Peterson v. Lesser, No. 14-1986 (7th Cir. 2015)
Annotate this CaseBell established mutual funds, raised $2.5 billion, and invested in vehicles managed by Petters, who said that he was financing Costco’s electronics inventory. Instead he was running a Ponzi scheme, which collapsed in 2008. Bell and Petters went to prison for fraud. Peterson, the Funds’ trustee in bankruptcy, filed multiple suits. The Funds’ auditors appealed a finding that they committed accounting malpractice because they did not perform spot checks that would have revealed the Petters scheme. On remand, the auditors contended that Bell had committed fraud because documents sent to potential investors represented that the money lent to Petters entities was secured by Costco’s inventory and that repayment was ensured by a “lockbox” arrangement under which Costco would make payments into accounts that the Funds (not Petters) would control. Bell admitted that he knew from the outset that this was not true. The district court concluded that the Funds’ misconduct was at least equal to the auditors, if not greater, and dismissed the auditors, without considering whether they failed to perform their duties. The Seventh Circuit affirmed, rejecting an argument that the pari delicto doctrine in Illinois applies only when plaintiff and defendant commit the same misconduct and stating that it is time to focus on the investors’ claims.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.