May 26, 2022

A high-stakes lawsuit involving allegations that Bank of Montreal lied to a judge after a predecessor bank destroyed key evidence is slated for trial this fall, potentially complicating the Canadian banking giant’s deal to acquire Bank of the West.

The lawsuit, which grew out of a long-defunct Ponzi scheme, was filed a decade ago, but last summer BMO started making public disclosures about the possibility of a large financial liability. The plaintiff is seeking $1.9 billion in compensatory damages, plus interest, punitive damages and attorneys’ fees, BMO stated in a March 1 report to its shareholders.

The suit against BMO’s U.S. subsidiary was filed by trustees in the bankrupt businesses of Thomas Petters, seeking damages from Petters’ Ponzi scheme, which fell apart in 2008.

BMO said that it “approaches litigation with integrity and a commitment to high ethical standards, including by partnering with expert outside counsel,” after a judge accused the bank of lying.

Bloomberg

BMO inherited the legal exposure when it acquired Marshall and Ilsley Bank in 2011. Milwaukee-based M&I was alleged to have looked the other way as Petters, who was a client, moved money between his accounts. BMO has denied the lawsuit’s allegations.

BMO “continues to vigorously defend itself against unmeritorious allegations about the banking relationship between a company engaged in fraud and a bank that BMO…

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