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

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(credit: CBS) Esme Murphy
Esme Murphy, a reporter and Sunday morning anchor for WCCO-TV, h...
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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.

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