Ritchie Tries To Block Petters Trustee Appointment

Jan 27 2009 | 12:23pm ET

Embattled hedge fund Ritchie Capital Management will continue its battle to recoup some of the $160 million it lent accused fraudster Tom Petters in court today.

Lisle, Ill.-based Ritchie is trying to prevent Doug Kelley from being named trustee for some of Petters’ bankrupt business. The hedge fund says that the Minneapolis lawyer’s position as court-appointed receiver for Petters creates a conflict of interest that should bar him from also serving as trustee. Ritchie reportedly fears that Kelley will work with the U.S. Attorney’s office in Minneapolis in seeking to pay Petters’ victims restitution before paying off his creditors.

For his part, Kelley claims that Ritchie is simply trying to gain control of Petters Group Worldwide and Petters Co. to have his way with some possible valuable assets owned by Petters, including Polaroid Corp. The receiver also blasted Ritchie in court filings, accusing the hedge fund of charging 362.1% interest on a $12 million loan and 80% interest on a $146 million loan. Ritchie called the interest rates standard for “very, very short-term loans.”

Last week, U.S. Bankruptcy Judge Gregory Kishel rejected Ritchie’s bid to depose Kelley, saying the hedge fund’s tone implied “some kind of conspiracy” between the receiver and prosecutors. Kishel said he saw no evidence that Kelley was working “in concert with the U.S. government.”

Petters was arrested in October and has been charged with running a $3.5 billion Ponzi scheme.

Ritchie is also in some legal hot water due to its Petters investments. Barclays Bank in November sued the hedge fund, accusing it of investing “significant sums” from two of its hedge funds when they “were supposed to be winding down.”

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