Dave Matthews

Tom Petters, the controversial Minnesotan businessman who has pledged $14 million in gifts to Miami University’s Farmer School of Business since 2004, pleaded not guilty Tuesday to 20 counts of wire and mail fraud, money laundering and conspiracy.

Petters is charged with leading a $3.5 billion fraud scheme that falsely reported to investors that his companies bought wholesale goods and re-sold them to retailers. The alleged scheme ran from 1995 until September, when Deanna Coleman, a Petters executive, informed federal authorities of the alleged plot.

Since Petters’ arrest, Miami has suspended expending funds related to Petters gifts. Petters donated $10 million to endow two professorships in “curricula development and opportunities for students to practice and enhance their leadership and professional skills,” in the Farmer School of Business in 2004, according to the Love & Honor Campaign.

The center would be named after Tom’s son, John, a former Miami student who was killed during spring break in Italy in 2004. Miami has received $5 million of the pledged gift.

Petters also pledged a $4 million gift to establish a chair in Asian Business in the Farmer School in the name of his daughter, Jennifer, who graduated from Rollins College in Winter Park, Fla., in 2006. Documents show that Petters has currently paid Miami $200,000 of the gift.

He has also paid in full a John T. Petters International Scholars fund worth $105,000.

In 2005, Petters was inducted into Miami’s Academy of Entrepreneurs for supporting entrepreneurship education at the university.

According to Roger Jenkins, dean of the Farmer School, there has been a motion to remove Petters from the Academy.

Despite Petters’ indictment, President David Hodge said Miami will wait until due process runs its course before deciding on the status of the gifts Miami has received from Petters.

“We are deeply concerned about the situation, we have suspended expending funds related to Mr. Petters, and we await the outcome of the legal proceedings before deciding what else to be done,” Hodge said via e-mail.

Petters’ attorney, Jon Hopeman, said Petters intends to fight off all 20 charges on his 13-page indictment.

“(Petters) is beginning the process of reviewing the government’s evidence, which he is now entitled to see,” Hopeman said via e-mail. 

Hopeman said the trial is set for Feb. 9, 2009 before Judge Richard Kyle in St. Paul. Currently, Petters remains in custody.

“He has great affection for Miami University and its deans, students, and professors,” Hopeman said.

According to United States Code, Petters faces seven counts of mail fraud, with each count carrying up to 30 years in prison and a $1 million fine, according to Title 18, Section 1341, and an additional five years in prison, according to Title 18, Section 1342. He also faces three counts of wire fraud that carry up to 5 years in prison each, according to Title 18, Section 1342, and 30 years in prison and/or $1 million fine according to Title 18, Section 1343.

He faces one count of mail and wire fraud conspiracy that carries up to five years in prison if convicted. Petters is also charged with a count of money laundering conspiracy and seven counts of money laundering that carry up to 20 years in prison each.

Oxford criminal defense attorney Dan Haughey said the indictment is a typical step in the legal process for this case, and he does not expect to see the number of counts in the indictment go down unless Petters accepts a plea bargain, which he shot down by pleading not guilty Tuesday.

“At this point, what’s important to stress is that none of the evidence that (the federal authorities) have put up has been challenged,” Haughey said. “But based upon the evidence that the government has presented, these citizens on the grand jury have found reason to believe that these offenses have been committed … I think that they’ve indicted everything they feel that they can.”

In addition to Petters himself being indicted, two of his companies-Petters Company, Inc. and Petters Group Worldwide-are also named as defendants in the trial.

Haughey added that there is nothing unusual about the indictment except for the level of specificity it has with regard to the exact instances where alleged transactions took place within Petters’ shell companies.

In September, Coleman informed authorities of the alleged Petters scheme and has since pleaded guilty to one count of conspiracy to commit mail fraud in exchange for cooperating with the prosecution. Every other person named in the FBI’s affidavit of Petters in September has accepted similar plea bargains.

Petters will make his next court appearance Dec. 23. Haughey said that Petters defense team will now begin the “discovery process” and organize their case against the government. Haughey said there is a “distinct possibility” that the trial will begin as scheduled.

“Like I’ve always said, an indictment isn’t a conviction and everyone is afforded the presumption of innocence,” Haughey said. “But at this point … there are (serious charges), and the repercussions are significant, but perhaps things will become further into focus as we go into the discovery process and trial.”