Ill. fund manager linked to Petters ordered freed

ST. PAUL, Minn. - A federal magistrate judge ordered the release on bail Wednesday of an Illinois hedge fund manager who allegedly helped Minnesota businessman Tom Petters orchestrate what prosecutors call a $3.5 billion Ponzi scheme.

Prosecutors tried to persuade U.S. Magistrate Judge Jeffrey Keyes that Gregory Bell should be held without bail because he has no significant ties to Minnesota and has millions of dollars in offshore accounts.

They said he also may have or be able to get citizenship in Russia, which has no extradition treaty with the U.S. Bell was born in Moscow in 1965, emigrated to the U.S. in 1981 and is a naturalized U.S. citizen.

Bell's attorneys, however, told Keyes that Bell has cooperated with prosecutors and regulators investigating the Petters case.

Keyes agreed that Bell's roots are firmly established in Highland Park, Ill., and ordered him released on a $1.5 million bond, but confined on home monitoring and other restrictions.

U.S. District Judge Ann Montgomery earlier froze the assets of Bell, his wife, Inna Goldman, and their children, including money held in an account Bell set up in the Cook Islands, and funds on a Swiss bank account authorities believe may hold as much as $15 million. Montgomery also ordered the money repatriated to the U.S. within two weeks and an accounting of Bell's assets.

Bell was arrested Friday in Illinois on fraud and money laundering charges.

Assistant U.S. Attorney Tim Rank, who also is prosecuting Petters on conspiracy, fraud and money laundering charges, outlined the case against Bell in a memorandum filed Wednesday morning.

Rank alleged Bell misled investors in his business, Lancelot Investment Management, about the structure of their investments with Petters Co. Inc., the primary vehicle Petters allegedly used in the fraud scheme.

Prosecutors say investors thought they were helping finance merchandise that Petters would resell to big retailers, but the merchandise didn't exist.

Rank said Bell's actions resulted "in a loss to numerous investors collectively of over $1 billion."

When Petters' companies collapsed last year, so did Lancelot Management, which filed for bankruptcy, and Bell told investors at the time that they were Petters' victims. The Securities and Exchange Commission, however, claims Bell had clear indications Petters was in trouble but helped prolong the alleged Ponzi scheme and made sure he got his own money out before it collapsed.

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Information from: Star Tribune, http://www.startribune.com

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