The Story of Tom Petters
Before anyone had heard of Bernie Madoff, Minnesota businessman Tom Petters carried out the largest Ponzi scheme in U.S. history.
His company, Petters Group Worldwide, owned brands like Polaroid and Fingerhut, as well as a controlling share of Sun Country Airlines. As federal agents learned, though, these legitimate businesses were propped up entirely by a $3.5 billion Ponzi scheme.
Petters sold promissory notes through his wholesale brokerage firm Petters Co. Inc., offering stunning returns of 15 percent to 20 percent. The company offered financing on the niche business known as diverting. Investors believed PCI was dealing in electronics and consumer goods, but there was no real merchandise bought and sold — and no real profits. Petters was running a scam.
Prosecutors say Petters defrauded investors to finance his "extravagant lifestyle," which included luxury homes, fancy cars, several yachts and a private jet. He was convicted of federal fraud charges in 2009 and is serving a 50-year prison sentence.
Click ahead for a glimpse into his lavish lifestyle and collapse of his multibillion-dollar Ponzi scheme.
By Drew Sandholm with CNBC.com
Posted 22 February 2012
Petters' Minnesota Mansion
Be it for his business acumen, ability to keep his fraud under wraps, or both, Petters watched as both his business empire and fortune steadily grew over the years. By 2008, he gained entry into the billionaire's club and enjoyed all the perks that came with it. He owned this $5 million home on Lake Minnetonka, an affluent area in the western suburbs of Minneapolis.
Home in Florida
Petters also purchased this $9.5 million home in Manalapan, Fla., a wealthy coastal community that sits between Palm Beach and Ocean Ridge. The sprawling estate boasted stunning views of the water, private beaches and a long dock at which he kept some of his yachts.
Collection of Yachts
Petters owned four yachts in total; two are pictured here. The boat at left is valued at $110,000, while the boat on the right is worth $142,000.
Bentley Continental GT
At each of Petters’ homes, fancy cars were parked in the garages. He owned this 2008 Bentley Continental GT. This sporty, two-door coupe is equipped with a 6.0 liter, twin-turbocharged W12 engine. A car like this will run you about $126,000.
Petters' Private Jet
To woo investors and sell his brand, Petters traveled the globe in style. He owned this Boeing-727, a midsize, narrow-body jetliner powered by three engines. The plane was customized for Petters. Its empennage sports the Petters branding and insignia.
Living The High Life
As Petters’ business empire grew, so did his public image, though he wasn’t all about the glitz and glam of the highlife. Petters became just as well-known for giving back to his community. He donated millions of dollars to dozens of charities and a few universities, including a $3 million gift to his mother's alma mater, the College of St. Benedict, and a $10 million pledge to Miami University of Ohio, where his son attended school.
In 2004, Petters started the John T. Petters Foundation to provide scholarships to college students for foreign travel. He spent up to $400,000 on lavish annual fundraising galas that were attended by many celebrities, including actor David Spade, pictured here.
Brushing Shoulders Power Players
Petters’ charity galas also attracted a “who’s who” of Minnesota politics, including former Minnesota Gov. Tim Pawlenty. The two-term governor would later make a bid for the 2012 Republican presidential nomination.
Ponzi Scheme Revealed
Petters was able to carry out his scam for 10 years undetected, but on Sept. 24, 2008, dozens of federal agents raided his headquarters. The feds were tipped off by a PCI employee, who wore a wire for two weeks and recorded hours of secret conversations.
On Oct. 4, 2008, Petters was arrested on charges of mail and wire fraud, money laundering, and obstruction of justice. Here is his booking photo from the Sherburne County Jail.
Conviction and Sentencing
On Dec. 2, 2009, Petters was convicted of all 20 counts he faced, including wire fraud, mail fraud and money laundering. A few months later, a federal judge sentenced him to 50 years in prison.
Today, Petters is serving his time in Leavenworth Prison in Kansas. He is appealing his conviction and maintains his innocence.
Season 6 of American Greed
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