Twin Cities Business Litigation Blog : Minneapolis Business Litigation Lawyer & Attorney : Gavin P. Craig Law Firm : St. Paul, Twin Cities, Minnesota MN

The Minneapolis Star Tribune is reporting that in the 16 months since the Petters was arrested, the lawyers and accountants have billed $12,000,000. Not bad for a few months work.

Apparently Petters criminal defense costs were paid by insurance, (I didn't realize that insurance coverage would cover criminal defense!) and that bill was $3.3 million. The remaining money was spent for accounting and searches in attempts to locate the money stolen by Petters and his crew. According to the article, the money was also used for the defense costs of the officers and others that turned states evidence.

Of the $3.65 Billion Ponzi scheme run by Petters and others, I understand that most of the money is still unaccounted for, so this effort has not been a tremendous success. What has been recovered is used in part to pay for the lawyers and accountants. The bottom line is that the victims are paying for the cost to try to recover what assets can be found. The last I heard, is that Petters is not talking.
 

• Email This
• Print
• Comments
• Trackbacks

When Tom Petters was convicted in US District court of multiple counts of fraud, I wondered why a supposedly smart person would resort to fraud. Bernie Madoff essential did the same thing. They paid the early investors with the money invested by later investors. Petters created phoney documents to show business activity that was a fiction, and was able to get other people to invest in his enterprise. Both Petters and Madoff became very wealthy, with other peoples money. Now they are both enjoying life at taxpayers expense.

What troubles me, besides the very fact that they would defraud innocent people, is that they were operating a scheme that could not succeed in the long run. Madoff's operation was surprisingly long lived, but wouldn't have lasted quite so long had the regulatory agencies done their jobs. But these schemes can not be successful in the long term. You can't keep bring in more money to pay off prior investors. Eventually you will run out of willing investors, and the truth will come out.

So, why would supposedly smart people do this? The only answer is that they were not smart enough to figure out that the fraud had a limited life, or they planned to leave the country. In the Petters case, Star Tribune reporters David Phelps and Aimee Blanchette had an interesting interview with the foreman of the Petters jury. In the end, Petters own e-mails were his undoing.

Since Petters contended that he was innocent, there was no revelation about the why, and what he would do once it became clear he was going to be caught. However, most of the money is still missing. Petters isn't talking, so perhaps he had plans but he was not able to leave before he was arrested. We probably will never know.
 

• Email This
• Print
• Comments
• Trackbacks