Business

MINNEAPOLIS (AP) ― The chairman and CEO of Petters Group Worldwide and several associates allegedly schemed to defraud investors of $100 million or more since the 1990s, according to a search warrant unsealed Friday in U.S. District Court.

The search warrant, executed Wednesday at the company's Minnetonka headquarters, contains an affidavit alleging that Tom Petters, some employees of Petters Co. Inc. and associates created fictitious documents for current and potential investors.

The affidavit said the scheme tricked more than 20 investors and investment groups that had provided more than $100 million, and perhaps "substantially more." It said a person associated with Petters and PCI had approached authorities with documents and evidence of fraud.

Jon Hopeman, an attorney for Petters, said he would not comment in detail until he read the search warrant, which was unsealed shortly before the courts closed.

"Mr. Petters denies that he did anything wrong and intends to fight," Hopeman said.

Petters did not return phone messages left at his homes in Minnesota and Colorado.

According to the affidavit, Petters lured potential investors by telling them funds would be secured by certain transactions that were actually fictitious.

Investors were given false documents that PCI was purchasing merchandise from vendors such as Nationwide International Resource, based in Los Angeles, and Enchanted Family Buying Co., based in Excelsior, Minn. Additional purchase orders falsely said that PCI sold the same merchandise to stores such as BJ's Wholesale Club and Sam's Club.

"The purchase orders and other documents in support of the transactions are entirely fabricated," the affidavit said. "PCI does not buy merchandise from NIR or Enchanted. Nor does PCI sell merchandise as described ... Petters uses these documents to induce investors to invest money."

The affidavit said that on occasion, investors wanted to wire funds directly to NIR or Enchanted as payment for the false purchase orders provided by Petters. The affidavit said that in those cases, officials at NIR and Enchanted had agreements with Petters to receive the funds, then send them back to Petters, minus a percentage as their compensation for their part of the scheme.

Petters Group Worldwide comprises several companies, including Sun Country Airlines and Polaroid. Company spokeswoman Andrea Miller declined to comment on the contents of the warrant.

Federal officials executed search warrants for nine properties and two vehicles.

Only one search warrant, for the office of Robert White, was made public as U.S. District Court was closing Friday. White is listed in the warrant as a former PCI officer who still consults for the company.

The affidavit accuses White of making false purchase orders related to the fictitious sale of merchandise to BJ's, Sam's Club, Costco and Boscovs. Authorities also searched White's residence and two of his vehicles.

Attempts to reach White at home on Friday were unsuccessful, and his voicemail box was full.

An FBI affidavit says the witness who came forward was part of the scheme, and agreed to cooperate with investigators and plead guilty to a single count of conspiracy.

The witness told investigators that PCI is used by Petters for his other business ventures and "to support his extravagant lifestyle," the affidavit said.

The witness, who is not identified in the document, gave investigators a balance sheet for PCI and its affiliates that listed current liabilities of $3.5 billion, and accounts receivable of about $1.9 billion, according to the warrant. The witness said the accounts receivable figure was based on false documents, and the actual figure was "substantially less."

Through their investigation, authorities corroborated the witness's evidence, finding fictitious purchase orders for Wal-Mart stores or Sam's Club totaling over $10 million. The investigation also found $11.6 billion in wire transfers in and out of an NIR account from January 2003 through March 2006. Specifically, from Jan. 4 2006 through Jan 10, 2006, NIR received $51.3 million in 8 incoming wires, and the day after receiving each wire, NIR transferred the funds, less a 0.05 percent commission, to PCI, the affidavit said.

The warrant, signed by Judge Ann Montgomery, was issued on Sept. 19 and executed on Wednesday.

The warrant sought documents ranging from 1995 through the present.

The items seized from White's office include BlackBerrys, thumb drives, bank and other financial records, purchase orders, an $8.5 million check from NIR to PCI and a $1 million check from PCI to White.

The case is a joint investigation by the FBI, the IRS Criminal Investigation Division, and the U.S. Postal Inspection Service.

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Items federal agents seized at Tom Petters' Wayzata home in the fall of 2008 included $13,000 in cash, numerous credit cards, a .22 caliber revolver and 11 high-end watches, including four Rolexes.

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