In spring 2010, Minnesota businessman Tom Petters was convicted to 50 years in federal prison for masterminding a $3.7 billion Ponzi scheme.
One person who says he was subpoenaed involuntarily by the Petters defense team to provide testimony was George Danko, a former executive at both Kardia Health Systems Inc. and the troubled Healthcare IP Partners LLC.
Between 2004 and 2007, Danko was CEO of Springworks LLC, a venture capital firm that’s part of the Petters group of companies.
Now Danko finds himself a target of Douglas Kelley, the court-appointed trustee who is attempting to recover money bilked from investors.
In a lawsuit filed late last year in bankruptcy court, Kelley alleges that Danko received $1.93 million over a three-year period in "fraudulently obtained funds" and demands they be returned.
Specifically the complaint alleges that Danko "knew or should have known that he was benefiting from fraudulent activity, or at a minimum, failed to exercise reasonable due diligence with respect to Petters" and Petters Company Inc. The complaint also charges that the money that Danko received were "disproportionately large relative to his salary."
In interviews, both Danko and his lawyer vigorously denied the charges.
"The business I ran was a legitimate independent business; the primary funder was Tom Petters," Danko said about SpringWorks, a wholly owned subsidiary of Petters Group Worldwide. "I have never been investigated by the FBI, or by the prosecution."
His lawyer, former U.S. Attorney Tom Heffelfinger, explained the lawsuit is not a criminal lawsuit but a bankruptcy proceeding.
"We deny these allegations" Heffelfinger said. "We’re going to fight the case."
Heffelfinger added that the language of the complaint – the charge that Danko "knew or should have known" that potential fraud was involved – has been used in multiple cases filed by the court-appointed trustee to recover funds.
"Doug Kelley filed 200 complaints and every lawsuit has that same stock language," he said.
Heffelfinger contended that Danko "earned every nickel that Mr. Kelley is trying to recover."
Danko’s lawyer also stressed that it’s purely coincidental that Danko is an investor and works at Kardia and that he was an employee of a Tom Petters business previously.
"There’s no relationship with Kardia and Petters," Heffelfinger said.
He added that Danko has filed a motion to dismiss the case and Kelley is required to respond soon.
Other associates of Danko – Carl George who hired him at Kardia Health Systems and Kevin Molloy, who worked with him at Healthcare IP Partners, where George was chairman – voiced their support.
"Quite frankly, it’s unfortunate that good people were painted by the Petters brush," George said.
But a person whose company was acquired by Kardia in 2008 and knows Danko disagreed.
"He was part and parcel of the Petters scam," said John Freeland, managing partner of Freeland Systems who recently settled a lawsuit with Kardia that began soon after its acquisition.