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Investor in Minn. man's alleged scheme charged
Associated Press
6:43 PM CDT, July 11, 2009
MINNEAPOLIS - An Illinois hedge fund manager who claimed to be the biggest victim of Minnesota businessman Tom Petters' alleged Ponzi scheme was actually a participant in it, the Securities and Exchange Commission says.
Greg Bell and his company, Lancelot Investment Management, were charged with fraud Friday. The SEC said it also moved to freeze his assets, which include millions of dollars in Swiss bank accounts.
Ron Peterson, a court-appointed trustee for Lancelot's investors, told the Star Tribune that Bell was arrested Friday in Highland Park, Ill., and was taken to the Anoka County jail in Minnesota.
The criminal complaint against Bell in federal court in Minneapolis is sealed, but Peterson told the newspaper that the fund manager could appear in court as early as Monday.
A phone number for Bell's business was disconnected.
"Greg Bell portrayed himself as a helping hand to investors -- avidly protecting their funds and verifying the legitimacy of Petters' business," Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement. "But behind their backs, he was handing over billions of dollars of his clients' money to feed a fraud."
Lancelot's clients included individuals, retirement accounts, trusts and other hedge funds. They invested $2.6 billion in the Petters group of companies. The SEC alleges that Bell and his company pocketed tens of millions of dollars in fraudulent fees.
Petters has remained jailed, fighting charges of mail and wire fraud, money laundering and obstruction of justice for masterminding what federal authorities say is a $3.55 billion Ponzi scheme that cheated investors who thought they were financing merchandise sales to major retailers. He says he's innocent.
Ever since Petters' arrest last October, questions have been raised about how much investors might have known about what he was doing.
"People have long observed that, at a minimum, there had to be a colossal failure of due diligence on part of these hedge funds," said Doug Kelley, the court-appointed trustee for much of Petters' corporate estate. "And there are certain indicators of fraud that caused everyone to scrutinize them."
When Petters' companies collapsed, so did Lancelot Management. In an e-mail to investors on Oct. 21 after five funds and their subsidiaries filed for bankruptcy, Bell wrote: "We are disappointed that the massive fraud perpetrated by Petters Co. has now claimed our funds, and each of our investors, as its victims."
The SEC, however, alleges that Bell had clear indications that Petters was in trouble but helped prolong the alleged Ponzi scheme and made sure he got his own money out before it collapsed.
Peterson said he had been conducting his own investigation of Bell, suspecting that "he wasn't totally without knowledge." He said the SEC charges were both good news and bad news.
"It adds a defense to the people who we're suing that didn't exist before," Peterson said. "On the other hand, as a result of this, if the government can plea-bargain with Bell in which he fully cooperates, that'll be a great boon."
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Information from: Star Tribune, http://www.startribune.com
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