to pay others collaborating in the scheme and, according to court affidavits, for "Petters' extravagant lifestyle." Petters' legal troubles led to Sun Country Airlines filing for bankruptcy; the airline had been relying on an operating loan from Petters, who owns all the voting shares of Sun Country, to help the low-fare

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