Class Claims Lancelot’s Boss Took Millions|While Losing More to Petters’ Ponzi Scam

CHICAGO (CN) - A federal class action claims that Gregory Bell and his cohorts took $115 million in fees from Bell's company, Lancelot Investment Management, while losing "hundreds of millions of dollars" of his customers' money in Tom Petters' $3 billion Ponzi scheme, "with no investigation or supervision whatsoever."

Lead plaintiff Tradex Global Master Fund also sued Lancelot's outside auditor McGladrey & Pullen, and Thomas Demaio, claiming he prepared and approved false and misleading documents with Bell, as "corporate insiders with direct involvement in the daily affairs of the Fund and Lancelot Management."

Petters has been charged in Minnesota with running a $3 billion Ponzi scheme based on false invoices to electronics wholesale clubs.

Plaintiffs in this case say the "defendants literally handed over hundreds of millions of dollars to Petters with no investigation or supervision whatsoever. ... For their 'efforts' on behalf of the fund, moreover, defendants paid themselves tens of millions of dollars in 'management' and 'performance' fees".

They say Lancelot's annual financial states were "materially false and misleading."

For 2004-2007, Bell "and his affiliated entities" took $41.6 million in "management fees," $56.3 million in "performance fees," $6.2 million in "servicing fees," and $11.7 million in "origination fees," according to the complaint.

"All told, Lancelot Offshore paid over $115 million to Bell and his affiliated entities for perpetuating a Ponzi scheme that cost plaintiffs and investors hundreds of millions of dollars," the complaint states.

Lancelot is based in Northbrook, Ill. Bell is its sole principal, according to the complaint.

Plaintiffs want their money back and punitive damages. They are represented by Carol Gilden with Cohen Milstein & Sellers.

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