Minnesota businessman rose quickly, but fell even faster
By Amy Forliti and Steve Karnowski
MINNEAPOLIS — With million-dollar homes in three states, yachts, luxury cars and a friends list teeming with celebrities and athletes, Tom Petters seemed to have it all.
Over two decades, Petters used his charisma and salesmanship to turn a small liquidation company into a diversified, billion-dollar business with stakes in companies including Polaroid and Sun Country Airlines. He wrote big checks to politicians and pledged millions to universities that named programs and buildings after him.
"I thought that everything he touched turned to gold," said George Wozniak, a Minneapolis travel agency owner who once considered a business deal with Petters. "That’s what it looked like."
What Wozniak and others saw was an illusion, federal prosecutors say — little more than a Ponzi scheme that somehow endured for at least 14 years and bilked investors of some $3 billion before a troubled insider blew the whistle in September.
The demise of a man once hailed as a Minnesota success story has been stunning in its speed and totality. Petters, 51, the alleged mastermind of the scheme, is in jail on felony charges. Petters Group Worldwide faces more than 30 lawsuits and has been plunged into bankruptcy.
Fraud experts say the Petters case is "in a standalone class" not just for the money but for how long it lasted and how far it reached.
If it weren’t for the current mess on Wall Street, said Jacob Frenkel, a former Securities and Exchange Commissioner enforcement lawyer, "this would be one of the highest-profile, highly scrutinized criminal cases of this decade."
Petters founded what would become Petters Group Worldwide in 1988 as a one-man operation. By 2007, the Minnetonka-based holding company had interests in dozens of businesses, reporting 2007 revenue of $2.3 billion. At the start of 2008, about 2,400 people worked for Petters Group or one of its entities.
The middle child of seven, Petters grew up in St. Cloud and worked at the tailor, fur and fabric shop started by his great-grandfather. He attended Catholic school, and started his first business at age 15, selling electronics out of a rented office. The enterprise had an 18-month run — until his mother found out.
In the 1980s, Petters worked as regional manager for a consumer electronics chain in Colorado, and bought five of the chain’s stores when it fell into bankruptcy.
The business failed, but by 1988, Petters had made a fresh start — launching a company to buy goods from bankrupt or troubled retailers and then resell them. In 1995, he started Petters Warehouse Direct to sell goods directly to consumers.
Wozniak, the travel agency owner, first met Petters around this time. He said Petters approached him about opening travel agencies within Petters’ stores. Wozniak didn’t do the deal, but says he regarded Petters as a visionary who made things happen.
"He had a hundred ideas about how things were going to work all the time," said Wozniak, president of Hobbit Travel. "If you weren’t a good listener, you didn’t talk to Tom very long."
In 2002, he teamed with former Fingerhut Cos. CEO Ted Deikel to buy various assets of the distressed catalog retailer. In 2005, he acquired his best-known company — Polaroid Holding Co.
In 2006, it was time to buy an airline: Sun Country, the former charter carrier that had struggled to become a scheduled-service airline. Bob Daly, Sun Country’s co-founder, remembers Petters from negotiations as "the consummate sales person."
Court records trace Petters’ rising fortunes. Divorce documents show he was making about $30,000 a year in 1990. By the end of 2007, court documents put his personal assets at more than $1 billion.
Public records list a $5.3 million lake home in Wayzata, Minn.; a $9.6 million oceanside getaway in Manalapan, Fla.; and a $1.4 million home on a golf course in the Colorado resort town of Keystone.