Wednesday, October 3, 2012

Palm Beach Trustee: General Electric Capital Conspired With Tom Petters to Defraud Investors

The attorney for the Palm Beach Finance Trustee filed a civil suit  (PDF) against GE Capital, one of the world's biggest financial firms  alleging GE Capital employees knew that Tom Petters was running a Ponzi scheme way back "on or about October 24, 2000" and did nothing to stop it:
GECC would remain silent about its discovery of the Conspiracy and assist in its continued fraudulent concealment. Petters would cause GECC to be paid from new, defrauded lenders rather than from the proceeds of legitimate operations.
Even worse, the document alleges GE Capital helped Tom Petters recruit more victims with a recommendation letter addressed to "Whom it May Concern" (see screenshot of the letter below).

Here's the part that mentions the role Vennes played in the scheme involving the letter:
In 2002, Vennes introduced the principals of the general partner of the Palm Beach Funds to Petters. Petters used his former relationship with GECC as a strategic selling point, representing to the Palm Beach Funds through Vennes and Vennes’ Minnesota legal counsel, that the GECC-Petters business relationship ended: (i) profitably for both sides; (ii) with appropriate and ordinary documentation; and (iii) because GECC wanted to be Petters’ sole lender but Petters refused. 
The Recommendation Letter was shared by Petters with Vennes. Vennes in turn waxed poetic about the successful Petters-GECC relationship as a part of his efforts to convince the Palm Beach Funds to lend to Petters. Vennes’ representations to the Palm Beach Funds in regards to Petters’ “excellent” relationship with GECC were influenced by the Recommendation Letter. The Palm Beach Funds, through its agent, justifiably relied upon these representations. 
These representations were false and Petters and GECC knew them to be when made.
Here is the infamous letter that GE Capital's  Richard Menczynski gave Petters to use to  convince victims to give money to Petters:

NOTE: The PBF Trustee is seeking the total losses of the Palm Beach funds (approximately $1.1 Billion) plus punitive damages.