Canadian bank BMO has appealed an $834.2m (CAD1.1bn) charge it has been forced to record after a US jury found the bank liable for $564m in damages in a lawsuit related to one of the largest Ponzi schemes in history.
On Tuesday (8 November), a jury in a Minnesota bankruptcy court held BMO Harris Bank, the US subsidiary of BMO, liable for "aiding and abetting breach of fiduciary duty", according to a court filing.
The lawsuit was related to a Ponzi Scheme run by Thomas Petters, a Minnesota businessman, who was found guilty in 2009 of orchestrating a $3.65bn Ponzi scheme and sentenced to 50 years in prison.
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It sought to recover nearly $2bn based on sums Petters transferred from an account at Marshall & Ilsley Bank, which BMO bought in 2011.
When the fraud was discovered in 2008, the funds were no longer accessible for reimbursement to creditors, a trustee stated in the lawsuit.
The jury determined that Petters' breach of his fiduciary duties to his company, Petters Company Inc (PCI), which harmed PCI, was "aided and abetted" by the BMO unit. However, the jury did not find the unit directly aided the fraud.
"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.
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A spokesperson for BMO's US subsidiary said in a statement the unit was "disappointed with the jury's verdict, which is not supported by the evidence or the law".
"The bank intends to pursue all available legal options including appealing the jury verdict and award [...]. BMO Harris is entitled to recover approximately 21% of any amount that it pays to the trustee. We are confident that we have strong grounds for appeal," the statement read.
BMO's CAD1.12bn provision includes possible prejudgment interest as well as potential recoveries, which will result in an after-tax charge of CAD830m than the bank will book once it releases its fiscal fourth-quarter financial results this month.
