Chapter 11 Trustee Douglas A. Kelley, who's been liquidating Petters Co. and other Petters-affiliated companies in bankruptcy court since 2008, on Wednesday sued Frank E. Vennes Jr. and three entities affiliated with him seeking to recover the promissory note principal payments, false profits and commissions Kelley says were fraudulently transferred to them in connection with Petters's Ponzi scheme.
Bankruptcy laws allow companies to recoup funds they paid out fraudulently or while they were insolvent.
"Every transaction entered into" by Vennes's company Metro Gem Inc., "its predecessors, and the remaining defendants to invest in [Petters Co.] and the Ponzi scheme was based upon wholly fraudulent and fictitious documents and financial transactions," Kelley said in court papers.
In the suit, filed Wednesday in the U.S. Bankruptcy Court in Minneapolis, Kelley said Vennes and Metro Gem "knew or should have known" they were profiting from Petters's fraud, or at a minimum failed to perform "reasonable" due diligence on the companies they were doing business with. Instead, Kelley said Vennes and Metro Gem "ignored numerous indicia of fraud from the general manner in which Petters and" Petters Co. operated.
Vennes's attorney, Jim Volling, said Thursday that he and his clients disagree with the lawsuit's allegations and will "strenuously defend" against them.
The transactions Kelley is taking aim at, of which there were more than 700, took place between 1998 and 2008. In addition to Metro Gem Inc., two other Vennes-affiliated entities were named as recipients of fraudulent transfers: Metro Gem LLC and Northwestern Foundation.
Bachmann wrote a letter in support of a pardon for Frank Vennes Jr., a major donor to her campaign.
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