Petters is serving a 50-year sentence in the United States Penitentiary in Leavenworth, Kansas. But before he traded his pinstripes for prison jumpsuits, he was a persuasive charmer.
In 1994 — a year after federal prosecutors say Petters began his Ponzi scheme — he convinced Michael O. Freeman, Klobuchar’s predecessor in the Hennepin County attorney’s office, to help expunge his prior record of alleged financial crimes.
In an October 1989 arrest warrant, Colorado authorities had accused him of forgery and fraud related to a $75,000 swindle over nonexistent VCRs. In Minnesota, he made a financial restitution payment to sidestep a fugitive warrant. And with the help of Assistant County Attorney Nancy McLean, he succeeded in making the Colorado record vanish.
The expunged documents remained in the Hennepin County Attorney’s office, however. TheDC has obtained copies of them. They show authorities in the office Klobuchar inherited in 1999 knew years earlier that Petters had a dishonorable and criminal financial past.
The documents show that McLean represented the State of Minnesota in the push to have Petters’ record expunged. McLean served as Freeman’s assistant, and would continue in the job as Klobuchar’s assistant.
With his Colorado records expunged, Petters carried a clean legal slate into the early years of his Ponzi scheming.
Petters’ charmer instincts extended to his political largesse. Petters Group Worldwide, his legitimate business empire, was overall the third largest source of contributions to Klobuchar’s 2006 Senate run, with the company and its employees donating $75,800. After Petters was convicted in federal court, Klobuchar ultimately returned much of that money.
At the time it was uncovered, Tom Petters’ $3.65 billion Ponzi scheme was the biggest in history. Today it trails only the Bernie Madoff affair and the MF Global collapse in size and scope.
CNN reported that Petters and his business “defrauded billions of dollars and property by convincing investors to give the company money to purchase electronics to be sold to big-box retailers, such as Costco and Sam’s Club. Instead, Petters diverted the funds to make payments to other investors, fund his other businesses and finance his extravagant lifestyle.”
Documents obtained by The Daily Caller show that Sen. Klobuchar had enough evidence in 1999 to prosecute Petters years before the federal government unraveled his scheme, but chose not to. At the time, she was the chief prosecutor in the county where Petters lived.
The documents also show that Klobuchar exceeded the bounds of her jurisdiction as County Attorney to intervene in federal bankruptcy and other legal proceedings whose results helped Petters erase the earliest indications of his criminal activity.
In January 1999, evidence of what the St. Paul Pioneer Press called “early signs” of Petters’ Ponzi scheme crossed Klobuchar’s desk when officers from her Hennepin County Attorney’s Office raided the home Richard Hettler shared with Ruth Kahn, another Petters investor.
Documents retrieved in that raid, including those TheDC is publishing with this report, showed Hettler, Kahn and Petters engaged in a mutually beneficial and highly illegal financial scheme.