Investment manager: Petters pressed for quick deals: The federal fraud trial of Wayzata businessman Tom Petters continued today.

Oct 30, 2009 (Star Tribune - McClatchy-Tribune Information Services via COMTEX) -- PRDCQ | Quote | Chart | News | PowerRating -- A partner in a Minneapolis investment firm testified this morning in the federal fraud trial of Wayzata businessman Tom Petters that the high-energy wheeler-dealer was always trying to put together major deals like his acquisition of Polaroid Corp.

"There was always an urgency; there was always a tight time frame to complete a deal," said Gregg Colburn, a partner in the Interlachen Capital Group.

Lance Breiland, a former Fredrikson & Byron attorney who became a partner at Interlachen, started talking with Petters about some deals in 2005, Colburn said. He said Breiland knew David Baer, an in-house attorney at Petters Group Worldwide. Colburn said Interlached talked about buying into Polaroid in October 2007, but ultimately took a pass. In Feburary 2008, they talked about buying into some Polaroid intellectual property, but someone else funded that transaction, he said.

Finally, in April 2008, Petters approached Interlachen again about consumer electronics deal that would involve selling televisions through a big-box retailer, Colburn said. He said Interlachen had planned to go to California to inspect the inventory, but Petters said no because it was in a locked facility available only to the insurers of the merchandise.

"That gave us a little pause," Colburn said.

But he said Interlachen felt reassured by the fact that it would have a mortgage on the goods, and because Petters said he was putting some of his own money into the deal. In addition, he said Interlachen hired an investigator in Minneapolis to check Petters' background. No "red flags" came up, Colburn said.

Interlachen agreed to put up $60 million at an interest rate of 20 percent interest over six months, he said.

Colburn said Petters was slow to begin repaying the money, and that Interlachen met throughout the summer of 2008 with Petters, his confidante Deanna Coleman, Baer, and Larry Reynolds, a Los Angeles business associate supposedly involved in the deal. (Coleman and Reynolds have both pleaded guilty in the alleged fraud conspiracy.)

At first, Petters said the payments were late because the economic downturn caused retailers to stretch out their payments, Colburn said. In September 2008, he said Petters explained that the retailers were slow to repay because of an unusual number of returns.

Petters' business and home was raied Sept. 24, a day Colburn said he remembers well.

"I was scheduled to have an update call that day and I hadn't heard back from Deanna [Coleman]," Colburn said. "I was frustrated."

Colburn says he called Coleman but her number wasn't working. Nor was the general number at Petters' headquarters, and the company's web site was down, too. He said he left a message on Petters' voice mail. A while later, Petters called and explained that he'd been raided by the feds.

"I said, 'That doesn't sound like good news for you or for me,'" Colburn recalled.

He said he asked Petters if he had really bought any TVs with Interlachen's money. Petters said yes, but he said he couldn't talk at the time and promised to get back to him later, Colburn said.

Interlachen Harriet Investments Ltd., which is managed by Interlachen Capital, filed a lawsuit last year saying its $60 million investment turned out to be secured by "imaginary televisions."

The government contends that Petters routinely solicited investments to buy high-end electronics gear at a discount that he claimed would be resold for a profit. But the government says no such merchandise existed, and that Petters would spend the money on other investments, to repay earlier investors, and to live an extravagant lifestyle.

Earlier this morning, former Costco vice president Robert Pugmire continued a line of testimony that began yesterday when he said that some purchase orders and outsize checks Petters had used to "verify" his Costco transactions were fakes. On Thursday, the first day of a trial that could last up to six weeks, executives from General Electric Credit Corp. (GECC) and Costco told jurors that Petters had created false documents to stave off an impending financial catastrophe in 2000.

The government says GE Credit learned that Petters had been submitting bogus documents to make it look like Costco was paying for his company's merchandise when no such deals took place. He ultimately repaid GE Credit $38.5 million and the company cancelled his line of credit.

The trial is being held in U.S. District Judge Richard Kyle's courtroom in St. Paul. If convicted of the conspiracy, fraud and money laundering charges he's facing, Petters, 52, could spend the rest of his life in prison.

Kyle said he plans to adjourning at 2 p.m. today. With Colburn still on the stand and another witness lined up behind him, it doesn't look like Coleman -- who first told authorities that Petters was running a Ponzi scheme -- will testify until Monday.

David Phelps --612-673-7269

To see more of the Star Tribune, or to subscribe to the newspaper, go to
http://www.startribune.com/. Copyright (c) 2009, Star Tribune, Minneapolis
Distributed by McClatchy-Tribune Information Services. For reprints, email
tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax
to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave.,
Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index