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Madeleine Baran
St. Paul, Minn.

Illinois man pleads guilty to wire fraud in connection with Petters case

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A Chicago hedge fund owner accused of helping prop up the alleged Tom Petters Ponzi scheme pleaded guilty Wednesday to one count of wire fraud.

Gregory Malcolm Bell, 44, admitted in federal court to a $200 million scheme to defraud investors in the Minnetonka-based Petters Co., Inc.

Bell admitted that his hedge fund, Lancelot Investment Management, devised a method to make it appear to Lancelot investors that Petters Co. was paying off its promissory notes in a timely manner.

When Petters Co. fell behind in paying the notes, Bell hid the problem from investors by making 86 sham "round-trip" banking transactions from his hedge fund to the company for several months in 2008.

During those months, Lancelot raised more than $200 million from 43 new investors, based on false representations that the Petters Co. investments were sound and paying positive returns, according to a statement from the Minnesota District of the U.S. Attorney's Office.

Under his plea deal, Bell, of Highland Park, Ill., agreed to help the government find his accounts and disburse the money to victims of his fraud.

Bell faces up to 20 years in prison. A sentencing date has not been set. Bell has been in custody since his arrest in July.

A Lancelot accountant, Harold Alan Katz, of Illinois, pleaded guilty in September to conspiracy to commit wire fraud in connection with the scheme.

Tom Petters will go on trial Oct. 26 on federal fraud charges. The Wayzata businessman is accused of running a $3.5 billion Ponzi scheme.

(The Associated Press contributed to this report)