Petters arrested in fraud investigation

Tom Petters did not enter a plea during today's court appearance.

The charges allege that Petters and some associates at Petters Group Worldwide committed mail fraud, wire fraud, money laundering and obstruction of justice in a scheme that defrauded investors out of more than $1 billion. Investigators say this is an increase from initial estimates.

The criminal complaint accuses Petters of contacting a subject of the investigation, and encouraging the person to leave for a country from which he could not be extradited. Petters also allegedly said he regretted turning over his passport to federal authorities. The FBI says it has recordings in which Petters says he would flee the country if the scheme is discovered.

Through his attorney Petters has denied any wrongdoing. But earlier this week, he left the company that bears his name saying the investigation made it impossible for him to continue to lead the company.

But the trouble is already showing up at Petters' subsidiaries. Yesterday, Sun Country Airlines warned employees that layoffs, or even a complete shutdown, could come as early as December.

Pat Hogan, spokesman for the Metropolitan Airports Commission, says Sun Country Airlines was having a cash flow problem before the Petters investigation.

"Sun Country's difficulty is really a cash flow problem, and they were having some of that before the whole Petters investigation became public, so this is really just another nail in the box that they have found themselves in," said Hogan.

Hogan said any job cuts at Sun Country could have a major impact on overall service at MSP airport. That's because after Northwest, Sun Country is the number two carrier.

Sun Country's busiest season starts in January, and airline officials say they were counting on a loan from Petters Group to help them. But with Tom Petters under investigation, they say that is no longer an option. Sun Country is seeking to defer half of employees' wages through the end of the year to free up cash.

Hogan says airport officials have been in talks with the carrier for months about ways to help it weather the financial storm.

"Our hope is that they can make it through December and get into the busy first quarter of next year, because at that point they could traditionally make some money here and be profitable, so its really just trying to get them past this hurdle and on to the first quarter."

Hogan says if the low cost airline is forced to cut jobs and service the ripple effects could also lead to headaches for travelers. A cut in flights would cut down on competition at the airport, freeing up other carriers to raise fares on Sun Country's busiest routes.

Ticket agent Laura, who spoke on condition that her last name not be used, says she and her co-workers are trying to be optimistic that the airline will make it through the tough times.

"Working for the airlines right now, it's difficult for everyone, so I think to think there aren't going to be changes in the industry would be very naive. It is a crazy time, but Sun Country's employees continue to be very optimistic, especially here at the airport," said Laura. Travelers were taking the news of possible cuts in stride.

Jo Gregory and her colleague, who work in the insurance industry, were checking in for their afternoon flight. She says they won't avoid the airline because of questions about Sun Country's future.

"No, well, we are business traveling, so we are just always going to go for the best rate, not unless there were any safety issues, because most airlines offer bare minimum service anyway these days," said Gregory.

Gregory says she will continue to fly the airline as long as it offers competitive fares between the Twin Cities and their Florida headquarters.

Sun Country spokeswoman Wendy Blackshaw is also optimistic. She says bookings for the busy winter season are already much stronger than last year. In addition, the company made money in August, and it has been able to boost revenues while at the same time fuel prices are coming down.

"We believe that this airline will continue on. Absolutely, we believe it will continue on. If you ask 99 percent of the people (here) that's what we believe," said Blackshaw.

A magistrate judge ordered Petters to remain jailed until next Tuesday, in order to give prosecutors more time to explore the evidence against him.

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