BMO Harris handed setback in multibillion greenback court docket battle

BMO Harris Bank, which might be on the hook for billions of {dollars} in a lawsuit involving its legal responsibility for a big Ponzi scheme, has misplaced a key ruling forward of an upcoming trial.

The Chicago-based financial institution faces the potential for an astronomical payout after a federal decide discovered that BMO Harris deliberately destroyed proof that it knew was dangerous to its protection.

Assuming the case goes to trial, the jury will likely be instructed that it will probably draw an hostile inference concerning the proof destruction, in keeping with the decide’s ruling. The case is scheduled to go to trial on Oct. 7 in Minneapolis.

BMO Harris Bank mentioned via a spokesperson that it “respectfully disagrees” with the choice by U.S. District Judge Wilhelmina Wright.


“BMO Harris undisputedly destroyed dozens of email backup tapes containing multiple years’ worth of unique digital information,” wrote U.S. District Judge Wilhelmina Wright, upholding a chapter decide’s 2019 determination.

“The record reflects that BMO Harris’s personnel knew that the backup tapes likely contained unique and relevant information from pre-March 2005 that was not preserved elsewhere.”

The case includes a Ponzi scheme that Thomas J. Petters ran between 1994 and 2008. In 2010, Petters was sentenced to 50 years in jail in reference to what the Department of Justice described as a $3.7 billion scheme.

While the Ponzi scheme was nonetheless working, Petters used fraud and misrepresentations to acquire billions of {dollars} from buyers, in keeping with the decide’s ruling final week. Funds went into and out of an account that his firm had at National City Bank, which was acquired in 2001 by Marshall & Ilsley Bank. In 2011, BMO Harris acquired Marshall & Ilsley.

In the lawsuit, the chapter trustee for Petters’ firm alleges that BMO Harris’ predecessor banks failed to reply to irregularities — facilitating and legitimizing the Ponzi scheme. BMO Harris denies the allegations.

Earlier this 12 months, in a transfer that’s widespread upfront of trials, the decide urged the 2 sides to achieve a settlement.

Part of what’s at situation are six email-backup tapes present in 2014 that may not be positioned.

In her July 18 determination, Wright wrote that she was not persuaded by the financial institution’s argument that the destroyed proof is both duplicative or marginally related.

“The record reflects that, when deposed, numerous BMO Harris employees could not recall numerous important details from the time period relevant,” the decide wrote.

“One BMO Harris employee, who was a business banker during the relevant time period, could not remember all of the details from that time period and testified that the best source of information from that time period would have been her emails,” the decide wrote.

A BMO Harris spokesperson mentioned that the financial institution “respectfully disagrees” with the decide’s determination.

“BMO Harris will continue to defend itself vigorously in this litigation involving a fraud perpetrated by Tom Petters between 1994 and 2008, before BMO Harris acquired M&I in 2011,” the spokesperson mentioned in an e mail. “BMO Harris looks forward to presenting the case to the jury.”

Lawyers for the chapter trustee — who’s in search of $1.9 billion in compensatory damages, along with punitive damages, attorneys’ charges and prejudgment curiosity from the financial institution — declined to remark.

The stakes are excessive for BMO Financial Group, the Toronto-based guardian firm of BMO Harris.

In fiscal 12 months 2021, the Canadian banking firm reported web earnings of $6.04 billion in U.S. {dollars}, primarily based on Monday’s trade charge. During the identical fiscal 12 months, BMO Financial reported web earnings from U.S. private and industrial banking of round $1.7 billion.

The authorized combat is unfolding as BMO Harris seeks to finalize its pending acquisition of Bank of the West — a deal that will give the Canadian-owned financial institution a large presence in California and an entree into different Western states. BMO Harris has estimated that the deal, which was introduced in December 2021, will shut earlier than the top of the 12 months.


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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