- by GI Magazine
- Dec 06, 2022
Nov 9, 12:47 Pm (Reuters) - A U.S. jury on Tuesday found a local unit of Canada's Bank of Montreal (BMO) liable for over $550 million in damages over a Ponzi scheme operated by a Minnesota businessman, leading the bank to book a charge of C$1.12 billion ($834.2 million).
Thomas Petters was found guilty in 2009 of orchestrating a $3.65 billion Ponzi scheme and sentenced to 50 years in prison. The lawsuit in Minnesota sought to recoup nearly $2 billion based on sums Petters transferred from an account at Marshall & Ilsley Bank, which BMO bought in 2011.
The sums became unavailable for repayment to creditors when the fraud was uncovered in 2008, a trustee said in the lawsuit. The jury ruled the BMO unit "aided and abetted" Petters in the breach of fiduciary duty to his firm, Petters Company Inc (PCI), causing harm to PCI. Fiduciary duty involves action taken in the best interest of another person or entity.
"BMO knew Petters' fraudulent conduct constituted a breach of fiduciary duty to PCI and substantially assisted or encouraged Petters to commit the breach," the ruling read. The jury did not find the BMO unit directly aided the fraud.
The unit said it would contest the jury's verdict and award. "We are disappointed with the jury's verdict, which is not supported by the evidence or the law," a spokesperson for the unit said in a statement.
BMO said the C$1.12 billion provision includes an after-tax charge of C$830 million that it will book in the fourth quarter.