Crime & Safety

Petters Associate Charged with Four More Crimes

A second superseding indictment was filed against Frank Elroy Vennes, Jr. this week in federal court, adding three new counts of wire fraud and one new count of mail fraud.

A business associate and primary fundraiser for Minnetonka businessman Tom Petters, convicted in 2009 of orchestrating a multi-billion dollar Ponzi scheme, faces additional charges.

A second superseding indictment was filed against Frank Elroy Vennes, Jr. this week in federal court in St. Paul.

Vennes, 53, from Florida, was originally charged on April 20, 2011, in a five-count indictment that alleged he fraudulently raised money from individuals and through hedge funds for investment in Petters Company, Inc. (PCI).

Find out what's happening in Minnetonkawith free, real-time updates from Patch.

A superseding indictment was filed on July 18. The second superseding indictment adds three new counts of wire fraud and one new count of mail fraud. Vennes is now charged with a total of eight counts of securities fraud, three counts of mail fraud, nine counts of wire fraud, three counts of money laundering, three counts of bank fraud and two counts of making false statements on credit applications. 

The new counts arose out of attempts by Vennes to raise funds to invest in PCI notes through a third-party agent in 2007 and 2008. Vennes, previously convicted on federal narcotics, firearms and money laundering charges, had difficulty obtaining institutional funding on his own and regularly worked through others to try to raise money from banks and institutional investors.

Find out what's happening in Minnetonkawith free, real-time updates from Patch.

PCI was owned and operated by Tom Petters, who, in or before 1993, initiated his Ponzi scheme by representing that funds invested in PCI promissory notes would finance the purchase of electronics and other consumer merchandise.

PCI would then resell the merchandise for a profit to certain “big box” retailers, including Sam’s Club and Costco.

In truth, however, no merchandise was bought or resold. Instead, Petters diverted for his own personal benefit hundreds of millions of dollars. His $3.65 billion Ponzi scheme unraveled in 2008, when federal agents executed search warrants at his business offices as well as other locations. He was subsequently prosecuted and, in April of 2010, sentenced to 50 years in federal prison. He is currently serving his sentence in the federal penitentiary in Leavenworth, Kansas. 

From 1999 through September of 2008, Vennes and his company, Metro Gem, allegedly made more than $80 million related to Metro Gem investments in Petters Company. Vennes’s co-defendant in this case, James Nathan Fry, formed hedge funds with Vennes’s assistance, known as the Arrowhead Funds, that raised funds from investors to invest with PCI. 

Vennes and Fry allegedly told investors that whenever a retailer purchased consumer electronics or other goods from PCI, those products were paid for by the retailer with funds directly deposited into a bank account under the control of a management company.

As a result, investors were falsely assured that all PCI transactions were, in fact, taking place, and all money was secure. However, Vennes and Fry, among others, knew that no payments were ever received from retailers and, instead, came from PCI alone. 

If convicted, Vennes faces a potential maximum penalty of 20 years in prison on each mail fraud, wire fraud, bank fraud, and false statement count; ten years on each money laundering count; and five years on each securities fraud count. Fry faces a potential maximum penalty of 20 years on each wire fraud count and five years on each securities fraud and false statement count. All sentences will be determined by a federal district court judge. 


Get more local news delivered straight to your inbox. Sign up for free Patch newsletters and alerts.

We’ve removed the ability to reply as we work to make improvements. Learn more here

To request removal of your name from an arrest report, submit these required items to arrestreports@patch.com.