(Reuters) – A U.S. jury ruled on Tuesday that a local unit of Canada’s Bank of Montreal (BMO) was liable for more than $550 million in damages under a Ponzi scheme operated by a Minnesota businessman, leading the bank to issue a charge of C$1.12 billion ($834.2 million).
Thomas Petters was convicted in 2009 of orchestrating a $3.65 billion Ponzi scheme and sentenced to 50 years in prison.
The lawsuit in Minnesota sought to recover nearly $2 billion based on money transferred by Petters from an account at Marshall & Ilsley Bank, which BMO bought in 2011.
The monies became unavailable for repayment to creditors when the fraud was uncovered in 2008, a trustee said in the lawsuit.
The jury ruled that the BMO unit “aiding and abetting” Petters in breaching his fiduciary duty to his company, Petters Company Inc (PCI), causing injury to PCI. Fiduciary duty involves an action taken in the best interests of another person or entity.
“BMO knew that Petters’ fraudulent conduct constituted a breach of fiduciary duty to PCI and materially aided or abetted Petters in committing the breach,” the ruling reads.
The jury did not find that the BMO unit directly contributed to the fraud.
The unit said it would challenge 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 record in the fourth quarter.
($1 = 1.3426 Canadian dollars)
(Reporting by Shubham Kalia and Shivani Tanna in Bengaluru; Editing by Jacqueline Wong and Christopher Cushing)
Copyright 2022 Thomson Reuters.
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