– General Electric Co. has reached a $ 49 million settlement to end a long-standing process of relations with Thomas Petters, the Minnesota businessman serving a 50-year prison term to run a million-dollar Ponzi scheme.
FILE PHOTO: The logo of the US General Electric conglomerate is depicted on the company's Belfort Energy Department website in France on February 5, 2019. REUTERS / Vincent Kessler / Filfoto
Settlement between GE and an administrator for two bankruptcy Florida investment funds known As Palm Beach Finance, which had applied for $ 651 million, was revealed on a Tuesday filing with federal bankruptcy law in West Palm Beach, Florida.
GE denied liability by agreeing to settle claims pertaining to the General Electric Capital unit, one of Petter's lenders. It did not immediately respond to requests for comment.
The agreement removes a financial overhang for Boston-based GE, which tries to cut costs while forecasting 2019 cash flow and profitability from its core business.
Petters, 61, was convicted in December 2009 of 20 counts including fraud and money laundering, over which prosecutors called a $ 3.65 billion scam.
Prosecutors said Petters bilked investors who thought he was using his money to buy consumer electronics from wholesalers and resell them to major bookstores such as Costco Wholesale Corp and Walmart Inc's Sam's Club.
The federal authorities rallied Petters offices in September 2008 and punished him in December that month, Bernard Madoff was charged with running his own Ponzi scheme.
Barry Mukamal, CEO of Palm Beach Finance Fund, said GE Capital knew about Petter's fraud as early as 2000, but kept quiet to ensure that Petters would continue to pay its fees.
The settlement came after US bankruptcy judge Paul Hyman in June 2017 refused to dismiss the case, which accused GE Capital of conspiring to commit fraud. Hyman had previously rejected eight other claims.
GE had said that Mukamal lacked authorization to sue, and only the trustee who monitors Petter's bankruptcy business could bring the conspiracy claim. The lawsuit was filed in September 2012.
On Tuesday filing, Mukamal identified potential dangers by going to court. These included the death of a key witness, and that three of Petters' other lenders who had "copycat" claims against GE had not recovered anything.
In 2015, Mukamal reached a separate $ 16 million settlement with the Bank of Montreal, whose Milwaukee-based unit Marshall & Ilsley had also worked with Petters.
The Palm Beach Finance Funds were filed for bankruptcy in November 2009.
The case is in: Palm Beach Finance Partners LP et al., US Bankruptcy Law, Southern District of Florida, No. 09-bk-36379.
Reporting by Jonathan Stempel in New York; editing by Phil Berlowitz, Susan Thomas and Richard Chang