Palm Beach Finance Trustee Files Motion to Settle With Minnesota Teen Challenge

The motion can be downloaded at this link (PDF).

Some highlights:

Altogether, as set forth in the complaints filed in the Litigation, the Petters Trustee, Petters Receiver and Liquidating Trustee assert that MTC received in the aggregate, approximately $8,247,319.51 in transfers from the Petters Receivership Defendants, the Vennes Parties and PCI. In particular: 

a) During the period beginning on or about April 1998 and ending on or about December 2007, one or more of the Receivership Defendants made transfers totaling $ 1,979,883.00to MTC; 

b) During the period beginning on or about August 2000 and ending on or about September 2005, PCI made transfers totaling $476,830.00 to MTC; 

c) During the period from February 4, 1998 through May 14, 2003, the Vennes Parties made transfers, including transfers made through the Fidelis Foundation, to or for the benefit of MTC in the amount of approximately $2,817,000; and 

d) During the period beginning on or about June 2004 and ending on or about July 2008, the Vennes Parties made transfers totaling $5,790,606.51 to MTC of which (i) approximately $2,689,606.51 of these transfers are asserted by MTC to be unrelated to donations made by the Vennes Parties and (ii) approximately $ 1,451,000.00 of these transfers were made by Mr, Vennes to MTC to refurbish and repair the Hope Commons Building located in Minneapolis, Minnesota, which is partially occupied by Teen Challenge under a tenant-friendly twenty-five year lease.

The settlement terms:

Cash consideration: upon approval of the Settlement, MTC shall pay or cause to be paid $2,051,000.00 ("Settlement Payment" ) in settlement of the Litigation. The Settlement Payment is comprised of two components, $600,000.00 of the Settlement Payment is directed at settling all claims the Petters Receiver and the Petters Trustee have against MTC directly based on transfers to or for the benefit of MTC made by entities for which Mr. Kelley serves as receiver or trustee (the "Direct Claim Amount" ). The remaining $1,451,000,00 is directed at settling all claims the Petters Trustee and the Liquidating Trustee have against MTC resulting from transfers MTC received from either of the Vennes Parties, either directly or through the Fidelis Foundation ("Indirect Claim Amount" ).

...and...

Allocation of the Settlement Payment with respect to the Indirect Claim Amount: The Petters Trustee, on behalf of PCI, will receive 50% ($725,500,00) of the Indirect Claim Amount on account of his settlement of his claims that predate November 30, 2003. In general, these claims are premised on the theory that MTC was a ) 550(a)(2) subsequent transferee of transfers made initially by PCI to one or both of the Vennes Parties. The remaining 50% ($725,500.00) of the Indirect Claim Amount is allocated 50% to the Petters Trustee on behalf of PCI ($362,750.00) and 50% to the Liquidating Trustee ($362,750.00) ("Palm Beach Settlement Payment" ) according to the Allocation Agreement.

MNTC also has to drop its motion to dismiss.

The settlement motion explains that there would be problems in going ahead with the clawback, including the cost of litigation and discovery and the recently passed Minnesota Uniform Fraudulent Transfer Act (MUFTA). And then there is the complication of the trial in October:

Moreover, a significant focus of the litigation will be the Vennes Parties themselves. To that end, the pending criminal case against Mr. Vennes is currently scheduled for trial in the fall of 2012. The possibility exists that discovery from the Vennes Parties may be delayed until the conclusion of that proceeding.

Will we learn more about the business relationship between Frank Vennes and Minnesota Teen Challenge at the trial? Stay tuned.
 

Palm Beach Finance Trustee Settlement With Vennes Attorney Craig Howse

Read the settlement (link PDF) at the website for the Trustee for Palm Beach Finance.

The settlement payment is $1,225,000 which will be paid out of the Howse and Thompson professional liability insurance policy.

Further clawback action by Liquidating Trustee is barred and the parties have exchanged general releases from future claims. This release includes the "Winning Edge Holding Company" a business entity "affiliated with Mr. Howse".

Mr. Howse has also agreed to cooperate with the Trustee's investigation without serving process or subpoena on Mr. Howse.

If Howse had not settled with the Trustee, the Trustee would likely filed claims against Howse asserting "fraudulent transfer" and "professional negligence", claims Howse has denied.

For more about Mr. Howse, read:

Vennes Lawyer/Lobbyist Craig Howse Continues to Trouble the Waters of Deer Lake

Whatever Happened to Vennes Lawyer/Lobbyist Craig Howse?

The Sorry Saga of Hope Commons

From Karl Bremer at Ripple in Stillwater:

Pawlenty judicial appointment is former lobbyist for convicted money launderer Frank Vennes Jr.

Minnesota Teen Challenge Files Motion to Dismiss PBF Clawback

UPDATE: The lawyers for Barry E. Mukamal,the Liquidating Trustee filed a response to MNTC's motion to dismiss (6/4/12). We will have more about this later.

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Minnesota Teen Challenge filed a motion to dismiss the $5,790,606.51 Palm Beach Finance clawback May 10th using  the recently passed statute limiting clawbacks of fraudulent transfers to 2 years instead of 6 years. The retroactive part of the  bill is intended by its sponsors to rescue non-profits from having to cough up the stolen money they received specifically from the Petters Ponzi scheme - Listen:


House_Audio_1384 by spongiforce

Defenders of HF 1384 claim the non-profits rescued by this new statute are unwitting victims of Tom Petters. The analogy they use is Petters, with no criminal record (it was expunged) is like a bank robber dropping his loot into a church's poor box - how were they to know?

When it comes to Minnesota Teen Challenge and other non-profits who received fraudulent transfers of money from Frank Vennes, there's three big problems with that analogy;

1) Frank Vennes was not an anonymous donor to MNTC.

2) He was a board member.

3) It cannot be said that MNTC was unaware that Frank Vennes was a fraudster - he was a convicted money launderer. It is highly unlikely that the MNTC board did not know that Frank Vennes had served time for that crime since he gave one or more lectures (audio here) about it, including one at something called the "God and Money Dinner" with Darrel Amiot who also served on the MNTC board.

This is what Minnesota Teen Challenge Director Rich Scherber said about accepting Vennes funds (2011?) - Note that it only mentions Petters, not Vennes (download PDF here):

Dear Friends of Teen Challenge,

If you have been following the news lately, you may have heard that Petters Companies is under investigation. Those who have walked with Teen Challenge over the years have seen the generosity Tom Petters has shown towards our ministry. Needless to say, we are stunned and saddened by the news we have recently heard. We have been contacted by many of you who are concerned for us and are praying; we are so thankful for your prayers and support.

In an affidavit, Teen Challenge is mentioned as being one of many victims. Our board felt it important to share with you the ministry’s involvement with Petters Companies, and how this situation has affected us.

About seven years ago, one of our major donors recommended that we consider building a strong reserve fund for Teen Challenge – a nest egg –for use in case of emergency or for program expansion. The donor suggested that we work with the Harvest Fund, and later the Fidelis Foundation, organizations that work with many other Christian ministries, and consider investing some of his large charitable gifts in the Petters Companies, a once strong, respected corporate entity in Minnesota.

From the very beginning of our investments, our board of directors adamantly insisted that no other general donor funds ever be transferred into those notes. For seven years this investment bore a healthy return and helped us expand our programming and outreach. In the past year, we have been using the interest on these funds to help underwrite the costs of our statewide programs.

Strong Christian stewardship is one of our embraced values. It is important for you to know that our board is very prudent and careful with all contributions that come into the ministry. We recognize that many of your contributions come at great sacrifice. This situation has caught hundreds of other investors and ministries by surprise and we are in the process of assessing its impact on the ministry.

As always, your prayers and support of our Christian mission are much appreciated.

Sincerely,

Rich Scherber

Executive Director

I contacted MN Teen Challenge. The spokesperson had no comment on the motion to dismiss.

Below is the MNTC letter (click on the letter to make it larger:

Twin Cities Business Magazine Article Repeats Tom Petters' Lies

A pathetic excuse for journalism - but if you must read it, here is the link.

I read the whole thing and it's the same old BS Petters told at his trial - here's the spoiler: Deanna Coleman was responsible for everything. Blame the woman.

Ho-hum.

I'm guessing this ridiculous article is part of the emerging counter-narrative I wrote about over a month ago.

 UPDATE: David Brauer at MinnPost reports that Twin Cities Business had a contract including a “pre-publication review” agreement with Tom Petters:

Getting a sensitive source to cooperate is often a matter of flattery, diplomacy and pressure; the challenge is not to sell out in pursuit of the story. Although Kurschner wrote a full-page editor’s note detailing the six-month saga of securing Petters’ cooperation, he did not disclose to readers the unusual provision that might have been the deal-clincher.

Pathetic.

Did Tom Petters Personally Lobby President Bush for Vennes Pardon?

Quote from Strib article about recent interview with Tom Petters:

"I was grateful for the good life I had. I had the opportunity to meet five U.S. presidents, I have an incredible amount of gratitude for the people who helped me," Petters said. "Not a day went by in which I ever knowingly defrauded anyone."

Tom Petters knew about the pardon.

Attorney for Palm Beach Finance Bankruptcy Trustee on Passage of HF 1384 "Unfair and Inequitable "

Statement by attorney Michael Budwick, representing Barry Mukamal Trustee of the bankrupt Palm Beach Finance hedge funds:

We believe it is unfair and inequitable to the victims of the Petters fraud to modify retroactively an existing statutory cause of action, particularly after we have invested substantial resources preparing and filing scores of lawsuits. In the coming weeks we intend to review the appropriateness of retroactive application.

According to the Strib, Doug Kelly is considering challenging the constitutionality of the law.

Developing...

Article About M&I Bank

Milwaukee Journal Sentinel Online business article titled "Lawsuit over Ponzi scheme seeks $1 billion from M&I".

The article quotes attorneys involved in the Palm Beach Finance Partners bankruptcy, but does not mention Frank Vennes. Quote from the complaint in the article:

"From Jan. 1, 2003, through Aug. 31, 2008, the astronomical sum of $35.35 billion was deposited into the M&I account"

Quote from the article:

The lawsuit, filed late last year, alleges that Petters could not have kept his Minneapolis-based fraud afloat had M&I enforced an agreement it signed that was designed to protect a Florida investor group that unwittingly helped finance the Petters scheme.

The MN DOJ had this to say about M&I and Vennes/Fry:

Accordingly, the first two false statements set out in the Bill of Particulars under Count 26 - “FRY testified that he believed that retailers paid the custodian bank directly until September 24, 2008" and “FRY later testified that he believed that retailers paid the custodian bank directly until he learned about the clearing account, but he was told by FRANK VENNES that the clearing account was controlled by M&I Bank not Petters” will both be proven false by the introduction of evidence, amounting to proof beyond a reasonable doubt, that defendant Fry knew from the earliest days of his involvement with Frank Vennes and Tom Petters that money to pay off promissory notes ALWAYS came from PCI and NEVER came from the retailers.

The complaint against BMO Harris Bank regarding M&I (PDF) at the PBFP bankruptcy website.

A report (PDF) by Kinetic Partners that mentions M&I bank.