From the New Republic:
A charismatic entrepreneur, an ex-con turned devout Christian, and the politicians who championed them.
Just after dawn on a cool morning in September 2008, two FBI agents and a police officer walked into the Bellagio Casino in Las Vegas and took the security elevator up to the twenty-third floor, where they knocked on the door of a high-roller haven known as the Grand Lakeview Suite. A Minnesota businessman named Tom Petters answered wrapped in a bathrobe. After a moment’s hesitation, he invited them in. The officer searched the bedrooms and closets to make sure no one was listening, and the FBI agents began peppering Petters with questions.
Then, suddenly, Petters’s Blackberry started ringing. At that moment, 1,700 miles away in the leafy suburb of Minnetonka, Minnesota, more than 50 government agents were swarming into the parking lot of Petters Company Incorporated (PCI). The agents entered the building, ordered everyone out, and began opening safes and rummaging through file drawers. Another team of agents descended on Petters’s mansion overlooking Lake Minnetonka, where they moved from room to room snapping photos and stuffing Petters’s belongings into cardboard boxes.
The next night, Petters, who had just returned from Las Vegas, turned out for a soiree at the Minneapolis-St. Paul International Airport, where one of his companies, Sun Country Airlines, was unveiling its new hangar. More than 100 people attended. Petters looked relaxed as he circled the room smiling and shaking hands. When he stepped to the podium, he sounded an optimistic note and even cracked a joke about the investigation, saying with a smile it “was not the media attention we wanted.” He added, “That, too, shall pass.”
Several days later, Cord Christensen, a longtime friend of Petters who had recently invested $3.6 million in PCI, drove to Petters’s house. Petters welcomed him in. His tie was undone, the first few buttons of his shirt were open, and he seemed to be in an amiable mood. “He was very relaxed,” Christensen recalls. “He was handling the situation, for what it was, better than I would expect anyone to be able to handle it.” Petters calmly explained that the accusations against him were a farce; he had caught a rogue employee embezzling $10 million, and she had gone to law enforcement with trumped-up allegations of fraud. The two men then spent a few minutes chatting about their families. Before Christensen left, they hugged.
Behind the scenes, however, Petters was contemplating an escape. Three days after the raid, he had summoned his designated document forger, a 68-year-old former stockbroker named Bob White, to his home. He hoisted up White’s shirt to see if he was wearing a wire, then asked if he had his passport ready. The two men later spoke by phone. Petters urged White to buy a fake ID and flee the country on his sailboat, presumably so he couldn’t testify, and suggested that he was planning to flee, too. White was wary. “I’m scared as can be, Tom, so I don’t know,” he said. “I have no frickin’ idea how it works.”
“Well, I do. I’m studying,” Petters replied. “Google Marc Rich.” Rich, the uber-wealthy commodities trader who had fled to Switzerland in the 1980s after being indicted for tax evasion and illegally selling oil to Iran, was infamously pardoned in early 2001 by President Clinton—a beneficiary of the Rich family’s generous political contributions. Critics grumbled that Rich’s pardon had been bought. “We’ve helped a lot of people,” Petters added, before rattling off a list of politicians—most of them recipients of Petters’s campaign largesse—who he claimed had called him since the raid. “Oberstar’s called me. Klobuchar’s called me. Ramstad’s called me. ... Ah, Al Franken’s called me.”
Meanwhile, as Petters was hunting for a way out, another man was walking into the heart of the storm. His name was Frank Vennes—and, of everyone affected by the Petters investigation, no one had more to lose. A soft-spoken, deeply devoted Christian, Vennes had brought in the bulk of PCI’s investments, many of them from evangelical Christians who were moved by his personal tale of faith and redemption. Some had sunk their life savings into the venture. Shortly after the raid, Vennes began calling prayer meetings with his investors. He told them he had been blindsided by the allegations of fraud at PCI and explained that Petters had swindled him along with everyone else. “His mother, his father, his children, his brother, his whole family was invested,” says Vennes’s longtime friend and investor Janet Leck. “He was just as shell-shocked as the rest of us.”
TOM PETTERS IS brash and charming and darkly handsome, with deep olive skin and black hair that he wears slicked back. One of seven children, he grew up in a cottage on the banks of the Mississippi River in St. Cloud, Minnesota, where his father ran a fur and fabric shop that had been in the family for generations. From an early age, he had an entrepreneurial bent. According to the Minneapolis Star-Tribune, in the ninth grade Petters told classmates that he knew someone who printed fake money and offered to provide a pile of it to anyone who gave him $20 cash. A handful of friends took him up on the offer. Petters pocketed the money, but never delivered the phony bills. They had to badger him for weeks to get their money back. Two years later, Petters secretly rented an office in downtown St. Cloud and started peddling stereo equipment. Often, he’d skip class and stuff flyers under dorm-room doors at local schools, like the College of St. Benedict and St. John’s University. Before long, he had hired a sales team and was raking in $5,000 a month. As Petters later told the story, his mother learned about the venture when she heard an ad for it on her car radio and was so shocked she almost drove off the road.
After high school, Petters enrolled at St. Cloud State University, but he dropped out after a single quarter and eventually started selling Yellow Pages ads. By the ’80s, he wound up in Colorado, working at a chain of bargain electronics stores. When the chain went bankrupt, Petters bought five of its locations.
It was around this time that Petters had his first tangle with the law. In 1989, Petters arranged to sell 450 refurbished Emerson VCRs to another retailer and collected $75,000 as payment. But he never delivered the goods. When police questioned the owner of the refurbishing shop, who was supposed to have supplied Petters with the equipment, he said he hadn’t had any contact with Petters and never had 450 VCRs for sale at one time.
As part of their investigation, police also questioned a former Petters employee named Chuck Sturgis. He knew nothing about the VCRs, but he said that Petters had opened a credit card in his name, racked up more than $6,000 in charges, and then disappeared. Another associate said Petters had gone back to Minnesota to seek treatment for a cocaine addiction. In 1993, Minnesota authorities issued a fugitive warrant for Petters’s arrest. He agreed to pay restitution and the charges were dropped. Petters then hired a lawyer to have his criminal file in Colorado sealed. The following year, his Minnesota warrants were expunged by the Hennepin County Attorney’s office in Minneapolis.
By that point, Petters was back in business—this time, selling hangover-cure pills to convenience stores. Then, in 1994, he launched Petters Company Incorporated. The idea was to find suppliers that, for whatever reason—be it overstock or slight product irregularities—were selling electronics and other goods on the cheap. PCI would buy these products and resell them to big-box retailers, such as Costco and Sam’s Club, at a profit. The deals were financed by investors, mostly small-time operators who put up $50,000 to $100,000 in return for generous interest.
Around this time, Petters brought on two people who would turn out to be crucial to the operation. The first was his receptionist and office manager, then a 26-year-old former debt collector named Deanna Coleman, who had grown up on a farm in the tiny town of Elbow Lake, Minnesota. The second person was Frank Vennes.
VENNES—A QUIET, socially awkward man with doughy features and coarse, graying hair—grew up in a small North Dakota town and studied business at a state university before opening a pair of pawnshops in the northwest corner of the state. In 1986, his life took a bizarre turn. Federal agents running a sting on a local drug ring began to suspect that Vennes was laundering drug money. Undercover IRS operatives posing as Chicago businessmen started giving Vennes piles of cash to smuggle out of the country—all told, he transported $370,000 to the Bahamas, the Isle of Man, and Switzerland.
Eventually, Vennes was arrested and pled guilty to money laundering—and also no contest to cocaine dealing and illegally selling firearms. He was sentenced to five years in Minnesota’s Sandstone penitentiary. Vennes later sued the federal government for $10 million, claiming that, after $100,000 of the $370,000 had gone missing—having been either lost or stolen by Vennes’s associates in Geneva—the undercover IRS agents had told him they were members of the Chicago mob and had threatened to kill him and “dismember” his children unless he recouped the money. It was this threat, he argued, that prompted him to sell drugs and guns....MORE