It was a typical Tom Petters affair. Flamenco dancers swirled
around the room. Actors dressed as matadors posed with Minnesota's rich
and famous. Saturday Night Live alum Kevin Nealon told jokes, and NFL
great Michael Strahan flew into town for the Aug. 9 party, a Petters
fundraiser for his late son's foundation that cost almost $400,000.
A beaming Petters shmoozed and draped his arm around anyone who passed by. Corporate big hitters. Celebrities. Politicians.
A month later, one of Petters' closest associates betrayed him to
federal authorities, accusing him of running a multibillion-dollar Ponzi
scheme.
Petters, a high-profile Twin Cities entrepreneur whose holdings
include Sun Country Airlines and Polaroid, was led from his Lake
Minnetonka mansion to the Sherburne County jail. He faces federal
charges of fraud, money laundering and obstruction of justice. Though
Petters maintains he is innocent, four associates already have pleaded
guilty for their roles in what may rank as one of the biggest investment
fraud schemes in history.
Petters' stunning reversal of fortune has everyone who believed in
him, from religious charities to international hedge fund managers,
scrambling to assess the damage and wondering how they could have been
fooled for so long. Joel Alsaker, Petters' boss in the 1970s when he was
selling stereo equipment in St. Cloud, has one answer.
"He was so talented -- you can't overstate that fact," Alsaker said. "He could talk your wallet right out of your pocket."
Alsaker said he believed in Petters so much that, in 1989, he lent
him $7,900. Petters had promised to repay the money in 19 days, but
according to court documents gave multiple excuses for missing the
payment, eventually claiming that he had filed for bankruptcy. When
Alsaker discovered that the bankruptcy claim was a hoax, he reopened the
case.
Court documents show that, before the next hearing, Petters called
the court office and claimed the case was settled and should be removed
from the court calendar. The ruse didn't work, though, so when Petters
failed to show up in court, a judge found him in default.
Alsaker finally collected his money, but only after threatening to repossess Petters' car.
The shopkeeper's son
The Tom Petters who hobnobbed with the elite, drove a Bentley and
reportedly dropped $10 million in gambling losses in Las Vegas contrasts
sharply with his upbringing in St. Cloud.
Petters grew up with six siblings in a nice but hardly opulent
cottage on the banks of the Mississippi River, just below "pill hill"
where the doctors lived. The house was secluded behind a stand of trees
and featured a domed greenhouse and gardens tended by his father, Fred,
who owned a fur, fabric and tailoring shop downtown. The Petters
Building had housed the family business for more than 100 years.
The Petterses live in Avon now, but still attend Catholic mass at the
Newman Center on the campus of St. Cloud State and are active in peace
and justice issues.
The Petterses are "very well respected for their integrity," said
Michael D. Doyle, a friend of the family. "They are considerate, modest
and gracious, and very much involved in the issues of the community."
In high school, Tom was gregarious, "a bit of a goofball, but nothing legendary," according to classmate Bill Kain.
"Tom was always very smart and very funny and very popular. He had
lots of friends," said Jon Petters, Tom's older brother by four years.
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