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Jul 10, 2009
MINNEAPOLIS (CN)- A Minnesota man took $24 million in "management" and "incentive" fees while losing his customers' money in Tom Petters $3 billion Ponzi scam, shareholders say in a federal class action. "Defendants literally handed over hundreds of millions of dollars to Petters with no investigation or supervision whatsoever," and lost practically all of it, according to the complaint.
James Fry was principal of BluePoint Management, and the founder and president of ArrowHead Capital Management, the three principal defendants, according to the complaint. Also sued is Metro II LLC, a creature of ArrowHead, and PriceWaterhouseCoopers, auditors.
Fry, through his companies, promised "advantageous rates of return through investments in short-term secured notes," though in practice he just handed it over to Petters, according to the complaint.
"For the years 2003-2006, Blue Point and Fry earned approximately $13 million in management fees and over $11 million in incentive fees," the complaint states.
It adds that nearly 100 percent of plaintiffs' investments have been lost. Plaintiffs are the Tradex Global Master Fund and ABL Segregated Portfolio, on behalf of themselves and others similarly situated.
After a federal investigation last fall, Petters was accused of orchestrating a massive Ponzi scheme involving $3 billion in investments involving the "completely fictitious" sale of high-end electronics.
Fry managed the ArrowHead fund and the Bermuda-based Blue Point Capital Management. PricewaterhouseCoopers, ArrowHead's auditor, failed to detect anything awry, the class claims, adding that "any reasonable and minimal investigation ... would have uncovered this thinly veiled fraud."
Plaintiffs are represented by Richard Lockridge with Lockridge Grindal Nauen.
Last edited by t28pilot on Sun Mar 17, 2013 1:03 pm, edited 1 time in total.
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