Should Charities Have To Return Money Donated By Petters?; Gov. To Decide

MINNEAPOLIS (WCCO) — It has been more than two years since Tom Petters was found guilty of running a $3.5 billion Ponzi scheme.

But the effort to recover money for Petters’ victims, some of which are in bankruptcy, has run smack into concerns by charities that received millions in donations from Petters and rely on that money to operate.

Late last week, the Minnesota Legislature overwhelmingly passed a bill that would limit the amount of money that the Petters’ trustee could try to recover from charities he donated to.

That bill sits on the Gov. Mark Dayton’s desk now. Dayton has until Tuesday to decide whether to sign the bill, and he is not saying what he will do.

If he signs it, Minnesota charities, including Big Brothers and Big Sisters, won’t have to pay back most of Petters’ donations.

Attorney Bob McCollum sits on the board of Big Brothers and Big Sisters. He says if Dayton signs the bill and it becomes law, the charity will not have to repay Petters’ $200,000 donation. It should be noted that Petters donated other people’s money.

If Dayton doesn’t sign the bill, McCollum says charity programs that Petters gave to will be cut.

“It means [charities] cannot provide the level of services they would otherwise provide to children,” he said.

Other charities have even more money at stake. Petters donated more than $1 million to Teen Challenge, a group which helps young people struggling with addiction.

While Teen Challenge is not commenting, it’s unclear how the charity could survive if they had to repay the full amount of Petters’ donation. That is why Sen. Benjamin Kruse (R- Brooklyn Park) sponsored the bill. He says the bankruptcy trustee only has two years to file a suit to recover money from nonprofits.

“I think right now that a safety net needs to be there for these [nonprofits],” Kruse said.

But the trustee in the bankruptcy case has asked Dayton to veto the bill so he can get more money for Petters’ victims. Trustee Doug Kelley uses this analogy:

“If a bank robber robbed a bank and went across the street and put it in the collection plate at the church, everyone knows that is not the church’s money,” Kelley said. “Petters is the same as the bank robber: he just stole much more money over a longer period of time.”

The bill that sits on Dayton’s desk does not specifically mention Petters, so it could be applied in other fraud cases, too.

Kelley says if the bill becomes law, he will only be able to recover $200 million from charities.

More from Esme Murphy
  • Larry Kutzler

    Doug Kelly seemed too self righteous in his comments tonight, and his analogy was off base. Most of these non profits received money over several years and all the money was spent for the purpose it was given. No one questioned Minnesota’s darling businessman Tom Petters. Doug Kelley on the other hand has been paid how much money for trying to recover money that was stolen? Millions. Now that would be a great follow up story, how the victims of this scheme are now being taken (again) by another scheme, called attorney’s fees. Kelley has profited handsomely from his analogy of stolen money. Go figure.

    • L George Fischer

      The people who invested with Petters all wanted a better than average return and thus should expect a risk on their money. The charities who received the money in good faith did not anticipate any risk in accepting the money. Doug Kelly is way off base in saying he should collect from the charities.
      The bill should pass ASAP

  • matt


    • Real Talk

      News Flash….the donanted money…..WAS STOLEN!!!!

  • Pinkie

    They received the money in good faith and SPENT it in good faith. They should be allowed to keep it. Returning it now only adds duress and ugly to an already overly ugly situation. Let a little bit of good come from this mess.

    • joe

      It is easy to say that when it’s not your money he stole. I bet if it was you would want every cent back

      • Jack Anderson

        Maybe not! Just maybe I might say it went to good causes and I should feel proud of that. FYI, I am one of those folks who gets characteristed as a greedy conservative. My personal track record, however, is one of supporting many, many worthy causes. I find myself wondering how many of the outspoken commentors here, nomatter their political stance, also feels good about their support of worthy initiatives?

        • joe

          What if that was your life savings? You are telling me that if you lost your life savings and you wouldn’t be able to retire because of it you would be fine with that because it went to a good cause? I am just sticking up for the people who that may of happen to. Some people have families to feed and can’t afford to be as generous as you. What’s fair is fair and what is not fair is for people to have money taken from them and them not being able to get it all back because it was donated to a charity. If the state wants to pass a law like this then the state should pay those people back.

      • Ron

        If you are stupid enough to invest with a criminal you deserve to lose it, there is no such thing as a get rich quick scheme unless it is unlawful.

        • Real Talk

          Umm…so you are saying the charities are stupid because they excepted the ciminal’s money…thus deserve to lose it. (your words)

          And the investors are stupid because they invested with a criminal…thus deserve to lose it. (agian your words)

          So who gets to keep it….You smart guy?

  • Mary

    The charities should keep that money. At least that money will have been used for great causes. The victims of Petter’s schemes might not have been victims if they did more homework before investing. Investing is like gambling, it’s your choice to participate or not.

    • Mad

      I bet if this was your savings you would sing a different tune.

    • Real Talk

      I love how you all turn into moral relativist based on your own experiences.

      This lady reasons that people who invested with Tom were stupid, and charities are good, therefor its ok for the people to lose their money and have the charities spend it.

      You are no-doubt, the sterotypical dumb MN housewife who couldnt pass highschool again to save your life.

  • Perry

    Petters GAVE money to charity.
    Piggy Wilf is trying to TAKE money from charity.

    Is the right guy in jail?

    • jackactionhero

      I don’t think gambling revenue counts as charity, Einstein…

    • Real Talk

      Petters STOLE the money he GAVE….so kinda a moot point you moron.

  • Guy

    Have the trustee figure out how much was donated. All of the creditors that Petters took money from should then get a prorate portion as a charitable tax deduction credit.

  • newcraft

    I can see both sides of the coin – but the only way you’re ever going solve this “problem” is to subject givers to solvency tests before a charity can ever spend donated money, and that’s not feasible.

    Two suggestions: have the charities make a one-time “good faith” repayment of a percentage of the total that was given. 10% or something small, but still meaningful. 10% is a recoverable loss. Let the claimants claim a percentage tax credit for a set number of years (3 years, 5 years, depending on how they’ve proven their money was used), and consider it settled. The charities won’t go under, and the claimants are recovering more than they would otherwise.

    I have a problem with giving the claimants a one-time tax credit for the full amount of their loss, because that’s money that eventually comes out of the taxpayer’s pockets to make up for what those claimants would otherwise be paying in state taxes in a particular year. It’s not the public’s burden to remunerate people for a private crime.

  • Richard in Minneapolis

    I assume that more was done with this money than just give it to charities. There were probably goods and services purchased as well. Should grocery stores be required to refund all the $$ Petters spend on groceries? Should the corner gas station give back all the money for gas Petters purchased?

    Businesses and charities have to be able to make, barring clear indicators to the contrary, an assumption that whoever is giving them money has ownership of that money.

    If the Trustee allowed to collect from the charities, by the extension, charities should be able to collect from whomever they gave money… employees who were paid with this tainted money, and so on down the line.

  • Mad

    He was such a good guy he gave away other peoples cash. I hope he has a great cell partner.

  • Tom

    He would never have been able to make the quite sizable donations he did
    without the proceeds from his illegal activities. I also doubt that Kelly has
    been “paid millions” for his work on this. His donations were quite a bit
    larger than normal for these charities, if his victims ought to have shown
    more caution, then the charities too (although I don’t know how they could
    have since he was not known as a fraud artist at the time he gave them.)
    Bottom line is that nobody should expect to profit from criminal activity.

  • Mike

    Should the recipient of the money from the charity, have to give the money back also. What if the noney was used to pay an electric bill or mortgage payment?

  • politicianSUX

    The charities should have to give the money back. People seem to have no problem demanding claw backs from individuals, many of whom had no idea or the resources to investigate where the money was coming from, except that Tom Petters and others were helping to make their dreams come true. So these people invested hard earned dollars and were getting returns that everyone stated only the rich get. Charities that have resources GIVEN to them and they have money to investigate where it came from and refused or knew and turned a blind eye. Why should they be exempt from returning the money, but not the people that worked hard and thought they finally figured otu the secrets of the rich?

  • Tenbears

    Tenbears thinks the money should be returned to its rightful owner…Tom Petters

  • Liquid Nails

    Stolen cash from a guy who’s trash.
    Illegal bucks must go back. Why is there even a debate about this?

  • Minnesota Lawmakers Seek to Protect Nonprofits From Clawbacks | Milwaukee Bankruptcy Attorney | Lawyer Bankruptcy Filing

    […] The bill is under consideration of Minnesota Gov. Mark Dayton, who has till midnight Tuesday to act, according to Minneapolis CBS affiliate WCCO. […]

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