memo heading - PDF - PDF

Document Sample
memo heading - PDF - PDF Powered By Docstoc
					 Case 0:08-cv-05348-ADM-JSM   Document 387   Filed 06/19/2009   Page 1 of 11

                       DISTRICT OF MINNESOTA
                      Civil No. 08-5348 (ADM/JSM)

UNITED STATES OF AMERICA,                          )
                Plaintiff,                         )
1.   THOMAS JOSEPH PETTERS;                        )
     PETTERS COMPANY, INC., aka                    )
2.   DEANNA COLEMAN, aka DEANNA MUNSON;            )
3.   ROBERT WHITE;                                 )
4.   JAMES WEHMHOFF;                               )
5.   LARRY REYNOLDS, dba                           )
     aka NIR;                                      )
6.   MICHAEL CATAIN, dba                           )
7.   FRANK E. VENNES JR., dba                      )
     METRO GEM FINANCE,                            )
     METRO GEM INC.,                               )
     GRACE OFFERINGS OF FLORIDA LLC,               )
     METRO PROPERTY FINANCING, LLC,                )
     38 E. ROBINSON, LLC,                          )
     55 E. PINE, LLC,                              )
     ORLANDO RENTAL POOL, LLC,                     )
     100 PINE STREET PROPERTY, LLC,                )
     ORANGE STREET TOWNER, LLC,                    )
     CORNERSTONE RENTAL POOL, LLC,                 )
     2 SOUTH ORANGE AVENUE, LLC,                   )
     HOPE COMMONS, LLC,                            )
     METRO GOLD, INC.;                             )
                  Defendants.                      )
     DOUGLAS A. KELLEY,                            )
              Receiver,                            )
     GARY HANSEN,                                  )
             Receiver.                             )
 Case 0:08-cv-05348-ADM-JSM          Document 387       Filed 06/19/2009    Page 2 of 11


       Douglas A. Kelley, the undersigned Receiver for all defendants except Frank E.

Vennes, Jr. and his entities, submits this report summarizing major activities undertaken

since his last Report.


       1.     Tom Petters

              a.     Receivership Account

       Balance on April 17, 2009                            $54.09
       Deposits during period                          691,857.00
       Expenses paid during period                     (62,554.12)
       Balance on June 19, 2009                       $629,356.97

              b.     Receivership Activity

       Preservation of assets expenses such as insurance, utilities expense and maintenance

expense are being paid. Monthly child support authorized by the Court is being paid to

Tracy Mixon. Nanny compensation, child care expenses and COBRA health insurance

premiums are also being paid.

       The 2004 Tiara 2900 Coronet and the 2000 Tiara Diesel Open 37 yachts have been

sold for $110,000 and $142,000, respectively. Net proceeds from those sales were deposited

in the individual receivership account established for Mr. Petters.

       Seven luxury automobiles, including a Bentley, five Mercedes, and a Lexus, were

sold for $356,500. Proceeds were deposited in the individual receiver’s account.

       At the request of the Receiver, Marquis Jet refunded the unused portion of a NetJets

card. Proceeds of $82,323.67 were deposited in the Petters individual receivership account.
 Case 0:08-cv-05348-ADM-JSM          Document 387        Filed 06/19/2009        Page 3 of 11

       The Tam O’Shanter Lodge and Convention Center was sold for $916,500. Net

proceeds of the sale have been deposited with a third party escrow agent pending resolution

of a lender’s claim to the proceeds. An undeveloped adjacent lot remains on the market.

       A purchase offer has been received for the Manalapan, Florida residence. Court

approval for the sale is in the process of being requested.

       The listing price for the Wayzata, Minnesota residence has been reduced to

$7,775,000 to reflect current market conditions. There have been showings and some buyer

interest, but no acceptable offers have been received to date.

       Two other parcels of land in Summit County, Colorado remain on the market, one

with a listing price of $17, 000,000 and the other listed for $2,200,000.

       Market appraisals have been obtained for the Plymouth, Minnesota and Winter Park,

Florida residences, but those properties have not as yet been listed for sale.

       2.     Deanna Coleman

              a.     Receivership Account

       Balance on April 17, 2009                     $3,306,502.55
       Deposits during period                                  0.00
       Transfer to Federal Court Registry Acct.       (724,995.69)1
       Expenses paid during period                      (33,324.74)
       Balance on June 18, 2009                      $2,548,182.12

              b.     Receivership Activity

       A stipulated order was entered in response to a motion filed by Ms. Coleman’s
former husband alleging claims to a portion of funds previously held in a joint investment
account liquidated by the Receiver. The disputed funds were deposited into a court registry
account pending adjudication of the competing claims regarding ownership of the funds.
 Case 0:08-cv-05348-ADM-JSM           Document 387       Filed 06/19/2009    Page 4 of 11

       Deanna Coleman’s Plymouth, MN home remains on the market. There have been a

few showings but no purchase offers received to date. The Receiver’s team continues to

oversee the property and respond to suggestions from the real estate listing agent. Due to

current market interest and interest in the property, The Receiver has agreed to lower the

listing price to $995,000 in the hope of attracting a potential buyer.

       Property owned by Ms. Coleman in Costa Rica has been listed for sale. In

preparation for the listing, the property was viewed and evaluated by an outside consultant

familiar with the locale to establish a reasonable listing price. Costa Rican attorneys were

retained to assist with the sale. Although several offers have been received, none have been

deemed sufficient for the Receiver to seek Court approval for a potential sale.

       Negotiations with a third party who received proceeds from bonuses paid to Ms.

Coleman by PCI in 2007 and 2008 are ongoing. The Receiver anticipates bringing a motion

for Court approval of a proposed settlement respecting these funds in the near future.

       3.     Robert White

              a.     Receivership Account

       Balance on April 17, 2009                     $2,769,823.41
       Deposits during period                            50,187.00
       Expenses paid during period                     (40,219.29)
       Balance on June 19, 2009                      $2,779,791.12

              b.     Receivership Activity

       Robert White’s 65 foot Kanter sailboat remains listed for sale with a broker. Offers

have been received but none in an amount deemed acceptable by the Receiver. The

Receiver’s team continues to work with the broker and caretaker to preserve this asset and
 Case 0:08-cv-05348-ADM-JSM            Document 387      Filed 06/19/2009    Page 5 of 11

obtain a reasonable sale price.

         The Court approved a sale of Mr. White’s Porsche for $50,187.00. The sale proceeds

were deposited in White’s individual receivership account. Thereafter, insurance on the

vehicle was canceled, reducing preservation-of-assets expenses incurred on behalf of Mr.


         The Court also approved sale of a Ski Natique boat and trailer for $1,708.29. After

paying storage and maintenance costs, net proceeds of $500 will be deposited into White’s

individual receivership account.

         The Receiver continues to pay necessary living expenses and preservation-of-assets

expenditures as previously directed by the Court. A final tuition payment for Mr. White’s

children was made on May 5, 2009, which will reduce necessary living expenses going

forward by $4,094.54.

         4.    James Wehmhoff

               a.     Receivership Account

         Balance on April 17, 2009                   $1,707,212.39
         Deposits during period                           4,682.30
         Expenses paid during period                   (16,540.31)
         Balance on April 17, 2009                   $1,695,354.38

               b.     Receivership Activity

         Real property owned by Mr. Wehmhoff’s company, Intrepid Investments, LLC, was

listed for sale. A reasonable purchase offer was received and the Receiver is currently

seeking Court approval for the sale. A second home owned by Intrepid is being rented with

all rent proceeds deposited into an account controlled by the Receiver. Proceeds from the
 Case 0:08-cv-05348-ADM-JSM           Document 387        Filed 06/19/2009     Page 6 of 11

account are periodically swept and deposited into Wehmhoff’s individual receivership

account. Rent payments comprise the deposits to the account listed above. The Receiver

anticipates listing the second Intrepid property for sale in July.

       Members of the Receiver’s team are evaluating personal assets including boats and

other recreational vehicles. Values are being determined so those assets can be sold.

       5.     Michael Catain

              a.     Receivership Account

       Balance on April 17, 2009                        $636,123.30
       Deposits during period                            992,700.09
       Expenses paid during period                      (83,455.75)
       Balance on June 19, 2009                       $1,545,367.64

              b.     Receivership Activity

       Mr. Catain’s Costa Rican property, Casa Tranquila, was sold for $1,050,000 with net

proceeds of approximately $986,000, after sale-related expenses, deposited to the Catain

individual receivership account. Additional payments from property rental and record

company royalties were also deposited into the individual receivership account.

       The sale of Catain’s property at 4550 Enchanted Point for $2,400,000 has been

approved and is awaiting closing. To permit the sale, the Receiver worked with the City of

Shorewood to clear up zoning violations that otherwise would have hampered or prevented

the sale. Net proceeds of approximately $1,500,000 after payment of expenses, broker fees

and satisfaction of existing tax liens are anticipated and will be deposited into Mr. Catain’s

individual receivership account upon receipt.

       A 29-foot boat owned by Mr. Catain has been listed for sale with a Sarasota, Florida
 Case 0:08-cv-05348-ADM-JSM           Document 387      Filed 06/19/2009     Page 7 of 11


       The Receiver continues to evaluate whether Mr. Catain’s real estate at 4340

Enchanted Drive, a downtown Minneapolis condominium unit, and properties in Nevada and

Arizona have any equity. The properties will be listed for sale or Court approval to

otherwise dispose of them will be sought after their respective valuations have been


       6.      Larry Reynolds

               a.     Receivership Account

       Balance on April 17, 2009                    $1,438,936.17
       Deposits during period                           15,440.18
       Expenses during period                         (72,801.73)
       Balance on June 19, 2009                     $1,381,574.62

               b.     Receivership Activity

       Previously identified safety deposit boxes were inventoried with all cash or cash

equivalent deposited into the individual Reynolds receivership account. An additional safety

deposit box was located in Nevada. The Receiver is working with the bank to obtain access

to the box and its contents.

       The real estate listing agreement for Reynolds’ Las Vegas property expired. The

Receiver is negotiating a new agreement to list the property for sale.

       The Receiver is obtaining an appraisal of Mr. Reynolds’ Hollywood, California

property in preparation for a sale listing.

       Personal property has been inventoried and the Receiver is working with counsel for

Mr. and Mrs. Reynolds to determine what property should be sold with the respective homes
 Case 0:08-cv-05348-ADM-JSM            Document 387        Filed 06/19/2009     Page 8 of 11

as part of their individual sales.


          The Receiver continues to work with outside counsel and its accountants to prepare

required tax returns for the individuals and entities under his control.


          1.    Lindquist & Vennum

          Lindquist & Vennum has been involved in the following activities since the last


                a.     Sale of Polaroid Assets. During the last 60 days, significant effort was

devoted by Lindquist & Vennum attorneys toward the final negotiation of an asset purchase

agreement for Polaroid Corporation and various subsidiaries, an auction for the sale of

Polaroid assets, a hearing to approve the sale, defending appeals from the bankruptcy court

order approving the sale, and attending to the sale closing and numerous post-closing issues,

primarily relating to the assumption or rejection of various executory contracts. The final

purchase price of $87,000,000 for the Polaroid assets was more than double the $42,000,000

stalking horse bid submitted in January.

                b.     Polaroid Art Sale. The firm is helping to evaluate the disposition of the

Polaroid art collection. Options include (i) selling a portion of the collection to a charitable

institution with a sale of the remaining items through a private or public auction, or (ii) sale

of the highest value items by a national auction house with the remaining items placed for

sale with regional auction houses.

 Case 0:08-cv-05348-ADM-JSM           Document 387       Filed 06/19/2009     Page 9 of 11

                 c.    Petters Capital Bankruptcy. A Chapter 7 petition was filed for Petters

Capital, Inc. on June 12, 2009.

                 d.    Litigation Representation. Lindquist & Vennum continues to represent

the Receiver is pending litigation, including appearing before this Court in responding to

intervention motions brought by JP Morgan Chase, the Ritchie Group and Acorn, along with

other matters.

                 e.    Stratify. The firm worked with the Receiver and Price Waterhouse

Coopers to design parameters for the Stratify software system, which will be critical in the

Receiver’s efforts to conduct and respond to discovery in pending and anticipated litigation.

                 f.    Central American Holdings. Lindquist & Vennum has worked with

Central American Holdings to collect amounts due under a secured note. An additional

$1,000,000 has been received by the receivership estate from these efforts since the last


                 g.    D&O Insurance. The firm continues to pursue efforts to obtain

reimbursements from insurance carriers that provided directors and officers (D&O) coverage

to PCI, PGW and Thomas Petters, Inc. Discussions with the insurers, through counsel,

remain ongoing in an effort to resolve the claims.

          2.     Price Waterhouse Coopers (PwC)

          PwC provided the following services to the Receiver during the period covered by

this report:

                 a.    Tracing Sources and Uses of Funds. PwC continued discussions with

Case 0:08-cv-05348-ADM-JSM           Document 387        Filed 06/19/2009         Page 10 of 11

bank representatives to obtain supporting documentation for PCI and PGW bank accounts.

PwC is continuing to analyze and categorize cash flows in and out of the bank account data

received to date. PwC continues to refine an inventory and timeline of notes payable that

PCI and certain PGW entities entered into with investors. PwC is matching investor note

activity to bank account transactional data and notes payable documents. PwC will use these

analyses to summarize principal and interest paid to each investor by year and to determine

each investor’s outstanding principal and interest balances.

       PwC has conducted a search of hard copy files stored at an offsite storage facility and

is presently searching hard copy files stored at the PGW offices in Minnetonka, Minnesota.

              b.     Electronic Discovery. PwC is continuing to work with PGW and

Polaroid IT employees to preserve certain electronic data and hard copy documents and

consolidate them into a centralized repository for review.

              c.     Asset searches. PwC performed investigative research to identify

information requested by the Receiver.

              d.     Tax Compliance Services. PwC met with management to determine the

status of various returns and to assess reliability of company prepared information. PwC

also met with representatives from the Receiver's office and legal counsel to discuss tax

filing responsibilities and coordinate activity to avoid duplication of effort.

       PwC compiled an inventory of historical income tax return filings for PGW, PCI and

related Thomas J. Petters legal entities (collectively “the Petters Entities”). The inventory

includes listings of delinquent filings as well as tax returns currently due for tax year 2008.

Case 0:08-cv-05348-ADM-JSM              Document 387    Filed 06/19/2009    Page 11 of 11

       PwC has begun the tax return preparation process for the Petters Entities. Included

in this effort is significant progress towards completing the 2008 Form 1065 partnership tax

returns for certain Petters entities.

                                            Respectfully submitted,

                                            KELLEY & WOLTER, P.A.

Dated: June 19, 2009                         s/ Douglas A. Kelley
                                            Douglas A. Kelley, Receiver
                                            Atty. ID No. 54525
                                            Centre Villages Offices, Suite 2530
                                            431 South Seventh Street
                                            Minneapolis, MN 55415
                                            (612) 371-9090


Shared By: