JPMorgan Sued by Petters Group Trustee Kelley Over Polaroid Sale Proceeds
JPMorgan Chase & Co., the second- biggest U.S. bank by assets, was accused with others in a lawsuit of getting more than $300 million from a scheme run by Thomas J. Petters that involved buying Polaroid Holding Co.
The trustee for Petters Group Worldwide LLC, in a complaint filed yesterday in federal court in Minnesota, said the New York-based bank and other defendants received more than $240 million from selling their stakes in Polaroid when Petters acquired it. JPMorgan was the majority owner of Polaroid at the time, according to the complaint.
In 2005, JPMorgan had the opportunity to conduct “extensive due diligence on Petters” in connection with his acquisition of Polaroid Holding for $426 million, of which JPMorgan received “in excess of $240 million,” according to the suit filed by the trustee and court-appointed receiver, Douglas A. Kelley.
The money Petters used to acquire Polaroid was derived from the Ponzi scheme, according to the complaint. JPMorgan also received about $40 million in fees and interest as financial adviser to Polaroid and due to $185 million in credit it provided to the company after Petters acquired it, according to the complaint.
“The windfall that JPMorgan would earn on the transaction gave JPMorgan an incentive to ignore red flags that would have revealed the massive Ponzi scheme,” according to the suit.
Petters was sentenced to 50 years in prison last year after being found guilty of running a $3.5 billion fraud. Petters conned investors into giving him money to finance phony consumer-goods purchase contracts. His Minnetonka, Minnesota- based businesses also owned Sun Country Airlines Inc.
Darin Oduyoye, a JPMorgan spokesman, declined to comment.
The case is Kelley v. JPMorgan Chase & Co., 10-04999, U.S. District Court, District of Minnesota.
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