The liquidating trustee for a bankruptcy case related to Tom Petters' $3.65 billion Ponzi scheme has sued U.S. Congresswoman and presidential hopeful Michele Bachmann in an attempt to recover $27,600 in campaign contributions.
Barry Mukamal-trustee for Florida-based hedge funds Palm Beach Funds-filed the "clawback" lawsuit last week in U.S. Bankruptcy Court in the Southern District of Florida. In addition to Bachmann, the suit names as defendants political committees Bachmann for Congress and Bachmann Minnesota Victory Committee.
According to the suit, Bachmann received the money from Frank Vennes, Jr., who was originally charged in April for securities fraud related to the marketing of a hedge fund's investments in Petters Company, Inc. (PCI). A superseding indictment was filed a couple of months later, adding additional charges against Vennes.
Petters raised money to perpetuate a Ponzi scheme by selling PCI notes to hedge funds, which supposedly would finance the purchase of consumer goods, but they didn't. The former Wayzata businessman was sentenced in April 2010 to 50 years in prison for orchestrating the fraud.
David Harrold and Bruce Prevost-each of whom were charged along with Vennes for alleged securities fraud-co-founded Palm Beach Capital Management, which served as the investment adviser for the Palm Beach Funds. Vennes allegedly recruited the two men to raise money for Petters' entities, and Harrold and Prevost together received more than $58 million in fees, while Vennes received more than $60 million in commissions based on the Palm Beach investments in PCI, according to charging documents.
The clawback suit against Bachmann claims that as a result of the Ponzi scheme, the Palm Beach Funds' investments with Petters were "worthless." And during the period in which Vennes and his related entities were "committing these tortious acts and receiving transfers from the Palm Beach Funds," Vennes provided money to Bachmann and her associated political committees, according to the lawsuit.
The complaint lists seven contributions to Bachmann's committees made between 2005 and 2008; they total $27,600, and the trustee is seeking to recoup that entire sum for the creditors of the Palm Beach Funds, which filed for bankruptcy in 2009.
A spokeswoman for Bachmann deferred questions about the lawsuit to Bachmann's campaign press secretary, who did not respond to a request for comment before this story was published online.
An attorney representing Mukamal on Monday declined to comment on the clawback lawsuit. Court records indicate that other similar "adversary proceedings" related to the Palm Beach Funds have recently been filed; one names several Minnesota-based organizations as defendants, including Minnesota Teen Challenge, Inc. According to several media reports, Vennes formerly served on the board of the Minneapolis-based nonprofit.
Political blogger and outspoken Bachmann foe Karl Bremer first reported on the clawback development in his Ripple in Stillwater blog.
The Washington Post recently reported on the complicated history between Vennes and Bachmann. Vennes, who had been caught in a sting by the Internal Revenue Service in 1986, received a prison sentence for money laundering-a crime that was unrelated to Petters' fraud. Former U.S. Senator Norm Coleman and Bachmann reportedly voiced their support for Vennes-whose family had contributed to both of their campaigns-in an attempt to have him pardoned by the White House. As the government considered the pardon in 2008, federal agents raided Vennes' home and offices for evidence of his connection to Petters' Ponzi scheme, and Bachmann subsequently withdrew her support for Vennes' pardon, according to The Washington Post.
MinnPost in April also reported on the connection between Vennes and several Minnesota politicians. In addition to Bachmann and Coleman, Vennes reportedly supported former Minnesota Governor Tim Pawlenty and U.S. Senator Amy Klobuchar.
Clawback actions are also playing out in the Petters' bankruptcy case, through which trustee Doug Kelley has filed about 200 such lawsuits. Those suits are seeking to claim more than $1.6 billion, according to a report by the Star Tribune. Thirty former Petters associates last week agreed to pay $8.5 million to settle clawback claims, and many other targets have filed motions to dismiss the suits. The fight over those motions is reportedly expected to play out later this month.