By Thomas R. Collins
Mayor Tom Gerrard lives just seven houses down from where Tom Petters used to live. And as mayor, he probably comes into contact with more people than just about anyone else in town.
But Gerrard said he never heard of, let alone met, the former Minneapolis businessman and part-time Manalapaner. It’s probably just as well.
Petters, in a federal prosecution with echoes of the Bernie Madoff scandal, is accused of masterminding a $3.5 billion Ponzi scheme. In Minnesota, he’s gone from high-flying businessman to high-profile defendant, although the case has generally flown below the radar locally.
Petters says he’s innocent and his trial is scheduled to start Oct. 26.
The corporate titan seems to have stayed low-key in Manalapan, where he bought a house at 1840 S. Ocean Blvd. in 2004 for $8.75 million.
“I never even heard of the man,” Gerrard said. “If he had been involved in Manalapan locally, I would most likely have heard of him and I have not.”
The more Manalapan would have known of Tom Petters, the worse it might be feeling these days.
Petters was founder and chairman of Petters Group Worldwide, a collection of 20 companies, including Polaroid and Sun Country Airlines.
Federal prosecutors say investors in one of Petters’ companies, Petters Co. Inc., were led to believe they were buying merchandise which was then being re-sold for a profit to retailers such as Wal-Mart and Sam’s Club. But, prosecutors allege, there was actually little or no merchandise and the operation consisted mostly of faking documents and keeping the cash.
Petters’ former six-bedroom, three-level house in Manalapan — it was sold in July for $8.98 million to a former Bear Stearns executive and his wife — includes 11,179 square feet of living space and a total of 20,798 square feet. There’s a beach house and private dock.
The owner before Petters was Amway co-founder Richard DeVos.
It was originally listed at $11 million, but the timing was bad: The Madoff scandal had just broken when the house went on the market, and a bunch of mega-mansions had just been put up for sale.
“The Realtor down there told us we were running into the Madoff effect,” said Minneapolis attorney Doug Kelley, the receiver in charge of corralling Petters’ vast wealth.
The Manalapan house appears to have been the priciest of all the items in Petters’ glittering array of luxury possessions.
Petters’ former Minnesota house was listed for sale at $8.25 million. A mountainside home in Colorado sold earlier this year for $1.5 million. A second Florida house, in Winter Park, is assessed at $655,000. And still another of Petters’ houses was valued at $670,500.
It’s been quite a challenge for Kelley. He said he’s been comparing notes with the receivers who are trying to sort out Madoff’s assets. And they told him, “We have more money involved but yours is infinitely more complicated.” Madoff’s scam involved just one main company, while Petters had more than 150 corporations, Kelley said.
Petters’ companies did some work in Palm Beach County. “There was a local office that was down there and he conducted some business from there,” Kelley said. “I’m finding assets that run to the Charlie Chaplain estate in Switzerland to the Jamaican Lottery,” he said. “There are just so many things that are out there.” Petters’ monthly expenses totaled $227,000, according to court filings.
His 590-bottle wine collection just sold for $7,080 — $2 more per bottle than the appraised value.
Petters’ 37-foot yacht, kept at his Manalapan house, sold earlier this year for $127,000, Kelley said.
In the Midwest, Petters was philanthropic, donating $8.3 million to the College of St. Benedict for a study-abroad program and an arts center and $4 million to Miami University for a chair in Asian business.
He founded the John T. Petters Foundation, which awards scholarships for study-abroad programs. It’s named for Petters’ son, who was murdered in Italy in 2004. The foundation is a separate entity from Petters’ corporations and continues to operate.
He also gave $12 million to Rollins College in Winter Park, where his daughter Jennifer went to school.
The director of a Minnesota domestic abuse center, where Petters helped with fundraising, told the Minneapolis Star-Tribune he was “a compassionate man who, when asked, will help people out.”
Petters’ lawyers have shown no signs of backing down.
“Mr. Petters maintains his innocence,” his attorney Jon Hopeman said when the case first broke a year ago, “and intends to fight this.”
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