BMO Financial Group Wins Appeal in Ponzi Case

BMO Financial Group successfully overturned a $564 million jury verdict related to its U.S. subsidiary's involvement in a Ponzi scheme orchestrated by Thomas Petters, with the Eighth Circuit Court of Appeals ruling that the bankruptcy trustee could not recover damages due to the company's complicity in the fraud. This decision allows BMO to reverse a $1.19 billion provision, resulting in an expected after-tax recovery of $875 million in its fourth quarter. The appeals court concluded that because Petters Company Inc. was equally or more at fault, the doctrine of 'in pari delicto' barred recovery against BMO. Petters, convicted in 2009, received a 50-year prison sentence for his role in the scheme, which defrauded investors of approximately $3.65 billion. The ruling aligns with previous cases, such as those involving Bernard Madoff, emphasizing that bankruptcy law does not permit claims against a party that participated in wrongdoing. BMO's legal team argued that there was no evidence showing bank officials were aware of Petters' illicit activities.