Bank of Montreal to pay $16 mln over Petters' Ponzi scheme

Thu Jul 16, 2015 12:28pm EDT
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By Jonathan Stempel

July 16 (Reuters) - Bank of Montreal agreed to pay $16 million to end a U.S. lawsuit claiming that a lender it bought caused two bankrupt Florida funds to lose money in imprisoned swindler Thomas Petters' $3.65 billion Ponzi scheme.

Thursday's settlement with the trustee liquidating the Palm Beach Finance funds was disclosed in a filing with the U.S. bankruptcy court in West Palm Beach, Florida, and requires court approval.

Bank of Montreal denied liability in agreeing to settle. A bank spokesman did not immediately respond to a request seeking further comment. Petters, 58, is serving a 50-year prison term.

The lawsuit by the trustee Barry Mukamal stemmed from Petters' relationship with Marshall & Ilsley Bank, a Milwaukee-based lender that Bank of Montreal bought in 2011.

Mukamal argued that Marshall & Ilsley had hoped to expand its "important" and "substantial" relationship with Petters, and did nothing while the Minnesota businessman used his account at the bank to further his fraud.

The lawsuit against Bank of Montreal originally sought to recoup $23.6 billion, based on sums transferred by Petters over five years to that account.

Any award at trial would likely have been far smaller.

The Palm Beach funds filed for bankruptcy in November 2009, just over a year after Petters' fraud was uncovered.   Continued...