Federal Agents Honored by U.S. Attorney for Investigating Largest Financial Crime in Minnesota History

June 9, 2010 - Earlier this year, Thomas Joseph Petters was sentenced to 50 years in federal prison for orchestrating a $3.7 billion Ponzi scheme through which he bilked countless individuals, companies, and organizations out of money. Petters’ actions amounted to the largest financial crime in state history, and his prison sentence serves as the longest ever imposed in Minnesota for financial fraud.

The Petters case was the result of a lengthy investigation by federal agents, in particular, Special Agents Brian Kinney and Eileen Rice and Forensic Accountant Josiah Lamb of the Federal Bureau of Investigation and Kathy Klug of the Internal Revenue Service-Criminal Investigation Division. In appreciation for their tireless investigative efforts over a period of almost two years, U.S. Attorney B. Todd Jones honored them earlier today by awarding them with the 11th annual U.S. Attorney’s Office Law Enforcement Recognition Award.

“Financial fraud is an insidious crime, which is particularly painful during these tough economic times. We in federal law enforcement owe it to our neighbors, many of whom are struggling to make ends meet, to pursue with vigor those who attempt to enrich themselves personally by cheating people and organizations out of hard-earned dollars. These agents did just that, and we all are extremely grateful for their tremendous effort.”

The U.S. Attorney’s Office Law Enforcement Award is presented annually to a local, state, or federal law enforcement agent, officer, or investigative team that has performed outstandingly on a significant federal case or on a series of cases. In addition, the recipient or recipients must exemplify the cooperative spirit Minnesotans have come to expect from local, State, and federal law enforcement. At today’s ceremony, Ralph S. Boelter, Special Agent in Charge of the FBI’s Minneapolis Field Office, said, “This award brings to light the collaborative effort needed to successfully combat complex criminal investigations of the size and scope of the Petters’s case. Two outstanding FBI agents with 34 years of collective investigative experience and a talented FBI forensic accountant with years of practical accounting experience worked seamlessly with a top-notch IRS agent and skilled prosecutors. I could not be more proud of these dedicated FBI employees and of this team as a whole.”

Following a month-long trial, Petters was convicted on December 2, 2009, of 10 counts of wire fraud, three counts of mail fraud, one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering, and five counts of money laundering. According to the evidence presented at trial, Petters, assisted by others, defrauded and obtained billions of dollars in money and property by inducing investors to provide Petters Company, Inc., with funds to purchase merchandise to be resold to retailers at a profit. However, no such purchases were made. Instead, Petters and his co-conspirators diverted the funds provided them for other purposes, such as paying off those who assisted in the fraud scheme, funding businesses owned or controlled by the Petters, and financing Tom Petters’s extravagant lifestyle.

Special Agent Eileen Rice has been a special agent with the FBI for more than 21 years. She has worked in the Minneapolis Division for the last 10 years, having served previously in the Los Angeles Field Office. She has worked white collar crime matters her entire career, specializing in public corruption and fraud investigations. Rice earned a bachelor’s degree in communication arts from the University of Wisconsin in 1983 and a master’s degree from Pepperdine University in 1996. Before becoming an FBI agent in 1989, she worked in the banking industry in Phoenix.

Special Agent Brian Kinney has been a special agent with the FBI for more than 13 years, all in the Minneapolis Division. He has worked predominately white-collar crime cases. Kinney earned a bachelor’s degree in business administration from Azusa Pacific University in 1983 and Contracting Administration Certification from the University of California, Irvine. Prior to becoming an FBI agent, he worked contract issues in the aerospace engineering field in Southern California.

Forensic Accountant Josiah Lamb has been with the FBI’s Minneapolis Division for almost four years. Thus far, his career has focused on white-collar crime matters. Lamb earned a bachelor’s degree in accounting from Carthage College in 2001 and a law degree from Hamline University in 2009. He has CPA and CFE certifications and worked as an accountant and in a SEC reporting role for five years before joining the FBI in 2006.

Special Agent Kathy Klug, of the IRS, has more than 27 years of law enforcement experience. Since September of 1993, she has been a special agent with the IRS-Criminal Investigation Division and has worked tax fraud, money laundering, narcotics, mortgage fraud, investment fraud, and embezzlement investigations. For a two-year period, she also was a supervisory special agent. Klug previously served 11 years in the U.S. Army. As a chief warrant officer and special agent with the U.S. Army-Criminal Investigation Division, she investigated crimes against persons and property as well as defense contract fraud cases. For a four-year period, she managed, led, and directed global security details for the Secretary of Defense, Chairman of the Joints Chief of Staff, Secretary of the Army, and other senior Pentagon officers and officials. Klug earned a Bachelor of Arts degree from Western Michigan University, where she majored in accounting.

Following today’s award ceremony, Julio La Rosa, Special Agent in Charge of the IRSCriminal Investigation Division’s St. Paul Field Office, said, “Special Agent Kathy Klug embodies all that the public should expect in a law enforcement officer and public servant. She is a shining example of what our criminal investigation special agents bring to the table on financial fraud investigations. Her professionalism and investigative skills were essential to proving the case against Mr. Petters, and Kathy is truly deserving of this award.”

The award ceremony, which took place at the U.S. Attorney’s Office in Minneapolis, was attended by the award recipients, their families, and friends, along with their law enforcement colleagues.