One phone call to the FBI on Sept. 8, 2008 put Minnesota on the map as the epicenter of a multi-million dollar ponzi scheme that defrauded investigators out of nearly $2 billion. Under the weight of potential consequences, Petters Investment Inc.
officer Deanna Coleman made the phone call to confess her involvement with Tom Petters in a 10-year, multi-billion dollar scheme. Her confession was countered with a request by the FBI. They wanted her to wear a wire.
Coleman agreed, and began to go about her regular business with Petters – all the while recording every word he said. Throughout the course of her assignment, she collected conversations in which Petters chronicled the history of the scheme — and ways to skirt responsibility, if the truth came to light. ADVERTISEMENT “Those recorded conversations chronicled the history of the scheme as well as the conspirators’ efforts to maintain the operation by obtaining new investors while lulling old ones,” an FBI press release states.
“ The recordings also detailed how the conspirators planned to avoid responsibility if the fraud was ever discovered.” The audio Coleman collected was crucial for the prosecution’s case against Petters. Yet it wasn’t the only leg the prosecution had to stand on.
The recordings were accompanied by recorded phone calls, e-mails, fraudulent records and testimony from an array of witnesses. Together, the information created the full picture necessary to convict Petters on Dec. 8, 2010 on 10 counts of wire fraud, five counts of money laundering, one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering and three counts of mail fraud.
He was later sentenced to 50 years in prison with no chance of parole. “I’m not satisfied that if he were released early, he wouldn’t re-offend,” U.S.
District Court Judge Richard H. Kyle said as he handed down the sentence, according to the FBI. The St.
Cloud native and once-Wayzata resident now calls Kansas’ Leavenworth Penitentiary home. The fall from grace Petters grew up in St. Cloud as one of seven children.
Business was a way of life for Petters’ family. Growing up, he worked for his great-grandfather at a fur and fabric shop. ADVERTISEMENT By the time he was 15, he tried a hand at business on his own with the creation of Ear Electronics.
He bought stereos and speakers at wholesale and turned around to sell them to college kids at a discount through a mail-in order system. After a semester in college, Petters moved to Colorado for a management position overseeing dozens of retail locations. The company, Top Brass, eventually went bankrupt.
Petters attempted to buy a number of its locations, but it fell through and he moved back to Minnesota. By 1988, he owned and operated a wholesale brokerage company that sold televisions to big box retailers, according to a 2012 interview Petters conducted with Twin Cities Business. By 1994, that company morphed and became known as Petters Company, Inc.
— the company at the center of the ponzi scheme. The next year, he opened Petters Warehouse Direct in Minnetonka, where he sold wholesale items for discounted prices. The trial against Petters would later prove that Petters, along with his associates, used the company to fraud investigators by convincing them to loan billions of dollars, with the promise of a healthy return on investment.
The prosecution argued that the scheme began on day one. At the center of this scheme were fake documents that ensured investigators that their funds would be used to purchase merchandise from suppliers, whose names were given to investors. Falsified documents were also created by Petters and his associates to show CI merchandise was being sold to large companies, such as Costco and Sam’s Club.
ADVERTISEMENT Throughout the course of the business transactions, Petters and his associated promised that portions of the profits would make their way back to investors. Instead, the purchases were never made. Funds received by investors weren’t coming from merchandise transactions.
Instead, the money was being moved around to pay investors. Payments were made to one investor on the back of another investor — a model that eventually caught up to him. “When Petters could not pay an investor on time, he employed delay and evasion tactics, such as promising payment in the near future, making up excuses about slow payments from retailers, or providing checks that bounced,” an FBI press release states.
Throughout the course of the 10-year ponzi scheme, Petters Company, Inc. went on to acquire Polaroid, Fingerhut and Sun Country Airlines, giving the illusion that his company was exceeding on all fronts. “In reality, investment funds were used to make lulling payments to previous investors, pay off those who assisted in the scheme, fund businesses owned or controlled by the co-conspirators, and finance Tom Petters’ increasingly extravagant lifestyle,” the FBI stated in a press release issued after Petters’ sentencing.
At the time he was arrested in 2008, Petters was living a lavish lifestyle, with impressive homes in Minnesota and Florida, a collection of expensive boats and cars, and a private jet. Petters’ Lake Minnetonka home and headquarters were raided on Sept. 24, 2008.
Inside the home and headquarters, FBI agents discovered he falsified documents at the heart of the ponzi scheme, and financial records indicating the way in which the scheme was run. ADVERTISEMENT Coleman, who made the call that started the investigation, received millions of dollars for her part in it all. Despite Coleman coming forward and wearing a wire to capture Petters admitting to wrongdoing, she did not go without punishment.
She was sentenced to one year in prison on one count of conspiracy to commit mail fraud. “While Deanna Coleman’s assistance in the Petters investigation was extremely valuable, she still had to pay a price for her own wrongdoing,” U.S.
Attorney B. Todd Jones said in a press release. “She worked with Petters and others to dupe people out of a lot of money.
However, in the end, she did the right thing by bringing this fraud into the light of day, and the sentence imposed reflects this choice of conscious over loyalty and greed.” In a 2012 interview with Twin Cities Business magazine, Petters maintained his innocence, claiming that he only discovered the ponzi scheme was operating under his nose shortly before the authorities were alerted — and he had every intention to sort it all out. Despite his claims, his sentence without the possibility of parole means the 67-year-old will be spending the rest of his life in prison — a far cry from his luxury home on Lake Minnetonka.
In 2020, the Department of Justice announced that an additional distribution of $22 million — adding to an already distributed $16 million — would be sent to 364 of Petters' investment victims around the world..
