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Sunday
Mar312013

Former Polaroid CEO Faces Clawback Lawsuits Targeting Kickbacks, Bonuses From Petters Ponzi Scheme

The former chief executive officer of Polaroid, a once-iconic photography company that recently succumbed to bankruptcy, is the subject of multiple 'clawback' lawsuits relating to his role as an executive of one of the many companies ensnared in Thomas Petters' $6.5 billion Ponzi scheme.  Lorence Harmer faces clawback lawsuits seeking nearly $6 million from both the court-appointed Petters receiver as well as the Polaroid bankruptcy trustee.  

Petters raised billions of dollars from investors who were promised lucrative returns through the purported purchase and resale of consumer electronics to big-box retail stores. Investors were shown falsified invoices and bank records to paint the illusion of a highly-successful company, but in reality Petters was running a massive Ponzi scheme that ranks as one of the largest in history.  Instead of using investor funds as promised, Petters built up an elaborate business empire by purchasing legitimate companies such as Polaroid and Sun Country Airlines.  However, when the fraud was uncovered in late 2008, those once-legitimate companies imploded along with the rest of Petters' empire.  Petters was eventually sentenced to serve fifty years in prison for the fraud.

One of Harmers' duties was to locate manufacturing facilities in China for the consumer brands division. While Harmer successfully located such manufacturers, later information showed that he had received nine kickback payments from a certain Chinese manufacturer totaling over $5 million.  The kickbacks were not discovered until after Harmer had left the company, and when confronted, Harmer confessed to the charges and agreed to repay the company for the full amount by signing a promissory note.  However, Petters' fraud collapsed shortly after this agreement, and Harmer never made the required payments. 

Additionally, the Petters receiver alleged that Harmer received nearly $500,000 in bonuses and fees in efforts to create the appearance that Petters' businesses were legitimate.  However, because of his close relationship with Petters, the receiver claims that Harmer knew, or should have known, that Petters and his enterprise was a massive fraud.  

The newly-filed cases bring the total amount sought in clawback litigation from Harmer to nearly $10 million, as Harmer also was employed as an executive at several other Petters companies including Petters International and Petters Consumer Brands.

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