After three days of deliberations, a federal jury found a Minnesota man guilty on twelve fraud counts for his role in the massive Ponzi scheme masterminded by Thomas Petters. James Fry, a former Minnesota businessman, was convicted of twelve counts of wire fraud and securities for his role as an investment manager who funneled hundreds of millions of dollars into Petters' scheme. Fry, who will remain free on bail until his sentencing, faces up to a twenty-year term for each of the five wire fraud counts, and up to five years for each securities fraud count. Petters is currently serving a 50-year term after he was convicted of twenty fraud counts in December 2009.
According to authorities, Fry was the CEO of Arrowhead Capital Management, LLC ("Arrowhead"), which served as an investment advisor to a number of hedge funds. Beginning in 1999, Fry began working with Frank Vennes to raise funds to invest in promissory notes issued by Petters' company, Petters Company Inc. ("PCI"). PCI raised billions of dollars from investors who believed their funds were being used by PCI to purchase and resale consumer electronics to big-box retailers. From 1999 to September 2008, Fry was accused of funnelling hundreds of millions of dollars he raised through Arrowhead to be invested in PCI. While Fry told investors that a 'big-box' retailer would make payments directly to an Arrowhead bank account, the reality was that Arrowhead received all payments from PCI. Authorities alleged that, despite knowing the falsity of these representations, Fry continued soliciting investors. In total, Fry received more than $41 million in commissions from PCI.
While Fry's lawyers claimed that Fry believed Petters was conducting a legitimate business and was simply another of the victims duped by Petters, the jury was not convinced. The trial lasted over three weeks, and the jury had reached the third day of deliberations before it was able to agree on a verdict.
The Superseding Indictment charging Fry is here.