Alleged Petters Co-Conspirator Fry Pleads Not Guilty Again
James Fry, whose case is expected to close a chapter in the long and complicated Tom Petters Ponzi scheme saga, pleaded not guilty Wednesday for a second time, after his co-defendant recently pleaded guilty.
His trial date, meanwhile, has been moved back to May.
Fry was charged in 2011 for alleged securities fraud, wire fraud, and making false statements to the U.S. Securities and Exchange Commission during its investigation of his company, Minnetonka-based hedge fund Arrowhead Capital Management. He was charged along with Frank Vennes, who allegedly served as one of Petters’ primary fundraisers.
Fry pleaded not guilty soon after being indicted. Vennes also initially denied the charges—but he did an about-face last month, making a last-minute guilty plea right before his and Fry’s trial was set to begin.
A new indictment was subsequently filed against Fry, this time with the charges against Vennes removed. It was because a new indictment was filed that Fry made a second plea.
Petters raised money to perpetuate a Ponzi scheme by selling Petters Companies, Inc. (PCI), notes to hedge funds, which supposedly would finance the purchase of consumer goods, when in fact they didn't. Vennes allegedly began raising money for the purchase of PCI notes in 1995, through his company, Metro Gem, Inc.
Fry, who was CEO of Arrowhead Capital Management, is accused of working with Vennes to raise money for Petters’ $3.65 billion Ponzi scheme. Between 1999 and September 2008, when Petters’ fraud scheme began to unravel, the Arrowhead funds invested more than $500 million of investors’ money in PCI Notes, according to the indictment. During that period, Fry, Arrowhead, and the firms’ related entities allegedly obtained more than $41 million in fees for the PCI investments.
Fry is accused of working with Vennes to mislead investors; for example, the men told investors that when retailers bought goods from PCI, the retailers made direct payments for those goods to a bank account controlled by Arrowhead. In reality, the money was coming directly from PCI, according to prosecutors.
Fry also allegedly withheld information from investors regarding Vennes’ criminal history.
Fry’s attorneys, meanwhile, have argued that Fry was unaware that Petters was operating a Ponzi scheme, according to a report by the Star Tribune.
Of the 13 people charged in relation to the Petters fraud, only Petters has gone to trial: The rest, with the exception of Fry, have pleaded guilty to the charges against them, the Minneapolis newspaper reported.
Fry’s trial was initially set to begin last month but was postponed following Vennes’ guilty plea. Court documents filed Thursday show that his trial is now scheduled for May 17.
Petters, who is serving a 50-year prison sentence, broke his silence in 2012, speaking from prison in an exclusive interview with Twin Cities Business Editor in Chief Dale Kurschner. To read the resulting feature story, click here.