A federal jury in St. Paul on Tuesday afternoon awarded $564 million in damages in a lawsuit filed in reference to Twin Cities businessman Tom Petters’ Ponzi scheme – the most important recorded jury verdict in Minnesota.
The jury dominated that BMO Harris Financial institution should pay $484 million in compensatory damages and almost $80 million in punitive damages to the chapter trustees dealing with Petters’ case. An estimated $400 million in prejudgment curiosity, relationship again to when the case was filed in 2012, means BMO Harris could possibly be answerable for about $1 billion, mentioned Doug Kelley, the chapter trustee overseeing the restoration of funds in Petters’ $3.65 billion Ponzi scheme, the largest monetary crime in Minnesota historical past.
Kelley filed the lawsuit towards M&I Financial institution in federal chapter court docket in St. Paul in 2012, alleging aiding and abetting fraud, breach of fiduciary obligation and civil conspiracy. M&I Financial institution was acquired by BMO Harris Financial institution, a subsidiary of BMO Monetary Holdings, in 2011.
Kelley mentioned financial institution officers have been complicit in Petters’ unlawful operations by ignoring a number of pink flags as they dealt with his enterprise accounts earlier than 2008 with a purpose to defend a profitable banking relationship.
Greater than $41 billion “flowed by means of a single checking account throughout the seven years that they'd Petters as a buyer,” Kelley mentioned. “As a former white-collar-crime federal prosecutor, I knew that was an astronomical quantity to stream by means of a small-business checking account.”
Financial institution officers ignored a number of computer-generated money-laundering alerts related to the checking account, he mentioned.
“If they'd finished what they have been purported to do, they might have filed suspicious-activity stories, which might have gone to the feds,” Kelley mentioned. “That they had 39 months in a row the place they'd suspicious-activity stories the place they turned all these alerts off. If they'd reported this to the feds early on, it will have stopped this Ponzi scheme useless in its tracks.”
Officers with BMO Monetary Group, which is predicated in Montreal, mentioned Tuesday that they might put aside $1.12 billion Canadian dollars on account of the end result “in accordance with relevant accounting requirements.” In a ready assertion, they mentioned that they “strongly deny” the allegations within the lawsuit and plan to attraction the jury’s verdict and award.
“We're upset with the jury’s verdict, which isn't supported by the proof or the legislation,” BMO officers mentioned. “We are going to file quite a few post-trial motions with the trial choose to reverse the decision or scale back the damages, and we intend to pursue all avenues to overturn the jury’s verdict, together with appeals. We're assured that we have now robust grounds for attraction.”
Pursuant to a previous settlement in reference to one other Petters matter, BMO Harris is entitled to get better roughly 21 p.c of any quantity that it pays to the trustee, financial institution officers mentioned.
Kelley, who has been working since 2008 to assist organizations and people who misplaced billions within the Petters schemes, mentioned he was assured the jury’s verdict would stand. He mentioned it might take 12-18 months to hold out the attraction course of.
BMO Harris officers and Kelley have been twice inspired to debate a doable settlement throughout U.S. Chapter Court docket proceedings, Kelley mentioned.
“There was by no means any indication that they may settle with us,” he mentioned. “We saved saying, ‘Effectively, that’s effective. We’ll go to trial as a result of we have now each confidence that what you probably did was improper.’”
Petters’ enterprise empire imploded in 2008 when Petters Co. was revealed as an enormous Ponzi scheme. Income from the scheme was used to prop up Petters’ respectable companies, together with Solar Nation Airways in Mendota Heights, and finance acquisitions of different corporations, together with Polaroid Corp.
Petters, 65, previously of Wayzata, was indicted in 2008 on a number of counts of mail fraud, wire fraud, cash laundering and conspiracy. A 12 months later, a federal jury discovered him responsible on all counts and he was sentenced by U.S. District Decide Richard Kyle to 50 years in jail.
He's an inmate on the federal jail in Leavenworth, Kan.; his launch date is Could 13, 2050, in keeping with the U.S. Bureau of Prisons.
Others wrapped up within the enterprise additionally have been convicted. As a part of their sentences, Petters and others have been ordered to forfeit belongings gained by means of the Ponzi scheme, together with financial institution and funding accounts, autos and actual property.
Kelley commenced greater than 300 lawsuits, most of which have been so-called “claw-backs,” or chapter adversary proceedings, to get better different income and worker bonuses acquired by Petters’ earliest buyers or executives.
So far, greater than $737 million has been recovered and returned to victims and collectors. That features creditor settlement and distributions; lender settlement distributions; funds to chapter estates and funds forfeited by the U.S. authorities for distribution to victims, Kelley mentioned.