August 29, 2012
By Jacqueline Palank
The trustee tracking down funds to pay creditors of Ponzi-scheme orchestrator Tom Petters just scored a goal in bankruptcy court.
Trustee Douglas Kelley, who is overseeing the bankruptcy liquidation of Petters’s former business empire, on Tuesday won a $200,000 judgment against Luxembourg soccer club CS Fola Esch, court papers show.
The soccer—wait, football—club received $200,000 from Petters in July 2008, mere months before Petters was arrested and his companies taken away from him and placed into bankruptcy protection. Petters is now serving a 50-year prison sentence for his 2009 conviction on multiple fraud and other charges, which he unsuccessfully asked the Supreme Court to review.
As part of the bankruptcy, Kelley has been suing to recover the money that Petters fraudulently paid out to a host of individuals, businesses and charities before he was found out. He sued Fola in October 2010 not to accuse the club of any wrongdoing but rather recover money that wasn’t Petters’s to give—instead, it was money that should have gone to Petters’s investors.
Fola is lumped in with the charities and other nonprofits that together received more than $6 million in fraudulent payments in the months before the bankruptcy. Others include Minnesota Teen Challenge, which received nearly $1.8 million, and the Juvenile Diabetes Research Foundation, which received more than $263,000. The latter was among six charities that settled the lawsuits by agreeing to return a portion of the donations.
Charitable donations were a way for Petters to boost his reputation as a businessman and attract new investors, Kelley said in his lawsuit against Fola.
“The transfers to universities, schools and other charities were made as part of the Ponzi scheme to impress existing and future investors, to add credibility to the scheme and to convey that Petters [and his businesses] were trustworthy, impressive and profitable enterprises,” Kelley wrote.
Fola never answered the complaint despite facing a court-imposed deadline to do so, which are the grounds upon which Judge Gregory F. Kishel of the Minnesota bankruptcy court ordered the club to return the $200,000, cover the trustee’s costs and pay prejudgment interest.
Fola currently tops the Luxembourg national football league. The team, however, is ranked 428 of the 443 teams that are members of the Union of European Football Associations, or UEFA—a far cry from the #1 FC Barcelona and #5 Real Madrid CF teams, which will face off in Madrid Wednesday.