Petters morning update: Two court dates, more money troubles
Thursday will be a big day for the Petters' alleged $3 billion Ponzi scheme case. Former CEO Tom Petters is scheduled to appear in court hoping to be set free while prosecutors build their case, according to the Star Tribune.
It's also the day that a top figure in the alleged scheme, Larry Reynolds, is expected to plead guilty in front of U.S. District Judge Paul Magnuson in St. Paul, according to pleadings filed Monday by federal prosecutors.
Reynolds, 65, of Las Vegas, is being held in protective custody. He allegedly helped launder cash that Petters had obtained from investors who thought he was buying electronics merchandise and selling it for a profit to big-box retailers.
The government says no such merchandise existed and that Petters used the money for other businesses, to pay debts and to maintain a lavish lifestyle.
If Reynolds goes through with the plea, he'll be joining Robert White, a former employee and consultant to Petters; Deanna Coleman, a former executive and government informant, and Michael Catain, a former business associate.
Each of his "conspirators" has said that Petters was "the leader of this enormous fraud scheme," Assistant U.S. Attorney John Marti said in arguing to continue holding Petters without bond. Petters' attorneys say he should be released to help prepare his defense.
There's some good news in the Petters story. Tiger Oak Publications bought GreatWater Media, formerly Metropolitan Media Group. The magazines basically shut down two weeks ago due to the fraud case, but will resume publication with little interruption, according to Minneapolis-St. Paul Business Journal.
Tiger Oak Publications Inc. closed on a deal Tuesday to buy Great Water Media, a magazine business owned by Petters Group Worldwide that includes Edina Magazine and Minnesota Business.
Great Water, formerly Metropolitan Media Group, had been bought by Petters Group this summer – months before Petters was hit by allegations of a massive fraud scheme involving former CEO Tom Petters. Petters Group Worldwide filed for chapter 11 bankruptcy protection on October 11.
The travails at Petters prompted Great Water to virtually shut down two weeks ago, with all employees being laid off while a buyer was sought.
Tiger Oak, which publishes Minnesota Bride, Twin Cities Metro, Seattle Magazine and several other publications, paid $275,000 for Great Water. The sale was approved last Thursday by U.S. District Court judge Ann Montgomery, and closed Tuesday.
Tiger Oak President and Publisher Craig Bednar said the company planned to continue publishing most of the magazines and will re-interview all the former employees.
Bednar said the acquisition would add about $4.5 million in revenue for Tiger Oak, bringing its total revenue to an estimated $21 million.
Petters is also causing financial hardship to a bank in Rochester, according to KSTP:
HMN Financial, Home Federal's parent company, reported a $7.1 million loss in its third-quarter earnings and cited a link to Petters on Monday.
The bank reported that a borrower took out a $12 million loan and passed it on to Petters Group Worldwide. Home Federal took a security interest in receivables from Petters' company as collateral.
Bank officials said before the case, the bank would have barely been in the black for the fourth quarter. But now, it has forced the bank's board to suspend payment of stock dividends.