Targets of 109 Petters Clawback Suits Seek Dismissal

More than half of the organizations and individuals targeted in clawback lawsuits seeking to recover money from Tom Petters' fraud scheme have asked to have the suits thrown out.

Targets in 109 of the approximately 200 Tom Petters-related clawback lawsuits filed last fall have asked to have the suits dismissed-signaling that the aftermath of Petters' $3.65 billion Ponzi scheme is far from over.

The targets of the clawback lawsuits include both organizations and individuals. George Singer-an attorney at Minneapolis law firm Lindquist & Vennum, PLLP-reported the dismissal requests to U.S. Bankruptcy Judge Gregory Kishel at a procedural hearing on Tuesday.

Singer is an attorney for Doug Kelley, the trustee overseeing the Petters bankruptcy proceedings who filed the roughly 200 clawback suits. Kelley has previously indicated that he aims to recover at least $1.745 billion for victims of the fraud scheme.

Singer told Twin Cities Business on Wednesday that motions for dismissal in cases like this one are “very common” and that the requests came as no surprise. The parties seeking dismissal have differing reasons for doing so, but there are a “great number that raise common issues,” Singer said. For example, many have argued that Kelley's clawback claims fall outside of the statute of limitations under which funds from ill-gotten gains can be recovered under Minnesota law. Others have used “specific defenses relating to whether we've outlined the facts supporting the claims with sufficient specificity,” Singer said.

According to Singer, the Petters bankruptcy proceedings, including the clawback litigation, are anticipated to take at least one more year. By April 22, Kelley and the attorneys working with him will have filed motions addressing the requests for dismissal. Then at a hearing on April 27, Kishel will outline how he plans to address the motions-and oral arguments from the involved parties will be heard at subsequent hearings that will take place later this spring before a decision is made.

At least 50 attorneys representing various parties involved in the clawback lawsuits were in attendance at Tuesday's hearing, according to Singer.

Among the individuals who face clawback lawsuits are 45 to 50 former Petters employees. Attorneys representing them and attorneys working with Kelley have agreed to a consolidated mediation in an attempt to resolve the suits, through which Kelley is seeking bonus and other payments that employees received during the period when the fraud scheme played out.

Petters is currently serving a 50-year prison sentence for running a Ponzi scheme took place for more than a decade. Petters filed an appeal shortly after he was sentenced, and he told federal judges in February that his trial was tainted and he deserves another.