Wednesday, April 22, 2009

Roots of $3 Billion Fraud Case Lie in DVD Players, Not CDOs

MINNEAPOLIS -- Bernard Madoff bilked the public with fictitious securities transactions. Tom Petters, prosecutors allege, gulled his victims with nonexistent DVD players and flat-screen TVs.

Among the spate of alleged scams that have come to light in recent months, the $3.5 billion one that Mr. Petters is charged with is among the most unusual. The Minnesota businessman promised fat returns to investors who lent him money to buy surplus merchandise and resell it to famous retailers like Wal-Mart Stores Inc.

"In fact, there were no such purchases or resales," says a federal indictment. It says both were faked. Mr. Petters denies the charges.

Two months before Mr. Madoff burst onto the public stage last year charged with a Ponzi scheme, authorities here accused Mr. Petters, a gregarious 51-year-old appliance wholesaler, of running a multibillion-dollar fraud of his own. http://online.wsj.com/article/SB124035239814540625.html

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