Harold Alan Katz, an Illinois hedge fund accountant who invested with Tom Petters, was sentenced Friday to one year and one day in prison for his role in Petters' $3.65 billion Ponzi scheme.

U.S. District Court Judge Richard Kyle handed down the sentence on Friday morning in St. Paul. According to court documents, Katz will serve his sentence in Otisville, New York. Following his release, he will be supervised and must adhere to unspecified “special conditions” for an additional three years.

Katz was charged last year, and he pleaded guilty to one count of conspiracy to commit wire fraud in September 2009.

According to Katz's plea agreement, he conspired with Gregory Bell-who was sentenced Thursday to six years in prison-to defraud investors. Katz served as vice president of finance and accounting for Lancelot Investment Management, LLC, which was managed by Bell.

Lancelot managed three hedge funds, which were invested in almost exclusively by Petters Company, Inc. (PCI)-one of two companies owned by Petters that pled guilty to charges on Thursday.

Katz created fraudulent banking transactions for Bell-who admitted in his plea agreement to devising a plan that made it appear as though PCI was paying promissory notes to Lancelot investors, which was not the case.

Bell made “round-trip” banking transactions that misled investors. He wired money from Lancelot to PCI and then immediately back to Lancelot-where the money was represented to investors as a payment from PCI on the promissory notes held by Lancelot.

By 2008, PCI was not fulfilling its financial obligations-but Lancelot raised more than $200 million that year from new investors based on false representations that PCI investments were sound and were paying positive returns.

Katz was aware that PCI was not fulfilling its financial obligation. When an investor inquired about the pay-off status of PCI promissory notes, Katz allegedly created a spreadsheet that did not reflect that the funds were derived from the “round-trip” transactions.

Katz faced a maximum of five years in prison for his crime, as well as a fine of up to $250,000, according to court documents. Kyle's sentence does not require Katz to pay a fine.

In addition to Katz and Bell, four other co-conspirators who pleaded guilty to charges related to Petters' fraud scheme were recently sentenced: Deanna Coleman, Michael Catain, Larry Reynolds, and Robert White. A date has not yet been set for James Wehmhoff's sentencing.

Petters was found guilty in December of 20 felony counts relating to fraud, conspiracy, and money laundering, for orchestrating a $3.65 billion Ponzi scheme that spanned a decade.

Petters, who maintains his innocence, was sentenced to 50 years in prison in April. His attorney filed a formal notice of appeal later that month.