(CN) - Two officers of the Petters Group, whose owner was convicted in a multibillion dollar Ponzi scheme, do not have to face civil claims, a federal judge ruled in Minneapolis.
Investors led by Ritchie Capital Management originally sued former Petters CEO Camille Chee-Awai and former COO Mary Jeffries in Chicago over $100 million they loaned to the Petters Group.
After the Petters scheme unraveled, it allegedly prevented return of the investment by falsely telling a bankruptcy court that the money-management company had a hand in the Ponzi scam. The case was moved to Minnesota, where the Petters Group bankruptcy proceedings are currently being litigated.
Chee-Awai and Jeffries' attorneys argued that the case should be dismissed because Ritchie's security interests in Polaroid, a subsidiary of the Petters Group, depend upon whether Ritchie holds valid security interests in Polaroid. That matter is currently being decided in bankruptcy court.
"The bankruptcy proceedings will provide the most comprehensive resolution of Ritchie's security interests in Polaroid," U.S. District Judge Ann D. Montgomery wrote. "In the bankruptcy forum, the nature, extent and priority of Ritchie's security interests are being determined in conjunction with the claims and interests of other Polaroid creditors. In contrast, a determination of Ritchie's security interests by the district court would be made outside of the bankruptcy context and result in piecemeal litigation. The piecemeal determination of Ritchie's security interests creates the potential for inconsistent decisions between the district and bankruptcy courts. In this case of high public interest, conflicting decisions would likely erode the public's confidence in the judicial system."
A Minnesota federal jury convicted Thomas Petters on 20 counts relating to a $3.65 billion Ponzi scheme in December 2009. Petters is currently serving a 50-year prison sentence.
The plaintiffs included Ritchie Capital Management, Ritchie Special Credit Investments, Rhone Holdings II, Yorkville Investments I LLC and Ritchie Capital Structure Arbitrage Trading.
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