Petters Motion for Prelim Order Forfeiture

UNITED STATES DISTRICT COURTDISTRICT OF MINNESOTA

Criminal No. 08-364 (RHK/AJB)

UNITED STATES OF AMERICA, ))

Plaintiff, ))

v. ) MOTION FOR PRELIMINARY) ORDER OF FORFEITURE

(1) THOMAS JOSEPH PETTERS, ))

Defendant. )

The United States of America, by and through B. Todd Jones,

United States Attorney for the District of Minnesota, and James S.

Alexander, Assistant United States Attorney, respectfully moves

this Court, pursuant to 18 U.S.C. §§ 981(a)(1)(C) and 982(a)(1), 28

U.S.C. § 2461(c), and Fed.R.Crim.P. 32.2, for a Preliminary Order

of Forfeiture in the above-captioned case and in support thereof

represents to the Court the following:

1. On June 3, 2009, a federal grand jury sitting in the

District of Minnesota returned a Superseding Indictment against

Defendant Thomas Joseph Petters.

2. The Forfeiture Allegations of the Superseding Indictment

sought the forfeiture of the following property pursuant to 18

U.S.C. § 981(a)(1)(C) in conjunction with 28 U.S.C. § 2461(c), and

18 U.S.C. § 982(a)(1):

a. Funds in the amount of $1,026,352.86 seized from M&IMarshall & Ilsley Bank account number xxx9018;

b. Funds in the amount of $120,983.01 seized from Crown Bankaccount number xxx2227;

c. Funds in the amount of $289,658.89 previously held inCrown Bank Certificate of Deposit number xxx3081;

Case 0:08-cr-00364-RHK-AJB Document 366 Filed 01/15/10 Page 1 of 22

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d. Funds in the amount of $115,512.46 previously held inCrown Bank Certificate of Deposit number xxx3065;

e. the real property and premises located at 655 BushawayRoad, Wayzata, Minnesota 55391, together with itsbuildings, appurtenances, improvements, fixtures,attachments and easements, and/or proceeds traceable tothe sale of said property;

f. the real property and premises located at 320 Elk Circle,Dillon, Colorado 80435, together with its buildings,appurtenances, improvements, fixtures, attachments andeasements, and/or proceeds traceable to the sale of saidproperty;

g. the real property and premises located at 1840 SouthOcean Boulevard, Lake Worth, Florida 33462, together withits buildings, appurtenances, improvements, fixtures,attachments and easements, and/or proceeds traceable tothe sale of said property;

h. any and all funds held in JP Morgan Account No. xxx6009in the name of Thomas J. Petters;

i. any and all funds held in JP Morgan Account No. xxx5003in the name of Thomas J. Petters;

j. any and all funds held in JP Morgan Account No. xxx4009in the name of Thomas J. Petters;

k. any and all funds held in JP Morgan Account No. xxx8005in the name of Thomas J. Petters;

l. any and all funds held in JP Morgan Account No. xxx0007in the name of Thomas J. Petters;

m. the real property located at 15823 50th Avenue North,Plymouth, Minnesota, together with its buildings,appurtenances, improvements, fixtures, attachments andeasements, and/or proceeds traceable to the sale of saidproperty;

n. 333 Vitoria Avenue, Winter Park, Florida, together withits buildings, appurtenances, improvements, fixtures,attachments and easements, and/or proceeds traceable tothe sale of said property;

o. the real property located at 89405 Jack Pine Drive,


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Cornucopia, Wisconsin, together with its buildings,appurtenances, improvements, fixtures, attachments andeasements, and/or proceeds traceable to the sale of saidproperty; and

p. the real property located at 89435 Jack Pine Drive,Cornucopia, Wisconsin, together with its buildings,appurtenances, improvements, fixtures, attachments andeasements, and/or proceeds traceable to the sale of saidproperty;

3. On December 2, 2009, the defendant was found guilty of

Counts 1 through 20 of the Superseding Indictment. Following the

return of the guilty verdict, the defendant waived his right to a

jury determination of the forfeitures sought by the government.

4. Rule 32.2(b) of the Federal Rules of Criminal Procedure

provides that:

(b) Entering a Preliminary Order ofForfeiture.

(1) Forfeiture Phase of the Trial.

(A) Forfeiture Determinations. As soonas practical after a verdict or finding ofguilty . . . on any count in an indictment orinformation regarding which criminalforfeiture is sought, the court must determinewhat property is subject to forfeiture underthe applicable statute. If the governmentseeks forfeiture of specific property, thecourt must determine whether the governmenthas established the requisite nexus betweenthe property and the offense.

. . .

(B) Evidence and Hearing. The court’sdetermination may be based on evidence alreadyin the record, including any written pleaagreement, and on any additional evidence orinformation submitted by the parties andaccepted by the court as relevant and


The citation to Rule 32.2 is to the amended version of the1

rule that went into effect on December 1, 2009.

This motion seeks a personal money judgment forfeiture, and2

forfeiture of the assets enumerated in paragraph 2e through 2pabove. The government will be seeking the forfeiture of theadditional assets listed in paragraph 2, and listed in theSuperseding Indictment, against defendant Petters Company Inc.

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reliable. If the forfeiture is contested, oneither party’s request the court must conducta hearing after the verdict or finding ofguilty.

(2) Preliminary Order.

(A) Contents of a Specific Order. Ifthe court finds that property is subject toforfeiture, it must promptly enter apreliminary order of forfeiture . . .directing the forfeiture of specific property,and directing the forfeiture of any substituteproperty if the government has met thestatutory criteria. The court must enter theorder without regard to any third party’sinterest in the property. Determining whethera third party has such an interest must bedeferred until any third party files a claimin an ancillary proceeding under Rule 32.2(c).1

5. Based upon the evidence presented at trial, and the

additional evidence set forth below, the United States has

established the requisite nexus between the property and the

offenses of which the defendant has been found guilty at trial.

Accordingly, the property is subject to forfeiture to the United

States.2


Section 981(a)(1)(C) is a civil forfeiture provision.3

However, under 28 U.S.C. § 2461(c), the government may seek thecriminal forfeiture of property in any instance where civilforfeiture is authorized. United States v. Loren Jennings, 487F.3d 564, 585 (8th Cir. 2007).

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ARGUMENT

I. A Preliminary Order Of Forfeiture Should Be Entered As ToDefendant Thomas Joseph Petters.

The forfeiture allegations of the Superseding Indictment seek

forfeiture of specific property and a money judgment forfeiture

based on both the fraud and money laundering counts in the

Superseding Indictment.

Federal law authorizes the forfeiture of “[a]ny property, real

or personal, which constitutes or is derived from proceeds

traceable to . . . any offense constituting ‘specified unlawful

activity’ (as defined in section 1956(c)(7) of this title), or a

conspiracy to commit such offense.” 18 U.S.C. § 981(a)(1)(C).

Mail and wire fraud, in turn, are included within the definition of

“specified unlawful activity.” See 18 U.S.C. § 1956(c)(7)(A)

(incorporating the offenses listed in section 1961(1)). 3

Properties involved in money laundering transactions are also

subject to forfeiture to the United States. “The court, in

imposing sentence on a person convicted of an offense in violation

of section 1956, 1957, or 1960 of this title, shall order that the

person forfeit to the United States any property, real or personal,

involved in such offense, or any property traceable to such


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property.” 18 U.S.C. § 982(a)(1).

Property ‘involved in’ an offense ‘include[s] the moneyor other property being laundered (the corpus), anycommissions or fees paid to the launderer, and anyproperty used to facilitate the laundering offense.’

United States v. Hawkey, 148 F.3d 920, 927 (8th Cir. 1998), citing

United States v. Bornfield, 145 F.3d 1123, 1135 (10th Cir. 1998);

United States v. Huber, 404 F.3d 1047, 1056 (8th Cir. 2005).

Forfeiture under either a fraud or money laundering theory may

involve the forfeiture of specific property, and may also include

a money judgment. Huber, 404 F.3d at 1056 (“Forfeiture under

section 982(a)(1) in a money-laundering case allows the government

to obtain a money judgment representing the value of all property

‘involved in’ the offense, including ‘the money or other property

being laundered.’”); Jennings, 487 F.3d at 586 (affirming money

judgment for amount of proceeds defendant derived from “honest

services” mail fraud scheme).

Criminal forfeiture is a part of sentencing, it is not a

substantive element of the offense. Libretti v. United States, 516

U.S. 29, 38-39 (1995). Since criminal forfeiture is an aspect of

sentencing, the preponderance of the evidence standard of proof

applies. United States v. Huber, 462 F.3d 945, 949 (8th Cir. 2006)

(rejecting argument that defendant was entitled to have the jury

decide forfeiture beyond a reasonable doubt); United States v.

Bieri, 21 F.3d 819, 822 (8th Cir. 1994)(preponderance of the

evidence standard applies to criminal forfeiture).


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The issue in the forfeiture phase of the trial is limited.

“[T]he court must determine whether the government has established

the requisite nexus between the property and the offense.” Fed. R.

Crim. P. 32.2(b)(1)(A).

Third party claims to property are addressed in the ancillary

proceeding, and are not at issue at this stage of the proceeding.

See 21 U.S.C. § 853(n), incorporated by 18 U.S.C. § 982(b)(1) and

by 28 U.S.C. § 2461(c); Fed. R. Crim. P. 32.2(c). The preliminary

order of forfeiture is entered “without regard to any third party’s

interest in the property. Determining whether a third party has

such an interest must be deferred until any third party files a

claim in an ancillary proceeding under Rule 32.2(c).” Fed. R.

Crim. P. 32.2(b)(2)(A).

Case Background

As explained at trial, the main bank account utilized in the

fraud scheme was PCI’s Marshall & Ilsley Bank (“M&I Bank”) checking

account number xxx9018. This account received total deposits of

$35,353,320,826.13 between January 1, 2003 and August 31, 2008.

See Government Ex.5. These deposits were directly funded with

proceeds of Defendant Petters’ fraud scheme. The evidence

introduced at trial also indicated that Defendant Petters diverted

large amounts of money for his personal benefit. Government

Exhibit 7 indicates that Defendant Petters and his businesses

received net payments of $397,380,101.72 during 2003 through 2008.


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Net payments to Defendant Petters personally totaled $82,048,521.64

between January 2003 through August 2008. See Govt. Ex. 7A.

Josiah Lamb, a Forensic Accountant employed by the Federal

Bureau of Investigation, has conducted a financial tracing analysis

of the assets listed for forfeiture in the Superseding Indictment.

Affidavit of Josiah Lamb (“Lamb Aff.”) ¶4. These assets were

purchased almost entirely with funds derived from PCI M&I Bank

account number xxx9018, and are therefore purchased with the

proceeds of fraud. In certain instances, investor funds received

from Defendant Larry Reynolds were also used to purchase the

assets.

Exhibits A through H, which are attached to the Affidavit of

Josiah Lamb, summarize the financial tracing analysis relating to

how certain assets were purchased by Defendant Petters. Lamb Aff.

¶5. These exhibits were prepared using financial records,

including bank records, financial statements and other documents

gathered during the course of the investigation. Id. These

exhibits fairly and accurately summarize the financial transactions

that are depicted in the summaries, specifically those transactions

relevant to how the assets in question were purchased. Id.

655 Bushaway Road, Wayzata, Minnesota (Exhibit A)

On or about September 3, 2002, Thomas J. Petters purchased

real property located at 655 Bushaway Road, Wayzata, Minnesota

(“the Bushaway property”). Lamb Aff. ¶6. Thomas J. Petters had


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the existing house torn down and a new home built. Paragon

Designers and Builders was hired to construct the new home.

Exhibit A attached to the Affidavit of Josiah Lamb is a summary of

the funding used to purchase the property and construct the new

home. Id.

A financial analysis has been conducted to determine the

source of the funds used to purchase the Bushaway property and

build the new home. In summary, at least $3,797,327.75 in fraud

proceeds was used to purchase the land and construct the home.

Lamb Aff. ¶7. Since the fraud proceeds that were invested in the

property substantially exceeds the current net equity of the

property, not every dollar invested in the property has been

traced. Id. Additional tracing could establish that additional

fraud proceeds were invested in the property.

The Bushaway property was purchased with an earnest money

deposit of $50,000, a cashier’s check for $1,277,000 and a mortgage

of $999,900. The cashier’s check is traceable to the PCI fraud

scheme. Lamb Aff. ¶8. On August 6, 2002 and August 28, 2002,

$1,201,000 and $750,000 was wire transferred from PCI’s M&I Bank

account number xxx9018 to Thomas J. Petters’ Crown Bank account

number xxx1089. On August 28, 2002, Thomas J. Petters purchased a

cashier’s check for $1,277,000 which was given to Edina Realty for

the purchase of the Bushaway property.

As noted above, a new home was subsequently constructed on the


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Bushaway property by Paragon Designers and Builders. Payments to

the builder totaled approximately $3,280,755.15, with $2,520,327.75

traced to the PCI fraud scheme. Lamb Aff. ¶9 and Ex. A. There

were thirteen (13) payments made to the homebuilder. The funding

for each payment was traced separately. Approximately 77% of the

payments are traceable to the PCI fraud scheme. Additional detail

regarding the financial tracing of the payments is set forth in

paragraph 10 of Josiah Lamb’s Affidavit, and in Exhibit A.

320 Elk Circle, Keystone, Colorado (Exhibit B)

On or about October 28, 2005, Thomas J. Petters purchased real

property located at 320 Elk Circle, Keystone, Colorado. Lamb Aff.

¶11. The entire purchase price of $1,430,462.13 was traced to the

PCI M&I Bank account xxx9018. Exhibit B attached to the Affidavit

of Josiah Lamb contains a summary of the funding used to purchase

the property.

In summary, on October 28, 2005, $1,400,000 was transferred

from Thomas J. Petters’ JP Morgan account number xxx8005 to

Highland Title Company, and $30,462.13 was transferred from Thomas

J. Petters’ Crown Bank account number xxx1089 to Highland Title

Company. Lamb Aff. ¶13. Both of these transfers were used for the

purchase of the real property at 320 Elk Circle, Keystone,

Colorado. The funds used to make these payments were derived from

the PCI’s M&I Bank account, which account was funded with the

proceeds of fraud. Id.


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The 320 Elk Circle property has been sold by the court-

appointed receiver in connection with United States v. Thomas

Joseph Petters et al., Civil No. 08-5348 (ADM/JSM), therefore the

United States is seeking an order forfeiting the net proceeds from

the sale of the property which are currently being held by the

receiver.

1840 South Ocean Boulevard, Manalapan, Florida (Exhibit C)

On or about December 17, 2004, Thomas J. Petters purchased

real property located at 1840 South Ocean Boulevard, Manalapan,

Florida. Lamb Aff. ¶14. Attached to the Lamb Affidavit as Exhibit

C is a summary of the funding used to purchase the property. The

purchase price of $8,701,238 was paid in three installments. All

three payments were traced to the PCI fraud scheme. The three

payments included two payments of $400,000 each, and a wire

transfer of $7,901,238 used to fund the remainder of the purchase.

Two payments totaling $800,000 was traced to funds received

from Nationwide International Resources (“NIR”). Id. ¶15. NIR was

an entity controlled by Larry Reynolds and was used to perpetrate

the fraud scheme. Larry Reynolds has pleaded guilty in this case

to conspiracy to commit money laundering. On November 30, 2004 and

December 9, 2004, $400,000 was wire transferred to the Bathurst

Laymon Realty Group escrow account at Northern Trust Bank of

Florida. These payments were applied toward the purchase of the


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real property at 1840 South Ocean Boulevard, Manalapan, Florida.

Both of these payments were derived from funds transferred from the

NIR account at First Regional Bank, which account was funded with

funds fraudulently obtained from investors.

On December 16, 2004, $7,901,238 was wire transferred from

Thomas J. Petters’ Crown Bank account number xxx1089 to the William

R. Bird Jr. Esq. Trust Account at Wachovia Bank. This wire

transfer was used for the purchase of the real property at 1840

South Ocean Boulevard, Manalapan, Florida. This payment was traced

to funds received from the PCI fraud scheme account at M&I Bank.

Lamb Aff. ¶17.

The Manalapan property has been sold by the court-appointed

receiver in connection with United States v. Thomas Joseph Petters

et al., Civil No. 08-5348 (ADM/JSM), therefore the United States is

seeking an order forfeiting the net proceeds from the sale of the

property which are currently being held by the receiver.

15823 50 Avenue North, Plymouth, Minnesota th

(Exhibit D)

On or about May 24, 2005, Thomas J. Petters purchased real

property located at 15823 50th Avenue North, Plymouth, Minnesota

(“the Plymouth property”). Exhibit D attached to the Affidavit of

Josiah Lamb is a summary of the funding used to purchase the

property. Lamb Aff. ¶18. A cashier’s check for $720,587.70 was

used to purchase the property. This check was funded with an


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advance on a line of credit, which was later paid off with fraud

proceeds.

On May 24, 2005 $750,000 was wire transferred from Thomas J.

Petters’ Northern Trust Bank of Florida line of credit account

number xxx6561 to Thomas J Petters’ Crown Bank account number

xxx1089. Lamb Aff. ¶19. The Northern Trust Bank of Florida line

of credit account xxx6561 was secured by real property located at

1840 South Ocean Boulevard, Manalapan, Florida. As explained

above, this real property was purchased with the proceeds of fraud.

On May 24, 2005, a cashier’s check in the amount of $720,587.70 was

issued from Thomas J. Petters’ Crown Bank account number xxx1089

payable to Rels Title Company for the purchase of real property

located at 15823 50th Avenue North, Plymouth, Minnesota. Id.

The line of credit at Northern Trust of Florida Bank that was

used to fund the purchase of the Plymouth property was paid off

with a $1,250,000 wire transfer on December 16, 2005 (Ex. D #4),

and a $1,566,105.92 wire transfer on December 30, 2005 (Ex. D #7).

Lamb Aff. ¶20. The line of credit had a zero balance after these

two payments were made. The $1,566,105.92 wire transfer on

December 30, 2005, was paid with funds traced to PCI’s M&I Bank

account number xxx9018 (Ex. D #5, 6 and 7). Id. ¶20. The

$1,250,000 wire transfer on December 16, 2005 (Ex. D #4) was funded

with proceeds from the sale of real property located at 26705

Highway 9, Silverthorne, Colorado, which was purchased with the


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proceeds of fraud. Id. ¶22.

333 Vitoria Avenue, Winter Park, Florida (Exhibit E)

On or about May 27, 2004, Thomas J. Petters and Jennifer

Petters purchased real estate located at 333 Vitoria Avenue, Winter

Park, Florida. Exhibit E attached to the Affidavit of Josiah Lamb

is a summary of the funding used to purchase the property. Lamb

Aff. ¶24. The property was purchased with a mortgage loan, and a

cash payment of $134,198.28. The cash payment is traceable

directly to fraud proceeds. On or about March 3, 2004, Opportunity

Finance, an investor in the PCI fraud scheme, wire transferred

$3,973,667.76 to an investment account held by Thomas J. Petters.

Id. ¶25. On or about May, 25, 2004, check number 113 was written

from Thomas J. Petters’ DWS Investment account for $300,000. This

check was deposited into Thomas J. Petters’ Crown Bank account

number xxx1089. On or about May 27, 2004, $134,198.28 was wire

transferred to First Southwestern Title Company of Florida for a

cash payment toward the purchase of the real property at 333

Vitoria Avenue, Winter Park, Florida. Id.

89435 Jack Pine Drive, Cornucopia, Wisconsin (Exhibit F)

On or about October 31, 2005, Thomas J. Petters purchased

vacant land located at 89435 Jack Pine Drive Cornucopia, Wisconsin.

This property is located next door to the Tam O’Shanter Lodge.

Exhibit F attached to the Affidavit of Josiah Lamb is a summary of


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the funding used to purchase the property. Lamb Aff. ¶26. The

property was purchased with a $5,000 earnest money payment, and a

wire transfer on October 28, 2005, in the amount of $377,600.

The wire transfer for $377,600 was made from a line of credit

maintained by Thomas J. Petters at Northern Trust of Florida Bank,

account number xxx6561. The Northern Trust Bank of Florida line of

credit account was secured by real property located at 1840 South

Ocean Boulevard, Manalapan, Florida, which was purchased with the

proceeds of fraud. In addition, as shown on Exhibit F, this line

of credit was later paid off with funds which constituted fraud

proceeds.

The Northern Trust Bank of Florida line of credit account

number xxx6561 was subsequently paid off with fraud proceeds. The

Plymouth property and the 89435 Jack Pine Drive property were both

purchased with advances on the line of credit account. The line of

credit account was later paid off with the proceeds of fraud, as

discussed above with respect to the Plymouth property. The

financial analysis discussed there applies equally to the purchase

of the vacant lot on Jack Pine Drive.

Tam O’Shanter Lodge, 89405 Jack Pine Drive, Cornucopia,Wisconsin (Exhibit G)

On or about April 30, 2003, Tam O’Shanter, LLC, an entity 100%

owned by Thomas J. Petters, purchased the real property at 89405

Jack Pine Drive, Cornucopia, Wisconsin. This property is known as

Tam O’Shanter Lodge. Exhibit G attached to the Affidavit of Josiah


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Lamb is a summary of the funding used to purchase the property.

Lamb Aff. ¶26.

The Tam O’Shanter Lodge was purchased with a cashiers’s check

in the amount of $265,135.02, and funds in the amount of $621,600

funded with a mortgage from Private Bank. Lamb Aff. ¶30 and Ex. G,

page 2, items 11 and 12. The cashier’s check for $265,135.02 was

traced to the PCI fraud scheme. In April 2005, the Private Bank

mortgage was paid off with funds traced to the fraud scheme account

at M&I Bank.

A Private Bank mortgage in the amount of $621,600 was used to

fund the purchase of Tam O’Shanter Lodge. On August 28, 2005, this

mortgage was paid off with fraud proceeds. As shown in Exhibit G,

page two, items 13 through 15, on April 27, 2005, a wire transfer

in the amount of $625,000 was made from PCI’s M&I account number

xxx9018 to PCI’s Crown Bank account xxx2227. On April 28, 2005, a

$625,000 wire transfer was made from PCI’s Crown Bank account

xxx2227 to Thomas J. Petters’ Crown Bank account xxx1089. On the

same date, a wire transfer was made from Thomas J. Petters’ Crown

Bank account xxx1089 to pay off the Private Bank Mortgage. Lamb

Aff. ¶31.

The cashier’s check for $265,135.02 that was used for the down

payment on Tam O’Shanter Lodge was also funded with fraud proceeds.

As shown in Exhibit G, page two, items 10 and 11, on April 30,

2003, A check in the amount of $265,135.02 was deposited to Thomas


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J. Petters’ Crown Bank account number xxx1089. Lamb Aff. ¶32 and

Ex. G item 10. These funds were used on the same date to fund the

purchase of the above-described cashier’s check. The $265,135.02

deposited to Thomas J. Petters’ Crown Bank account was funded with

a loan secured by the real property located at 27 Brushwood Court,

Dillon, Colorado. See Lamb Aff. Ex. G, page one, items 9 and 10.

The real property at 27 Brushwood Court was purchased with the

proceeds of fraud, as shown on Exhibit G, items 1 through 8. In

short, the property was purchased with a $50,000 earnest money

check (Ex. G #6) and a cashier’s check in the amount of $692,939.17

(Ex. G #8). The money used to fund these payments traces back to

PCI’s M&I account number xxx9018. Lamb Aff. ¶33.

The Tam O’Shanter lodge has been sold by the court-appointed

receiver in connection with United States v. Thomas Joseph Petters

et al., Civil No. 08-5348 (ADM/JSM), therefore the United States is

seeking an order forfeiting the net proceeds from the sale of the

property which are currently being held by the receiver.

Thomas J. Petters JP Morgan Accounts (Exhibit H)

Thomas J. Petters maintained an investment account at J.P.

Morgan Trust Company, N.A. (“JP Morgan”). Lamb Aff. ¶34. This

account included several sub-accounts, which fluctuate in value on

a daily basis. Evidence introduced at trial indicated that

Defendant Petters invested substantial sums of money in his JP

Morgan accounts with funds from the fraud scheme. Government


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Exhibit 95 indicates that $60,589,503.50 in funds were transferred

from PCI M&I Bank account number xxx9018 to Defendant Petters

investment accounts at JP Morgan. An additional $4,900,000 in

funds was transferred for investment with JP Morgan from the Thomas

J. Petters Crown Bank account number xxx1089, and account which was

also substantially funded with proceeds of fraud. See Govt. Ex.

105.

The government is seeking forfeiture of the remaining funds

held in Defendant Petters JP Morgan accounts. On August 31, 2008,

the accounts had a cumulative value of $24,367,348.27. Lamb. Aff.

¶34. Numerous search warrants were executed in connection with

this case on September 24, 2008. JP Morgan subsequently liquidated

portions of Petters’ JP Morgan account and, upon information and

belief, applied the proceeds towards debts allegedly owed by

Petters’ business entities. By October 31, 2008, the overall value

of Petters’ JP Morgan accounts had been reduced to $4,583,344.29.

Id.

The remaining funds contained in Petters’ JP Morgan accounts

were funded directly with transfers from PCI’s M&I Bank account

number xxx9018. Lamb Aff. ¶35. These wire transfers are

summarized in Government Exhibit H, which is attached and

incorporated by reference. In summary, between August 15, 2006,

and November 3, 2006, $6,450,000 was directly transferred from

PCI’s M&I Bank to Petters’ investment accounts at JP Morgan. These


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transfers were funded directly with the proceeds of fraud. Id.

II. Motion For Money Judgment Forfeiture.

As noted above, a forfeiture order in a Federal criminal case

may involve the forfeiture of specific assets, and may also take

the form of a money judgment forfeiture. See e.g. Huber, 404 F.3d

at 1056 (“Forfeiture under section 982(a)(1) in a money-laundering

case allows the government to obtain a money judgment representing

the value of all property ‘involved in’ the offense’”); Jennings,

487 F.3d at 586 (affirming money judgment for amount of proceeds

defendant derived from “honest services” mail fraud scheme). The

United States is seeking the imposition of a money judgment

forfeiture in the amount of $3,522,880,614.10 against Defendant

Petters. This amount is based on Government Exhibit 34 introduced

at trial. Defendant Deanna Coleman testified that this exhibit set

forth the outstanding amount owed when the defendants’ fraud scheme

collapsed. The government believes that the law would support the

entry of a money judgment forfeiture in the amount of the gross

proceeds of the defendant’s fraud in the amount of

$35,353,320,826.13. However, since Defendant Petters will also be

subject to a restitution order, and given the large amount being

sought for the money judgment forfeiture, the government will limit

its request for a money judgment forfeiture to $3,522,880,614.10.


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III. Forfeiture Of Property As Substitute Assets

The United States is authorized by law to seek the forfeiture

of substitute property to the extent that the proceeds of fraud, or

assets involved in or traceable to money laundering, have been

dissipated or are otherwise unavailable for forfeiture. See 21

U.S.C. § 853(p), incorporated by reference by 18 U.S.C. § 982(b)(1)

and 28 U.S.C. § 2461(c); Fed. R. Crim. P. 32.2(e). The evidence

set forth in this motion and at trial establishes that the specific

property addressed above is directly forfeitable to the United

States. However, it is important to note that such property would

in any event also be subject to forfeiture to the United States as

substitute property pursuant to 21 U.S.C. § 853(p).

IV. Motion For An Order Allowing Discovery To IdentifyAdditional Assets Subject To Forfeiture.

The United States also seeks the entry of an order pursuant to

Rule 32.2(b)(3), Federal Rules of Criminal Procedure, authorizing

the government to conduct discovery for the purpose of identifying

and locating additional assets subject to forfeiture to the United

States, property traceable to such assets, or assets of the

defendant that may be substituted up to the value of the forfeited

assets. Rule 32.2(b)(3), Federal Rules of Criminal Procedure,

authorizes the Government, upon the entry of a preliminary order of

forfeiture, to “conduct any discovery the court considers proper in

identifying, locating, or disposing of the property” that has been


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forfeited to the United States. Such discovery may include the

taking of depositions of witnesses. See 21 U.S.C. § 853(m); United

States v. Saccoccia, 898 F. Supp. 53 (D.R.I. 1995) (Government can

take depositions for the purpose of locating assets controlled by

the defendant that are subject to forfeiture). In addition, the

reference in Rule 32.2(b)(3) to “any discovery the court considers

proper” necessarily permits the court to authorize discovery under

the Federal Rules of Civil Procedure. Such discovery includes, but

is not limited to, the authority to issue a request for documents

to a party under Rule 34 and to a non-party under Rules 34(c) and

45.

The United States has already located numerous items of

property for forfeiture in this action. However, certain property

may not have been located. Additional property is under the

control of the court-appointed receiver in connection with United

States v. Thomas Joseph Petters et al., Civil No. 08-5348

(ADM/JSM). The government’s reserves the right to forfeit such

assets, with the goal of using the assets or the proceeds from the

sale of such assets to reimburse the victims of Defendant Petters’

fraud scheme. See 21 U.S.C. § 853(m) (authorizing discovery for

the purpose of identifying and locating property declared

forfeited). Moreover, discovery may also be needed to locate

additional items of property to satisfy a portion of the personal

money judgment forfeiture that is being sought in this motion.


Therefore, the government seeks an order authorizing discovery to

locate assets subject to forfeiture, and to locate additional

assets to be used to satisfy the personal money judgment being

requested against defendant Petters. The court is also requested

to retain jurisdiction over this action pursuant to Rule 32.2(e) to

forfeit any subsequently discovered directly forfeitable or

substitute property, and to dispose of any third-party claims to

such assets.

WHEREFORE, the United States moves this Court for a

Preliminary Order of Forfeiture: 1) forfeiting the specific assets

enumerated above; 2) entering a personal money judgment forfeiture

against defendant Thomas J. Petters in the amount of

$3,522,880,614.10; and 3) authorizing the government to conduct

discovery as needed to locate assets subject to forfeiture, and to

locate additional assets to be used to satisfy the personal money

judgment being requested against defendant Petters.

Respectfully submitted,

Dated: January 15, 2010 B. TODD JONESUnited States Attorney

s/ James S. Alexander

BY: JAMES S. ALEXANDERAssistant U.S. AttorneyAttorney ID No. 166145600 U.S. Courthouse300 South Fourth StreetMinneapolis, MN 55415(612) 664-5600Email: [email protected]


mailto:[email protected]

Documents

Petters Motion for Prelim Order Forfeiture