Sept 12 (Askume) – Bank of Montreal (BMO.TO) told a U.S. appeals court on Thursday that its subsidiary was involved in a nearly $3.65 billion Ponzi scheme run by convicted Minnesota businessman Tom Peters, which persuaded a jury to overturn its $564 million verdict.
Citing a similar case involving Bernard Madoff, the US Court of Appeals for the Eighth Circuit ruled that the court-appointed trustee for the now-bankrupt Peters Corporation could not collect debts on behalf of its creditors because the company had facilitated the charity.
In a 3-0 decision, a court in St. Paul, Minnesota overturned the jury’s November 2022 verdict and directed that trustee Douglas Kelley’s case against BMO be dismissed.
Lawyers for the trustees did not immediately respond to a request for comment.
BMO said it was pleased with the ruling. The company expects the case will reverse a C$1.19 billion loss provision including interest, boosting its fourth-quarter after-tax profit in its corporate services business to C$875 million ($644 million).
Peters, 67, was convicted in 2009 of 20 criminal charges, including fraud and money laundering, and is currently serving a 50-year sentence.
Kelly alleges that Peters’ former bank, Milwaukee-based Marshall & Ilsley, knew about the Ponzi scheme and ignored threats of money laundering, allowing Peters to withdraw large sums of money that he had no right to do so.
BMO acquired M&I in 2011, and Kelly sought to keep it accountable.
However, the Court of Appeal held that the trustee actually represented Peters Corporation because the company had responsibilities equal to or greater than M&I.
It says this means BMO is not liable under the legal principle of “similar torts”.
Chief Judge Steven Colloton, citing Peters’ firm, wrote: “Nothing in the Bankruptcy Code exempts PCI or its trustee from PCI’s own wrongdoing.”
Colloton cited a similar 2013 ruling by a federal appeals court in New York in which Bernard L.’s claims against JPMorgan Chase & Co (JPM.N) and other banks used by Madoff were dismissed by the liquidation trustee of Madoff Investment Securities.
The case is Kelley v. BMO Harris Bank NA, U.S. Court of Appeals for the Eighth Circuit, No. 23-2551.
(1 USD = 1.358 Canadian Dollars)
