1 00:00:02,380 --> 00:00:08,220 In this episode of American Greed, in Minnesota's Twin Cities, billionaire Tom 2 00:00:08,220 --> 00:00:10,680 Petters is the face of business success. 3 00:00:11,220 --> 00:00:15,200 He was a deal chaser and a deal maker, you know. He was a mover and shaker. You 4 00:00:15,200 --> 00:00:17,260 couldn't hold Tom down. 5 00:00:17,620 --> 00:00:20,360 Eight million dollar house out in Lake Minnetonka. 6 00:00:20,880 --> 00:00:23,000 I think the one at Palm Beach was $15 million. 7 00:00:23,400 --> 00:00:27,440 A local boy made good who never forgets where he came from. 8 00:00:27,660 --> 00:00:31,180 We are a very caring company. That's one of our core values. This is a hometown 9 00:00:31,180 --> 00:00:36,580 guy who cares about his hometown, who cares about people losing their jobs. 10 00:00:36,580 --> 00:00:42,860 guy is the real deal, nothing to worry about. There seemed to be no reason at 11 00:00:42,860 --> 00:00:46,560 all to suspect that something was awry. 12 00:00:47,130 --> 00:00:50,210 Everything about Petters is blue -chip, or so it seems. 13 00:00:50,710 --> 00:00:55,750 His companies include iconic American brand Polaroid, Sun Country Airlines, 14 00:00:55,750 --> 00:01:00,570 retailer Fingerhut. But Tom Petters' reputation is built on a foundation of 15 00:01:00,570 --> 00:01:04,810 lies. His legitimate business is purchased with dirty money. 16 00:01:05,069 --> 00:01:06,910 Petters wasn't really that smart. 17 00:01:07,190 --> 00:01:09,190 He wasn't really that good a businessman. 18 00:01:09,800 --> 00:01:15,040 But he was a damn good confidant. And when his closest confidant turns on him, 19 00:01:15,220 --> 00:01:20,400 the Tom Petters empire, all $3 .5 billion of it, begins to crumble. 20 00:01:20,720 --> 00:01:22,240 This is one big fraud. 21 00:01:22,600 --> 00:01:25,360 That's what it is, and that's how I deal with it. 22 00:01:44,300 --> 00:01:47,740 Las Vegas, September 24th, 2008. 23 00:01:49,880 --> 00:01:54,660 The Bellagio Hotel is a favorite haunt of billionaire CEO Tom Petters. 24 00:01:55,760 --> 00:02:00,460 This morning, he has a 7 a .m. wake -up call, but it's not housekeeping or room 25 00:02:00,460 --> 00:02:01,460 service. 26 00:02:02,500 --> 00:02:03,620 It's the FBI. 27 00:02:04,200 --> 00:02:08,520 The head FBI agent, who was a woman, knocked on his door. 28 00:02:08,740 --> 00:02:11,000 Petters called lawyers and clammed up. 29 00:02:11,760 --> 00:02:17,200 Back home in Minnesota, more than 50 federal agents are rating his company, 30 00:02:17,400 --> 00:02:21,160 Petters Group Worldwide, on suspicions of fraud. 31 00:02:23,320 --> 00:02:26,700 It's a dramatic about -face for the well -respected CEO. 32 00:02:27,940 --> 00:02:32,540 For more than a decade, his high -flying lifestyle takes him around the world, 33 00:02:32,780 --> 00:02:36,420 wooing investors and selling the Petters brand. 34 00:02:37,390 --> 00:02:41,690 Tricia Volpe reports on Petters' dealings for NBC affiliate KARE. 35 00:02:42,210 --> 00:02:47,290 He was what many people would consider the American dream come true. 36 00:02:47,530 --> 00:02:53,530 And he built himself up to be the consummate tycoon, corporate tycoon, to 37 00:02:53,530 --> 00:02:58,630 owner, the president, the CEO of some of the most recognizable companies in the 38 00:02:58,630 --> 00:03:04,750 world. Petters employs 3 ,200 people, has more than 50 offices around the 39 00:03:05,150 --> 00:03:09,190 And in 2007, report $2 .3 billion in revenue. 40 00:03:09,970 --> 00:03:12,790 Our companies aspire to be the best. 41 00:03:13,070 --> 00:03:15,810 But today, Tom Petters is under siege. 42 00:03:16,210 --> 00:03:20,810 His public face hides a desperate man at the end of his rope on the Las Vegas 43 00:03:20,810 --> 00:03:24,930 Strip. And the FBI is catching it all on tape. 44 00:03:38,670 --> 00:03:42,130 The story begins in the small town of St. Cloud, Minnesota. 45 00:03:42,430 --> 00:03:44,130 The year is 1973. 46 00:03:45,050 --> 00:03:50,570 And at just 16 years of age, young Tom Petters is already showing a passion for 47 00:03:50,570 --> 00:03:51,570 business. 48 00:03:51,630 --> 00:03:55,110 He opens his own store called Ear Electronics. 49 00:03:55,730 --> 00:03:59,770 Petters' sister, Becky Randa, recalls his humble beginnings. 50 00:04:00,390 --> 00:04:05,510 It started in our basement, and then he went to head a business downtown when he 51 00:04:05,510 --> 00:04:06,590 was supposed to be in high school. 52 00:04:07,360 --> 00:04:12,520 And he had an office with his secretary, and he was guaranteeing the lowest 53 00:04:12,520 --> 00:04:13,520 prices in the nation. 54 00:04:14,100 --> 00:04:19,700 Petters even hires salespeople, marketing his goods to college kids, 55 00:04:19,700 --> 00:04:20,700 mother finds out. 56 00:04:21,019 --> 00:04:24,320 She was listening to the radio, and they were interviewing Tommy, and she 57 00:04:24,320 --> 00:04:26,880 thought he was in school, but he was not. 58 00:04:28,980 --> 00:04:33,800 In the early 1980s, Petters marries, starts a family, and heads west. 59 00:04:34,510 --> 00:04:39,630 He manages a small chain of electronics stores in Colorado and eventually buys 60 00:04:39,630 --> 00:04:40,630 the company. 61 00:04:41,130 --> 00:04:43,850 In 1990, Petters files for bankruptcy. 62 00:04:44,990 --> 00:04:49,450 Authorities say he leaves a trail of unpaid debt in his wake when he skips 63 00:04:49,450 --> 00:04:54,450 and heads home to Minnesota, divorced, jobless, and flat broke. 64 00:04:55,000 --> 00:04:57,740 I think he was overwhelmed. He had, you know, two little kids, and he was 65 00:04:57,740 --> 00:04:58,740 extremely broke. 66 00:04:58,900 --> 00:05:02,500 He essentially had nothing, and he was looking for the next thing. 67 00:05:02,960 --> 00:05:08,180 Tom Petters, always the businessman, always the salesman, was looking for the 68 00:05:08,180 --> 00:05:09,180 next sale. 69 00:05:10,100 --> 00:05:14,720 With a loan from his brother, Petters launches a new venture, the Petters 70 00:05:14,720 --> 00:05:16,580 Company, Inc., or PCI. 71 00:05:17,240 --> 00:05:22,400 It's a brokerage of opportunity goods, odd lots of closeout or distressed 72 00:05:22,400 --> 00:05:24,180 products that Petters buys up. 73 00:05:24,520 --> 00:05:26,480 and resells to big -box stores. 74 00:05:29,940 --> 00:05:34,640 Harold Simmons has worked as a salesman with Petters for more than a decade. 75 00:05:36,400 --> 00:05:40,860 If it was a $10 item, we could buy that product for $5. 76 00:05:41,740 --> 00:05:45,920 And if we could sell it for $7, we made good margins. 77 00:05:46,620 --> 00:05:51,020 In 1995, Petters decides to try his hand at retail once again. 78 00:05:51,470 --> 00:05:54,510 with a chain of stores called Pedder's Warehouse Direct. 79 00:05:55,150 --> 00:05:56,730 We were in the closeout business. 80 00:05:57,130 --> 00:06:01,470 In this promotional video, employee Deanna Coleman, who goes on to play a 81 00:06:01,470 --> 00:06:05,970 role in Pedder's fraud scheme, describes how it all started. Tom got a phone 82 00:06:05,970 --> 00:06:09,150 call from Kmart about two trailer loads of return merchandise. 83 00:06:09,890 --> 00:06:12,310 And, of course, Tom doesn't ever turn down a deal. 84 00:06:12,590 --> 00:06:16,330 So what did Tom decide to do? He decided to open up Pedder's Warehouse Direct, 85 00:06:16,550 --> 00:06:19,410 and he wanted it to open the day after Thanksgiving. 86 00:06:20,430 --> 00:06:22,530 This time, Petters finds success. 87 00:06:22,850 --> 00:06:27,910 In a few years, he has 12 stores in Minneapolis and North Dakota with annual 88 00:06:27,910 --> 00:06:29,510 revenues of $20 million. 89 00:06:30,870 --> 00:06:33,210 But Petters has bigger aspirations. 90 00:06:33,410 --> 00:06:37,330 And with the rise of the Internet, he jumps on opportunities to sell to the 91 00:06:37,330 --> 00:06:43,890 masses, starting international sailor RedTag .com and buying retail auction 92 00:06:43,890 --> 00:06:45,310 YouBid .com. 93 00:06:45,690 --> 00:06:47,970 Tom had a brilliant mind, still does. 94 00:06:50,250 --> 00:06:53,050 Put together deals, he was the best I ever saw. 95 00:06:54,330 --> 00:06:56,590 But they couldn't hold his attention. 96 00:06:57,670 --> 00:07:01,110 After he put them together, he was pretty much through with them, and he 97 00:07:01,110 --> 00:07:02,110 looking for the next deal. 98 00:07:03,050 --> 00:07:07,790 The deal that really puts Petters on the map is the purchase of Finger Hut in 99 00:07:07,790 --> 00:07:08,790 2002. 100 00:07:09,250 --> 00:07:13,970 The Minnesota -based catalog wholesaler is in danger of being shuttered by 101 00:07:13,970 --> 00:07:16,510 parent company Federated Department Stores. 102 00:07:17,160 --> 00:07:21,360 Until Tom Petters becomes the savior of St. Cloud by teaming up with another 103 00:07:21,360 --> 00:07:23,940 Minnesota businessman to purchase the company. 104 00:07:24,380 --> 00:07:29,900 This was certainly a good thing because it saved jobs, and it also helped 105 00:07:29,900 --> 00:07:34,940 contribute to his image. You know, this is a hometown guy who cares about his 106 00:07:34,940 --> 00:07:38,720 hometown, who cares about people losing their jobs, and he wanted to do 107 00:07:38,720 --> 00:07:39,720 something about it. 108 00:07:39,860 --> 00:07:45,160 As Petters cashes in on his newfound status as a hometown hero, his public 109 00:07:45,160 --> 00:07:46,400 appears to be golden. 110 00:07:47,100 --> 00:07:50,880 We are a very caring company. That's one of our core values, caring about the 111 00:07:50,880 --> 00:07:54,580 people you work with, caring about the communities you live in, caring about 112 00:07:54,580 --> 00:07:57,060 person that works next to you, caring about families. 113 00:07:57,400 --> 00:08:00,740 But investigator Randy Shane uncovers a different story. 114 00:08:01,480 --> 00:08:05,840 He's hired to check out Petter's operation by a financial group looking 115 00:08:05,840 --> 00:08:09,140 money into a hedge fund that invests heavily with Petter's. 116 00:08:09,960 --> 00:08:15,120 Shane's first tell is Petter's profile on business information service Dun and 117 00:08:15,120 --> 00:08:19,660 Bradstreet. And in that report, it said that Mr. Petter's graduated from a 118 00:08:19,660 --> 00:08:21,840 Minnesota college called St. Cloud University. 119 00:08:22,380 --> 00:08:26,320 We then sought to verify that, and it turned out he attended for a semester, 120 00:08:26,580 --> 00:08:32,039 which is pretty much as broad a gap as you can get, right? I mean, not eight 121 00:08:32,039 --> 00:08:34,039 semesters, not six, not five. 122 00:08:35,810 --> 00:08:41,090 Shane asks himself, what else could Petters be lying about? And he keeps 123 00:08:41,090 --> 00:08:46,950 digging. What we started to see was a number of, a great number of lawsuits 124 00:08:46,950 --> 00:08:53,610 naming him and or his company over a period of approximately 13 or 14 years 125 00:08:53,610 --> 00:08:58,010 in which he was getting accused of simply not paying money back or not 126 00:08:58,010 --> 00:08:59,430 for products that he had purchased. 127 00:09:00,620 --> 00:09:04,980 Worse, Shane discovers that Petters had been convicted of check fraud in 128 00:09:04,980 --> 00:09:09,060 Colorado in 1990 and had even become a fugitive. 129 00:09:09,400 --> 00:09:14,180 According to the records we saw, he was extradited from Minnesota to Colorado to 130 00:09:14,180 --> 00:09:15,180 go to jail. 131 00:09:15,260 --> 00:09:20,160 Years later, Petters hires an attorney to get the file sealed, and little more 132 00:09:20,160 --> 00:09:21,680 is known about the incident. 133 00:09:22,480 --> 00:09:27,000 Now, we never were able to get the final records of how long he served and so 134 00:09:27,000 --> 00:09:31,600 on, but from everything we saw, he actually was reporting to jail in mid 135 00:09:32,400 --> 00:09:36,460 Shane reports his findings, and his clients decide not to invest. 136 00:09:36,740 --> 00:09:41,940 But many others are lured in by Tom Petter's big smile, his charisma, and 137 00:09:41,940 --> 00:09:43,620 promises of huge returns. 138 00:09:44,740 --> 00:09:49,680 Next on American Greed, Tom Petter's empire appears to be rock solid. 139 00:09:50,380 --> 00:09:51,860 But is it all an illusion? 140 00:09:52,220 --> 00:09:57,420 It was, in fact, one of the biggest frauds in Minnesota history and the 141 00:09:57,420 --> 00:10:00,400 fraud in the nation's history before Bernie Madoff came along. 142 00:10:08,640 --> 00:10:13,940 In the early 2000s in Minnesota's Twin Cities, entrepreneur Tom Petters is 143 00:10:13,940 --> 00:10:14,980 making big moves. 144 00:10:15,400 --> 00:10:19,020 He owns a successful local chain of warehouse direct stores. 145 00:10:19,760 --> 00:10:21,500 multiple Internet retail sites. 146 00:10:21,940 --> 00:10:27,140 And his recent acquisition of catalog retailer Fingerhut puts him among the 147 00:10:27,140 --> 00:10:28,740 players in Minnesota business. 148 00:10:29,400 --> 00:10:33,300 He was a deal chaser and a deal maker. You know, he was a mover and shaker. You 149 00:10:33,300 --> 00:10:36,100 couldn't hold Tom down. 150 00:10:36,680 --> 00:10:40,880 I've learned when I get excited about something, I've got to pull myself back. 151 00:10:42,180 --> 00:10:43,760 And I've got to be able to look. 152 00:10:44,040 --> 00:10:45,040 I've got to handle it. 153 00:10:45,500 --> 00:10:46,700 And then they opened my mouth. 154 00:10:47,360 --> 00:10:51,580 Because when I walk out of a meeting, God knows, every executive or person in 155 00:10:51,580 --> 00:10:55,220 this company that knows me, knows they might hear me go, let's go on this 156 00:10:55,220 --> 00:11:01,040 project. The deals were getting bigger and Tom didn't have the financing to 157 00:11:01,040 --> 00:11:03,260 bankroll the deals. 158 00:11:04,500 --> 00:11:07,060 So therefore that brought on the investors. 159 00:11:09,480 --> 00:11:14,260 Petters begins trading on his reputation, offering potential investors 160 00:11:14,260 --> 00:11:15,260 of the dream. 161 00:11:15,790 --> 00:11:21,190 Through his Petters Company Inc., or PCI, a wholesale brokerage firm focusing 162 00:11:21,190 --> 00:11:23,710 a niche business known as diverting. 163 00:11:24,210 --> 00:11:31,030 Diverting is taking product, closeouts, out -of -dates, 164 00:11:31,090 --> 00:11:34,470 that would not sell to the big box stores. 165 00:11:36,450 --> 00:11:40,930 They would sell them to us. We would divert them into another company that 166 00:11:40,930 --> 00:11:41,930 divert them into that. 167 00:11:42,270 --> 00:11:46,090 into the big -box stores. That's diverting. That's the way it all came 168 00:11:47,110 --> 00:11:52,870 Petters decides to offer promissory notes, essentially IOUs with 60 - or 90 169 00:11:52,870 --> 00:11:55,470 terms and stunningly high returns. 170 00:11:56,390 --> 00:12:02,750 I recall the interest rates being 20%, maybe a little more than that. 171 00:12:03,800 --> 00:12:08,040 Doug Van Dyke is recently retired from a 30 -year career as an engineer. 172 00:12:08,280 --> 00:12:12,440 He and his wife learn about the deal through a mutual friend of Tom Petter's. 173 00:12:12,860 --> 00:12:16,500 Before jumping in, Van Dyke does his due diligence. 174 00:12:17,380 --> 00:12:24,180 Everybody came back with, this guy is the real deal, nothing to worry about, 175 00:12:24,440 --> 00:12:25,440 this is good. 176 00:12:26,000 --> 00:12:32,780 And so there seemed to be no reason at all to suspect that something 177 00:12:32,780 --> 00:12:33,780 was awry. 178 00:12:34,240 --> 00:12:39,680 For more than six years, he leaves his entire nest egg, several hundred 179 00:12:39,680 --> 00:12:42,200 dollars, in what he thinks are good hands. 180 00:12:42,480 --> 00:12:46,080 And the Van Dykes are able to live comfortably off their returns. 181 00:12:46,640 --> 00:12:52,800 There was literally hundreds of thousands of dollars that were earned as 182 00:12:53,390 --> 00:12:58,050 They fund their favorite Christian charities, purchase a spacious lakeside 183 00:12:58,050 --> 00:13:02,110 retirement home in northern Michigan, and a winter condo in south Florida. 184 00:13:02,530 --> 00:13:09,450 I'm a heavy -duty water skier, believe it or not, and so it was something that 185 00:13:09,450 --> 00:13:15,770 allowed me to be able to water ski year -round. We had our boats up at... 186 00:13:16,590 --> 00:13:18,830 the home on Lake Leelanau in the summertime. 187 00:13:19,470 --> 00:13:23,770 Petters' steady returns even attract the attention of hedge fund managers around 188 00:13:23,770 --> 00:13:27,250 the country who begin feeding him hundreds of millions of dollars. 189 00:13:27,590 --> 00:13:30,130 And Tom Petters is becoming filthy rich. 190 00:13:30,750 --> 00:13:35,970 So rich, his Petters Group Worldwide is able to start acquiring dozens more 191 00:13:35,970 --> 00:13:42,250 companies. In one of his most high -profile moves in early 2005, Petters 192 00:13:42,250 --> 00:13:45,490 Worldwide purchases the iconic brand Polaroid. 193 00:13:45,870 --> 00:13:47,610 For $426 million. 194 00:13:48,570 --> 00:13:55,210 Then from there, he started, you know, taking the 195 00:13:55,210 --> 00:14:00,530 Polaroid name and putting it on TVs, which had never been, DVDs. 196 00:14:01,170 --> 00:14:04,130 He exposed the Polaroid name. 197 00:14:05,110 --> 00:14:08,030 They were losing money big time when he bought them. 198 00:14:08,410 --> 00:14:10,770 But he bought it for the name. 199 00:14:11,560 --> 00:14:17,300 A year later, the CEO starts Petters Aviation and buys a controlling 50 % 200 00:14:17,300 --> 00:14:20,080 in Minneapolis -based Sun Country Airlines. 201 00:14:20,940 --> 00:14:26,620 It suddenly puts Petters worldwide on a national and an international stage. 202 00:14:27,340 --> 00:14:33,100 And according to Petters' sister, Becky Randa, the small -town Minnesota boy has 203 00:14:33,100 --> 00:14:34,280 truly arrived. 204 00:14:34,780 --> 00:14:36,040 Well, it definitely changed. 205 00:14:36,730 --> 00:14:40,990 We went to a family reunion. They picked us up in a Learjet and took us there. 206 00:14:41,110 --> 00:14:42,110 It was fun. 207 00:14:42,970 --> 00:14:49,750 By 2008, Tom Petters gains entry into the Billionaires Club, enjoying all the 208 00:14:49,750 --> 00:14:51,850 toys and trappings that come with membership. 209 00:14:52,560 --> 00:14:57,200 $8 million house out in Lake Minnetonka. I think the one at Palm Beach was $15 210 00:14:57,200 --> 00:14:59,140 million that he bought it for. 211 00:14:59,380 --> 00:15:01,920 And each one of those places usually had a Bentley. 212 00:15:02,120 --> 00:15:06,000 You would have a boat. Rolex watches were important to him. 213 00:15:06,980 --> 00:15:13,360 Petters also trades in the Learjet for a private customized Boeing 727 that 214 00:15:13,360 --> 00:15:17,860 flies him around the world, where he likes to wine and dine potential 215 00:15:18,600 --> 00:15:21,620 But Petters' public image isn't all about the glitz. 216 00:15:22,030 --> 00:15:23,930 He's just as well known for giving back. 217 00:15:24,690 --> 00:15:26,910 He's a major political contributor. 218 00:15:27,410 --> 00:15:31,590 And he donates millions of dollars to dozens of charities and universities in 219 00:15:31,590 --> 00:15:37,230 the area, including $3 million to his mother's alma mater, the College of St. 220 00:15:37,370 --> 00:15:43,270 Benedict, and a $10 million pledge to Miami of Ohio University, where his son 221 00:15:43,270 --> 00:15:47,030 attended, for a proposed Center on Leadership and Ethics. 222 00:15:47,580 --> 00:15:51,120 This is a guy that had a tremendous impact on this community. 223 00:15:51,360 --> 00:15:55,620 He gave money away. He was involved in community organizations. 224 00:15:55,900 --> 00:15:59,460 I mean, he, everyone knew him. Everyone loved him. 225 00:15:59,980 --> 00:16:06,520 Next on American Greed, is Tom Petters an entrepreneurial philanthropist or a 226 00:16:06,520 --> 00:16:07,560 self -serving criminal? 227 00:16:08,160 --> 00:16:12,860 It's easy to be charitable when you're giving away other people's money. 228 00:16:21,960 --> 00:16:26,680 At the start of 2008, Tom Petters is one of the Twin Cities' richest 229 00:16:26,680 --> 00:16:32,500 businessmen. In less than 15 years, Petters has gone from flat broke to 230 00:16:32,500 --> 00:16:38,040 and CEO of Petters Group Worldwide, with a personal net worth of $1 billion. 231 00:16:38,740 --> 00:16:44,300 I mean, Tom Petters was a local Horatio Alger story. 232 00:16:44,560 --> 00:16:51,460 He acquired an interest in the Fingerhut Corporation. He bought Polaroid. 233 00:16:51,820 --> 00:16:54,620 He purchased Fun Country Airlines. 234 00:16:55,980 --> 00:16:58,980 His rise was meteoric. 235 00:16:59,380 --> 00:17:02,160 Our core values tie into our entrepreneurial spirit. 236 00:17:02,520 --> 00:17:05,819 But it hasn't been all triumph for the billionaire CEO. 237 00:17:06,619 --> 00:17:11,319 In 2004, amidst some of the biggest business deals of his life, the dream is 238 00:17:11,319 --> 00:17:17,119 tragically interrupted when his 21 -year -old son, John T. Petters, known as JT, 239 00:17:17,380 --> 00:17:20,180 takes a spring break trip to Florence, Italy. 240 00:17:20,859 --> 00:17:23,420 in what has been deemed a horrible misunderstanding. 241 00:17:24,380 --> 00:17:29,300 J .T. was in a private garden with a friend late at night when he was stabbed 242 00:17:29,300 --> 00:17:31,700 a local man who thought he was a burglar. 243 00:17:32,000 --> 00:17:34,620 He bled to death before medics could save him. 244 00:17:35,000 --> 00:17:36,840 Tom Petters is devastated. 245 00:17:37,480 --> 00:17:40,800 He was horrified. I mean, he loved J .T. so much. 246 00:17:43,080 --> 00:17:45,360 He just fell apart, absolutely fell apart. 247 00:17:46,080 --> 00:17:47,680 He was depressed. 248 00:17:48,190 --> 00:17:49,190 He was down. 249 00:17:49,490 --> 00:17:53,730 He started drinking. He started abusing prescription drugs. 250 00:17:54,090 --> 00:17:59,050 Tom Petters had this enormous business empire to run. So when he started to 251 00:17:59,050 --> 00:18:04,830 of lose sight of things and started to become withdrawn and very sad and 252 00:18:04,830 --> 00:18:09,510 depressed about his son, that no doubt had an effect on the business. 253 00:18:09,890 --> 00:18:15,470 But in March of 2004, Tom Petters decides to turn his personal tragedy 254 00:18:15,470 --> 00:18:16,470 opportunity. 255 00:18:16,830 --> 00:18:21,390 He starts the John T. Petters Foundation to provide scholarships to college 256 00:18:21,390 --> 00:18:23,010 students for foreign travel. 257 00:18:23,310 --> 00:18:26,490 We created a foundation, so now we're raising money. 258 00:18:26,710 --> 00:18:28,390 His daughter, Jenny, is the chairman. 259 00:18:29,050 --> 00:18:34,530 Petters spends upwards of $400 ,000 on lavish annual fundraising galas, 260 00:18:34,590 --> 00:18:40,430 attracting the likes of Michael Strahan, Kevin Nealon, David Spade, and the 261 00:18:40,430 --> 00:18:44,550 who's who of Minnesota politicians, including Governor Tim Pawlenty. 262 00:18:45,850 --> 00:18:50,690 The way Petters publicly handles his personal tragedy makes him even more of 263 00:18:50,690 --> 00:18:52,290 respected figure in the Twin Cities. 264 00:18:52,550 --> 00:18:57,330 Everyone, it seems, trusts Tom Petters and wants to invest with him. 265 00:18:57,690 --> 00:19:02,710 We're doing a $2 billion fund called Petters Strategy Growth Fund. 266 00:19:02,990 --> 00:19:07,870 It'll include some investment banks. It'll include some lenders. It'll 267 00:19:07,870 --> 00:19:08,870 some hedge funds. 268 00:19:08,950 --> 00:19:10,650 People were drawn to him. 269 00:19:11,000 --> 00:19:16,380 The grandiose parties, the lavish lifestyle, as well as the success in 270 00:19:16,380 --> 00:19:20,420 and giving his money away to charity, it was because of that that people looked 271 00:19:20,420 --> 00:19:23,560 at Tom Petters and said, this is a legitimate man. 272 00:19:24,020 --> 00:19:25,620 I'm going to give him some of my money. 273 00:19:26,780 --> 00:19:27,860 Or a lot of it. 274 00:19:28,540 --> 00:19:33,080 In the booming financial climate of the mid -2000s, Petters has no problem 275 00:19:33,080 --> 00:19:38,020 securing hundreds of millions of dollars time and again, mainly from high 276 00:19:38,020 --> 00:19:39,020 -rolling hedge funds. 277 00:19:39,690 --> 00:19:44,850 Petters is promising 15 to 20 percent returns through his Petters Company, 278 00:19:44,850 --> 00:19:48,490 or PCI, which handles financing for his diverting deals. 279 00:19:49,350 --> 00:19:52,770 Dave Phelps is a reporter for the Minneapolis Star Tribune. 280 00:19:54,110 --> 00:20:01,070 Investors were led to believe that Petters Company, Inc. was buying 281 00:20:01,070 --> 00:20:06,770 electronic goods, consumer electronic goods, at a discount and selling them 282 00:20:06,770 --> 00:20:10,780 to... big box retailers like Costco or Sam's Club. 283 00:20:11,240 --> 00:20:13,980 Although Petters has more than 3 ,000 employees, 284 00:20:14,760 --> 00:20:19,400 PCI is made up of just a few people who have been with him for years, namely 285 00:20:19,400 --> 00:20:25,880 Deanna Coleman, Petters' one -time secretary turned operations manager, and 286 00:20:25,880 --> 00:20:27,780 White, PCI's treasurer. 287 00:20:28,240 --> 00:20:32,180 And they've been keeping an incredible secret for more than 10 years. 288 00:20:32,840 --> 00:20:35,540 The deals that Petters sells to his investors... 289 00:20:35,870 --> 00:20:41,390 involving electronics manufacturers, retailers, and warehouses are all fake. 290 00:20:41,750 --> 00:20:44,250 There is no merchandise being bought or sold. 291 00:20:44,610 --> 00:20:45,950 And there are no profits. 292 00:20:46,310 --> 00:20:48,530 In fact, it's all a fraud. 293 00:20:49,070 --> 00:20:51,250 So Petters would go out and he'd solicit money. 294 00:20:51,650 --> 00:20:56,070 He'd bring it into his fraud machine, which was called Petters Company, Inc. 295 00:20:56,930 --> 00:21:02,150 And then in that machine, then, wherever the money needed to go, it would go 296 00:21:02,150 --> 00:21:07,950 out. There was over $41 billion worth of inter -corporate transfers. 297 00:21:08,550 --> 00:21:13,190 Keeping track of who needs to get paid and when is a monumental task. 298 00:21:13,530 --> 00:21:18,950 It falls to Deanna Coleman, Petter's longtime employee and trusted confidant. 299 00:21:19,270 --> 00:21:24,710 Deanna Coleman was really Tom Petter's right -hand woman. She ran the 300 00:21:24,750 --> 00:21:29,570 She was the brains and the guts of the whole thing. 301 00:21:30,090 --> 00:21:33,610 Rounding out the three -person fraud unit is Bob White. 302 00:21:34,010 --> 00:21:38,450 Technically a consultant for PCI, he's a one -man forgery department. 303 00:21:39,190 --> 00:21:43,610 Turning out a mind -boggling number of phony purchase orders, bank statements, 304 00:21:43,710 --> 00:21:46,610 and other documents in order to keep the scheme going. 305 00:21:47,230 --> 00:21:54,030 He would spend hours, sometimes days at a time, with scissors, glue, 306 00:21:54,290 --> 00:21:56,130 cutting, and pasting. 307 00:21:56,620 --> 00:22:01,400 so that he could create an invoice or some sort of document that looked 308 00:22:01,400 --> 00:22:02,720 legitimate to investors. 309 00:22:03,620 --> 00:22:08,360 Bob White tells his son Chris that at its peak, the amount of money running 310 00:22:08,360 --> 00:22:10,000 through the scheme is staggering. 311 00:22:10,500 --> 00:22:15,040 There was new money that they had to come up with every month just to pay the 312 00:22:15,040 --> 00:22:16,040 interest on the debt. 313 00:22:16,760 --> 00:22:21,300 Not running businesses, not anything else, but just paying the interest on 314 00:22:21,300 --> 00:22:25,460 debt. The new money that was needed was $115 million a month. 315 00:22:28,780 --> 00:22:31,760 No one is sure when the fraud started exactly. 316 00:22:32,340 --> 00:22:36,520 But Bob White says he became unwittingly involved as far back as 1999. 317 00:22:37,120 --> 00:22:42,380 In this telephone interview, White tells American Greed that Petters sought his 318 00:22:42,380 --> 00:22:44,640 help getting out of a deal that went south. 319 00:22:45,400 --> 00:22:52,300 He was crying, help me get through this. And I did. We made up some documents 320 00:22:52,300 --> 00:22:55,800 that looked like the money was arriving and he hadn't spent it properly. 321 00:22:57,280 --> 00:23:01,600 According to White, a month later, Petters tells him it's all taken care 322 00:23:01,600 --> 00:23:04,120 as a thank you, drops off $15 ,000. 323 00:23:05,620 --> 00:23:11,640 The following year, Petters hires Bob White to work at PCI, and White says 324 00:23:11,640 --> 00:23:16,060 not long after that that Deanna Coleman tells him the truth about Petters' 325 00:23:16,200 --> 00:23:17,200 promissory notes. 326 00:23:17,580 --> 00:23:20,400 Something about the notes didn't seem right, and I asked Deanna. 327 00:23:21,020 --> 00:23:25,550 I said that, you know... something's not right about them and what's going on, 328 00:23:25,670 --> 00:23:29,150 and she said they're all fake. She told me they were all fake. It added up to 329 00:23:29,150 --> 00:23:36,130 about $100 million of fake notes, and I had made up several documents, and 330 00:23:36,130 --> 00:23:40,990 so I felt I was in the midst of a big 331 00:23:40,990 --> 00:23:47,350 Ponzi scheme, and that's when I figured it out. I confronted Tom, and 332 00:23:47,350 --> 00:23:51,550 he was pretty... 333 00:23:52,060 --> 00:23:54,200 Calm about it, and so is Deanna. 334 00:23:54,500 --> 00:23:58,820 Deanna was saying that Tom will figure a way out of it. 335 00:23:59,420 --> 00:24:03,140 Companies get to breaking points. That's how they get better. 336 00:24:03,580 --> 00:24:09,280 Over the next 13 years, Petters goes on to build a corporate powerhouse, funded 337 00:24:09,280 --> 00:24:13,820 in large part by his investors' principal, which he tells them is safe 338 00:24:13,820 --> 00:24:14,820 locked account. 339 00:24:14,940 --> 00:24:20,240 He pays fat returns on time, and few investors are asking any tough 340 00:24:20,920 --> 00:24:26,320 As the scheme grows, he, White, and Coleman are bound ever tighter in a web 341 00:24:26,320 --> 00:24:33,240 lies. Tom was saying to people, I've got this fantastic deal you can share 342 00:24:33,240 --> 00:24:38,700 in the profits and you'll make high interest rates on your money. 343 00:24:39,560 --> 00:24:42,400 And so the debt would grow. 344 00:24:42,800 --> 00:24:48,000 Next on American Greed, law enforcement has no idea what PCI is up to. 345 00:24:48,430 --> 00:24:53,330 Until Petters' girl, Friday, decides to save herself and take her boss down. 346 00:24:53,710 --> 00:25:00,130 And she just lost faith in his ability to make things good. 347 00:25:07,910 --> 00:25:11,750 Minnesota businessman Tom Petters appears to be at the top of his game. 348 00:25:12,320 --> 00:25:17,760 Founder, CEO, and sole owner of Petters Group Worldwide, which reports $2 .3 349 00:25:17,760 --> 00:25:19,920 billion in revenue in 2007. 350 00:25:20,600 --> 00:25:25,840 He boasts ownership of 150 companies, including Polaroid and Sun Country 351 00:25:25,840 --> 00:25:31,200 Airlines, and is a man whose sterling reputation helps bring in billions of 352 00:25:31,200 --> 00:25:33,420 investment dollars from people around the world. 353 00:25:34,260 --> 00:25:36,240 Tom Petters was... 354 00:25:37,129 --> 00:25:38,590 He was charming. 355 00:25:38,870 --> 00:25:40,290 He was very, very smart. 356 00:25:40,530 --> 00:25:42,570 And he knew a lot of these people. 357 00:25:42,770 --> 00:25:46,010 Some of the people who invested with him were family. 358 00:25:46,210 --> 00:25:47,250 They were friends. 359 00:25:47,550 --> 00:25:52,090 They were investment companies and other investors who he had done business with 360 00:25:52,090 --> 00:25:57,350 before. And I think he was just a really, really good salesman. 361 00:25:57,930 --> 00:26:02,510 What Petters is selling to investors are promissory notes through his company 362 00:26:02,510 --> 00:26:04,650 PCI, Petters Company, Inc. 363 00:26:05,429 --> 00:26:09,590 guaranteeing high returns on deals involving the sale of discount 364 00:26:09,590 --> 00:26:14,910 merchandise. But at some point more than 10 years ago, there stopped being any 365 00:26:14,910 --> 00:26:15,910 real merchandise. 366 00:26:16,550 --> 00:26:21,770 Petters and a small cadre of employees began forging documents and making up 367 00:26:21,770 --> 00:26:24,070 deals. It's all a Ponzi scheme. 368 00:26:24,730 --> 00:26:29,530 Petters knew that if you just paid people and paid them well and made them 369 00:26:29,530 --> 00:26:34,480 good about it, They wouldn't ask a lot of questions, and they wouldn't go off 370 00:26:34,480 --> 00:26:35,780 doing a lot of due diligence. 371 00:26:36,180 --> 00:26:40,260 Good evening. Between Friday and today, the Dow Jones Industrial Average has 372 00:26:40,260 --> 00:26:46,160 swung up and down almost 1 ,300 points. That is until late 2007, when the U .S. 373 00:26:46,200 --> 00:26:48,100 financial industry begins to collapse. 374 00:26:48,460 --> 00:26:53,200 New money sources are drying up. On top of that, many investors want their 375 00:26:53,200 --> 00:26:54,200 principal back. 376 00:26:54,960 --> 00:27:00,940 Petters is not able to bring in the $115 million a month he needs to keep the 377 00:27:00,940 --> 00:27:04,260 scheme going, and PCI cannot keep up with their payments. 378 00:27:04,860 --> 00:27:09,820 People needed their money to pay off their creditors, and so they squeezed 379 00:27:09,820 --> 00:27:14,180 Petters. Petters squeezed Deanna Coleman and White and the others to say, we've 380 00:27:14,180 --> 00:27:17,180 got to get this money, we've got to get it in and do that. 381 00:27:17,400 --> 00:27:23,420 A hedge fund named Acorn Capital has $273 million invested with Petters. 382 00:27:24,000 --> 00:27:29,220 When they failed to receive a $10 million payment in August of 2008, Acorn 383 00:27:29,220 --> 00:27:31,160 claiming they'd been defrauded. 384 00:27:31,740 --> 00:27:37,120 Another hedge fund in for more than $1 billion demands an audit of PCI's books. 385 00:27:37,480 --> 00:27:42,820 But there was definitely concern going on within the confines of PCI at that 386 00:27:42,820 --> 00:27:47,140 time. They had no books to audit, and they were afraid that that would just 387 00:27:47,140 --> 00:27:48,200 bring down the curtain. 388 00:27:48,960 --> 00:27:54,860 Totally on the operation that the auditors got in from this big hedge 389 00:27:55,240 --> 00:27:59,420 A fearful Deanna Coleman begins planning her exit strategy. 390 00:28:00,140 --> 00:28:05,200 Coleman has made more than $14 million in bonuses over the past eight years and 391 00:28:05,200 --> 00:28:06,780 is a key player in the fraud. 392 00:28:07,420 --> 00:28:13,180 In August 2008, she walks into her attorney Alan Kaplan's office and lays 393 00:28:13,180 --> 00:28:14,180 on the table. 394 00:28:15,400 --> 00:28:22,160 What she did was begin to explain the fact that she was involved 395 00:28:22,160 --> 00:28:27,340 in a $3 .6 billion scheme. 396 00:28:27,700 --> 00:28:34,320 I realized immediately that this may well have been, at that time, the 397 00:28:34,320 --> 00:28:38,920 largest Ponzi scheme ever in the history of the United States. 398 00:28:39,740 --> 00:28:43,700 Kaplan contacts the U .S. Attorney's Office and tells them he has the 399 00:28:43,700 --> 00:28:44,700 case of a lifetime. 400 00:28:45,370 --> 00:28:48,650 But before he gives it up, he wants a deal for his client. 401 00:28:48,990 --> 00:28:55,790 The deal was this, that they agreed that she would, under no 402 00:28:55,790 --> 00:29:02,670 circumstances, be exposed to a prison sentence of more than five years if 403 00:29:02,670 --> 00:29:03,670 she were to cooperate. 404 00:29:04,690 --> 00:29:11,610 And she was fine with that. And shortly thereafter, she came in with a stack of 405 00:29:11,610 --> 00:29:12,610 documents. 406 00:29:14,230 --> 00:29:17,170 And explained the whole scam. 407 00:29:17,910 --> 00:29:20,590 But federal prosecutors need more evidence. 408 00:29:20,810 --> 00:29:22,670 And they need Coleman to get it. 409 00:29:23,170 --> 00:29:26,970 They ask her to wear a hidden wire and go back to work the next day. 410 00:29:27,270 --> 00:29:28,550 Business as usual. 411 00:29:29,810 --> 00:29:35,390 And she agreed to do that. That was done both with the use of a wire. 412 00:29:35,920 --> 00:29:42,100 And they have recording devices that essentially look like car key fobs that 413 00:29:42,100 --> 00:29:47,220 capable of clearly recording up to eight hours of conversation. 414 00:29:47,800 --> 00:29:52,700 Next, hear how a desperate Tom Petter's own words seal his fate. 415 00:29:53,020 --> 00:29:57,980 I'm trying to figure out a way out because living the lie is worse than 416 00:29:57,980 --> 00:29:58,980 anything. 417 00:30:00,110 --> 00:30:05,650 Listen to more secret recordings of Tom Petters at AmericanGreed .CNBC .com. 418 00:30:05,730 --> 00:30:06,730 We'll be right back. 419 00:30:11,470 --> 00:30:17,050 On the morning of September 8, 2008, Tom Petters is about to have a meeting that 420 00:30:17,050 --> 00:30:18,250 he hopes will save his life. 421 00:30:18,530 --> 00:30:23,250 The CEO's $3 .5 billion empire is on the verge of collapse. 422 00:30:23,650 --> 00:30:27,050 His decade -long Ponzi scheme about to be uncovered. 423 00:30:27,930 --> 00:30:33,570 The financial climate was changing, and things were starting to fall apart on 424 00:30:33,570 --> 00:30:40,510 Wall Street. And for his investors, they started to ask questions. And that was 425 00:30:40,510 --> 00:30:42,690 something that had never really happened before. 426 00:30:42,890 --> 00:30:47,930 But because of the uncertainty of what was happening in the worldwide and 427 00:30:47,930 --> 00:30:52,910 national financial world, these investors wanted to know where their 428 00:30:53,110 --> 00:30:56,290 And things were starting to unravel. 429 00:30:57,050 --> 00:31:01,430 Ever the optimist, Petters believes if he can close a deal with the hedge fund 430 00:31:01,430 --> 00:31:07,110 Fortress Capital by getting it to invest $100 million immediately, he can hold 431 00:31:07,110 --> 00:31:08,110 off Judgment Day. 432 00:31:08,530 --> 00:31:10,270 It's what he's been doing for years. 433 00:31:11,270 --> 00:31:17,170 But this time, his right hand and co -conspirator Deanna Coleman is no longer 434 00:31:17,170 --> 00:31:21,910 Petters' side. This time, she's working with the feds and wearing a wire. 435 00:31:22,440 --> 00:31:24,300 And I went in your office and I looked at your calendar. 436 00:31:24,600 --> 00:31:26,680 Oh, it's just a meeting. I think I just put meeting out there. 437 00:31:26,920 --> 00:31:31,520 Within the first few hours of recorded conversations, the wire reveals a CEO 438 00:31:31,520 --> 00:31:36,240 drowning in self -delusion, who thinks he's even got the man upstairs working 439 00:31:36,240 --> 00:31:37,079 for him. 440 00:31:37,080 --> 00:31:40,320 See, the only thing that makes me believe that there is, like, some divine 441 00:31:40,320 --> 00:31:41,320 intervention. 442 00:31:42,560 --> 00:31:43,560 Seriously. 443 00:31:44,140 --> 00:31:46,660 There's no possibility we could have got away with this for so long. 444 00:31:47,400 --> 00:31:52,320 During the meeting with Fortress Capital, Petters details a proposal to 445 00:31:52,320 --> 00:31:57,340 firm's money to purchase electronics and resell them to big box retailers like 446 00:31:57,340 --> 00:32:02,420 Walmart and Costco, who have supposedly already provided purchase orders, or 447 00:32:02,420 --> 00:32:04,160 POs, for the goods. 448 00:32:04,500 --> 00:32:07,280 But the deal is entirely made up. 449 00:32:07,720 --> 00:32:10,100 Does Fortress know that all these POs are fake? 450 00:32:11,480 --> 00:32:13,140 No, they don't know they're fake. 451 00:32:13,500 --> 00:32:16,500 They're not going to be looking at our POs. They're only looking at one thing. 452 00:32:17,070 --> 00:32:21,490 That one thing? The 30 % or more in returns Petters is promising. 453 00:32:22,290 --> 00:32:26,970 Coleman tells the FBI that she and Petters had been making similar 454 00:32:26,970 --> 00:32:28,870 for at least 13 years. 455 00:32:29,310 --> 00:32:32,430 And for 13 years, no one has figured it out. 456 00:32:32,730 --> 00:32:36,510 But now, Petters is feeling the heat like never before. 457 00:32:37,690 --> 00:32:42,250 He's spending an increasing amount of time in Las Vegas, racking up an 458 00:32:42,250 --> 00:32:44,510 gambling debt estimated at $10 million. 459 00:32:46,960 --> 00:32:50,860 And according to close sources, he has a drinking and drug problem. 460 00:32:51,740 --> 00:32:55,300 Undercover FBI recordings reveal a man on the brink. 461 00:32:59,640 --> 00:33:06,440 After two weeks of undercover operations 462 00:33:06,440 --> 00:33:11,100 with Coleman, the U .S. attorney decides they have enough on Petters. And they 463 00:33:11,100 --> 00:33:12,100 move in. 464 00:33:12,360 --> 00:33:14,200 Petters was in Las Vegas. 465 00:33:14,780 --> 00:33:21,240 And the head FBI agent, who was a woman from here in Minneapolis, knocked on his 466 00:33:21,240 --> 00:33:26,360 door at the Bellagio at 6 o 'clock in the morning and talked to him and 467 00:33:26,360 --> 00:33:30,020 tried to get him to confess. 468 00:33:30,920 --> 00:33:36,080 Back in Minnesota, dozens of federal agents are executing an early morning 469 00:33:36,080 --> 00:33:39,100 on the headquarters of Petters Group Worldwide. 470 00:33:39,500 --> 00:33:41,780 They had Deanna's road map. 471 00:33:42,250 --> 00:33:47,230 She told them where to go, what records to look for, and so they hauled out box 472 00:33:47,230 --> 00:33:51,630 after box after box, bank records, accounting records, all kinds of things. 473 00:33:52,770 --> 00:33:55,310 News of the Petters' raid spreads fast. 474 00:33:56,010 --> 00:34:00,650 When individual investor Doug Van Dyke finds out, he's stunned. 475 00:34:01,910 --> 00:34:08,750 I guess the one word that would characterize how I felt was panic, 476 00:34:09,050 --> 00:34:10,929 sheer panic. 477 00:34:11,920 --> 00:34:17,080 Over the next couple of weeks, Van Dyke learns that all of his money, several 478 00:34:17,080 --> 00:34:20,480 hundred thousand dollars that he had saved over his 30 -year career for 479 00:34:20,480 --> 00:34:22,320 retirement, is gone. 480 00:34:22,719 --> 00:34:25,300 I didn't know if I was going to be able to survive. 481 00:34:25,620 --> 00:34:32,380 To try to absorb the enormity of this amount of money 482 00:34:32,380 --> 00:34:39,060 that we had invested that was gone was incomprehensible to me. I 483 00:34:39,060 --> 00:34:41,179 couldn't even begin to process it. 484 00:34:42,030 --> 00:34:46,989 Meanwhile, in the days after the raid, Tom Petters returns to Minnesota and 485 00:34:46,989 --> 00:34:48,690 holes up in his mansion on the lake. 486 00:34:49,050 --> 00:34:53,210 He is not under arrest, but expects to be any day. 487 00:34:53,590 --> 00:34:58,210 And begins talking about ways to ditch the feds with co -conspirator Bob White. 488 00:34:58,450 --> 00:35:02,010 What Petters doesn't know is that the FBI is listening. 489 00:35:14,440 --> 00:35:18,580 Petters is referencing the commodities trader who skipped the country after 490 00:35:18,580 --> 00:35:23,200 being charged with insider trading and was later pardoned by President Bill 491 00:35:23,200 --> 00:35:26,160 Clinton. Another core value in this company is humility. 492 00:35:26,520 --> 00:35:31,680 Next on American Green, the FBI is closing in on Petters and believes he is 493 00:35:31,680 --> 00:35:32,980 making plans to escape. 494 00:35:33,300 --> 00:35:39,120 Will agents catch him before he pleads? The plan was that Tom was going to... 495 00:35:40,140 --> 00:35:45,520 Give me a bunch of money and I was supposed to sail his boat down to meet 496 00:35:45,520 --> 00:35:49,960 later in the Caribbean On 497 00:35:49,960 --> 00:35:56,680 October 3rd 498 00:35:56,680 --> 00:36:02,900 2008 the FBI moves in on Minnesota businessman Tom Petters Suspected of 499 00:36:02,900 --> 00:36:08,890 a Ponzi scheme for 13 years agents have recorded Petters talking about fugitive 500 00:36:08,890 --> 00:36:10,610 financier Mark Rich. 501 00:36:11,370 --> 00:36:17,030 The reference to Rich suggested to federal authorities that Petters himself 502 00:36:17,030 --> 00:36:19,690 considering leaving the country. 503 00:36:20,470 --> 00:36:25,730 Petters also discusses an escape to a Caribbean island with his co 504 00:36:25,850 --> 00:36:27,290 but it wasn't meant to be. 505 00:36:27,830 --> 00:36:31,730 Because he's deemed a flight risk, Petters is taken into custody at his $8 506 00:36:31,730 --> 00:36:35,350 million Lake Minnetonka mansion and held without bail. 507 00:36:36,910 --> 00:36:41,590 A year later, the trial of Tom Petters opens at the St. Paul Federal 508 00:36:41,810 --> 00:36:47,310 He faces 20 counts of wire and mail fraud, conspiracy, and money laundering. 509 00:36:47,750 --> 00:36:52,130 It wasn't just charges of fraud, money laundering, and conspiracy. 510 00:36:52,430 --> 00:36:57,690 The amount of money that was involved, I think, floored everyone. 511 00:36:58,130 --> 00:37:01,550 Three and a half billion dollars. 512 00:37:01,970 --> 00:37:04,330 That's billion with a B. 513 00:37:05,600 --> 00:37:10,960 Petters' former secretary turned operations manager Deanna Coleman blew 514 00:37:10,960 --> 00:37:13,800 whistle on the operation after participating in the fraud. 515 00:37:14,380 --> 00:37:18,460 She had cut a deal with the feds in order to net the big fish, Tom Petters. 516 00:37:18,840 --> 00:37:23,440 Now, the once high -rolling CEO could face life in prison. 517 00:37:23,780 --> 00:37:30,580 It was not easy for her, but in spite of that, she was ready, willing, and able 518 00:37:30,580 --> 00:37:31,580 to... 519 00:37:32,160 --> 00:37:35,300 continue her cooperation with the government. 520 00:37:36,820 --> 00:37:41,440 Prosecutors played the tapes Coleman recorded of conversations with Petters 521 00:37:41,440 --> 00:37:46,420 September 2008, in the days before the FBI raided his operation. 522 00:37:47,140 --> 00:37:51,160 We're going to come up with some f***ing story. I'm trying as hard as I can to 523 00:37:51,160 --> 00:37:52,300 figure out how to get out of this. 524 00:37:53,200 --> 00:37:59,200 In testimony that stunned the courtroom, former PCI officer Bob White testifies. 525 00:37:59,840 --> 00:38:05,040 that he forged more than 10 ,000 documents over a nine -year period to 526 00:38:05,040 --> 00:38:06,040 scheme going. 527 00:38:06,140 --> 00:38:09,740 He was the wow witness. 528 00:38:10,000 --> 00:38:16,960 Wow in the sense of, that's really how it happened? That's really how we came 529 00:38:16,960 --> 00:38:19,320 have a $3 .5 billion Ponzi scheme? 530 00:38:19,800 --> 00:38:21,520 Cut and paste. 531 00:38:23,000 --> 00:38:27,780 Petters' attorney, John Hopeman, acknowledges the fraud, but tells jurors 532 00:38:27,780 --> 00:38:31,280 the alleged scheme took place at a time when Petters was grieving the loss of 533 00:38:31,280 --> 00:38:35,880 his son, who was stabbed to death during a study abroad trip to Italy in 2004, 534 00:38:36,380 --> 00:38:41,160 and that Deanna Coleman and Bob White were the ones responsible for the fraud. 535 00:38:41,500 --> 00:38:43,700 This was the guy who let things... 536 00:38:43,930 --> 00:38:49,490 get away from him. And he trusted the people around him to do things properly 537 00:38:49,490 --> 00:38:52,750 and to make them work, and they failed him. 538 00:38:53,490 --> 00:38:59,570 But the government says that the fraud far predates John T. Petter's death, and 539 00:38:59,570 --> 00:39:03,170 that it's Tom Petter's own words that are perhaps the most damaging evidence. 540 00:39:03,810 --> 00:39:08,690 This is one big fraud that there is, and that's how I'm dealing with it. 541 00:39:10,250 --> 00:39:15,750 On December 2, 2009, after five days of deliberations, the jury finds Petters 542 00:39:15,750 --> 00:39:17,650 guilty on all 20 counts. 543 00:39:18,550 --> 00:39:23,210 Four months later, a judge sentences him to 50 years in federal prison. 544 00:39:23,970 --> 00:39:28,530 Deanna Coleman serves a one -year sentence and is released from prison in 545 00:39:28,530 --> 00:39:32,370 2011. Bob White is sentenced to five years. 546 00:39:33,850 --> 00:39:38,230 At least eight other Petters associates have been convicted of money laundering 547 00:39:38,230 --> 00:39:41,190 and fraud, including... five hedge fund managers. 548 00:39:41,570 --> 00:39:44,050 But not everyone is happy with the outcome. 549 00:39:44,730 --> 00:39:49,170 Tom Petters' friend and former salesman, Harold Simmons, believes that Petters 550 00:39:49,170 --> 00:39:52,830 is innocent and his sentence of 50 years is unfair. 551 00:39:53,390 --> 00:39:55,810 Deanna Coleman gets a year. 552 00:39:56,670 --> 00:39:58,590 Bob White gets five years. 553 00:39:58,810 --> 00:40:00,450 Where's the justice in this? 554 00:40:01,990 --> 00:40:03,190 It's just not there. 555 00:40:03,430 --> 00:40:05,490 Tom's got a heart as big as Alabama. 556 00:40:06,200 --> 00:40:11,020 I'm not saying Tom didn't do some shady deals over the years to keep companies 557 00:40:11,020 --> 00:40:14,900 up and going and running. But Tom didn't do this. I'm just telling you. 558 00:40:15,580 --> 00:40:19,500 A judge appoints attorney Doug Kelly as receiver for the case. 559 00:40:19,800 --> 00:40:22,640 He's selling off assets, trying to recoup losses. 560 00:40:23,280 --> 00:40:28,300 And he's recovered more than $200 million so far, including more than $8 561 00:40:28,300 --> 00:40:30,780 from Deanna Coleman and Bob White. 562 00:40:31,000 --> 00:40:35,600 But the big money, according to Kelly, is tied up in what's known as clawback. 563 00:40:36,060 --> 00:40:40,800 The recovery of some $2 billion from people who are considered net winners in 564 00:40:40,800 --> 00:40:42,120 their dealings with petters. 565 00:40:42,900 --> 00:40:45,860 One of the harder parts of my job has been... 566 00:40:46,770 --> 00:40:47,810 charitable contributions. 567 00:40:48,090 --> 00:40:53,970 So I've had to call all these presidents of these colleges and schools and other 568 00:40:53,970 --> 00:40:59,490 things and say, I'm really sorry to do this, but this money was not Mr. 569 00:40:59,710 --> 00:41:01,010 Petter's money to give. 570 00:41:01,270 --> 00:41:06,350 It was all stolen money that he stole from other people. I hope you'll send me 571 00:41:06,350 --> 00:41:07,350 check back. 572 00:41:07,430 --> 00:41:08,450 And most of them did. 573 00:41:09,520 --> 00:41:12,980 For Doug Van Dyke, who lost all of his retirement savings, 574 00:41:13,780 --> 00:41:15,960 the Petters scam has been life -altering. 575 00:41:16,480 --> 00:41:20,800 After being retired for seven years, he is forced to go to his former company 576 00:41:20,800 --> 00:41:22,640 and ask for his job back. 577 00:41:23,060 --> 00:41:28,000 The thing you need to know is that I have flunked retirement 101, and I need 578 00:41:28,000 --> 00:41:32,280 come back to work if you'll have me. If not, then I've got to go somewhere else. 579 00:41:32,580 --> 00:41:35,620 And fortunately, they wanted me back. 580 00:41:36,360 --> 00:41:39,960 He and his wife now live in this small apartment near his office. 581 00:41:40,200 --> 00:41:43,180 They sold their Florida condo at a big loss. 582 00:41:43,520 --> 00:41:47,980 And they're struggling to hold on to their lakeside dream home where they 583 00:41:47,980 --> 00:41:51,160 that one day they might possibly be able to retire for good. 584 00:41:51,660 --> 00:41:55,780 Meanwhile, Tom Petters is serving his time at Leavenworth Prison in Kansas. 585 00:41:56,120 --> 00:41:59,940 He is appealing his conviction and maintains his innocence. 586 00:42:00,920 --> 00:42:02,940 Petters' story is a little... 587 00:42:03,960 --> 00:42:06,220 insight into our own psyche. 588 00:42:06,560 --> 00:42:11,920 There are a lot of folks here who turned their backs on questions they should 589 00:42:11,920 --> 00:42:16,040 have asked, turned their backs on people they should have pushed for due 590 00:42:16,040 --> 00:42:20,280 diligence. And the reason they turned their backs was because they were making 591 00:42:20,280 --> 00:42:25,500 so much money. And I think that's really sad because Petters wasn't really that 592 00:42:25,500 --> 00:42:31,040 smart. He wasn't really that good a businessman, but he was a damn good con 593 00:42:34,760 --> 00:42:37,080 They have everything money can buy. 594 00:42:37,300 --> 00:42:40,520 Dirty money taken from the riches of their poor nation. 595 00:42:40,760 --> 00:42:43,620 Filthy Rich proves tomorrow on CNBC.