Minnesota's largest law firm, Faegre Baker Daniels, was chastised Wednesday for sitting on more than $335,000 in assets that could have been used to repay some of the victims in the nearly seven-year-old Tom Petters Ponzi scheme.

The money belonged to Petters' co-conspirator Frank Vennes Jr. and as kept in a trust account by the law firm as a court-appointed receiver was liquidating the rest of the Vennes estate to recover pennies on the dollar for investors.

Attorneys for receiver Gary Hansen and the U.S. government, which prosecuted Vennes criminally, asked U.S. District Judge Ann Montgomery to order Faegre to turn over the money to Hansen and pay any fees or costs associated with distributing the money to victims.

"Simply put, the Faegre deposit should have been disclosed more than six years ago," said Ranelle Leier, representing Hansen.

Montgomery took the motion under advisement and said she would rule on the matter "fairly soon."

Vennes' trust account funds were originally given to Faegre in 2008 in the form of a $150,000 diamond ring and several gold coins. The valuable items were given to the firm to cover potential legal fees for Vennes' wife, Kimberly. Vennes at the time was under investigation but had not yet been indicted in connection with his role in Petters' $3.65 billion Ponzi operation. Vennes eventually pleaded guilty to charges of fraud and money laundering and is serving a 15-year prison sentence.

Existence of the Faegre account was not revealed outside the law firm until earlier this year after the ring and the coins were sold for a total of $335,333.

Faegre attorney James Volling said he didn't consider assets being held for legal fees as assets to run over to the receiver.

"If we failed to list those assets, I apologize for that," Volling told Montgomery.

But Assistant U.S. Attorney Gregory Brooker said the Faegre firm had three chances to list the assets on various financial disclosure forms for Vennes "and missed all three opportunities."

"It was the expectation of the United States that all parties would comply with a [2008] court order that no one should dispose of Vennes' assets and would work with Mr. Hansen," Brooker said.

Brooker also said the nondisclosure was a "disruption" of the receiver's recovery process and that all costs associated with the current attempt to recover funds should be borne by Faegre.

Hansen recovered and distributed nearly $19 million to about 127 creditors and individuals who invested money with Vennes. Vennes had used the funds to prop up the Petters operation, which ran for more than a decade until a whistle blower alerted federal authorities in 2008.

A separate receivership for Petters and five others involved in the heart of the scheme collected $57 million, part of which has been sent to the U.S. Department of Justice where it awaits distribution.

David Phelps • 612-673-7269