BMO Is Now Exonerated in Tom Petters Ponzi Scheme Case

September 14, 2024

BMO is now exonerated in Tom Petters Ponzi scheme case by a U.S. appeals court, dismissing a $564 million jury verdict against the bank.

A panel of judges from the 8th U.S. Circuit Court of Appeals has overturned a significant bankruptcy court ruling that found BMO Harris Bank liable for aiding and abetting a $3.7 billion Ponzi scheme orchestrated by former businessman Tom Petters.

The federal appeals court dismissed a $564 million jury verdict against BMO, which had been held accountable for its alleged involvement in the fraudulent activities.

Tom Petters was convicted in 2009 and sentenced to 50 years in prison for conspiracy, wire fraud, and mail fraud after defrauding investors and laundering money through accounts at Marshall & Ilsley Bank.

BMO acquired Marshall & Ilsley Bank in 2011 for $4.1 billion.

The three-judge panel ruled that Douglas Kelley, the court-appointed trustee for Petters Company, Inc., could not recover funds for creditors because the company itself had participated in the execution of the Ponzi scheme.

The court referenced a similar ruling in a case involving Bernie Madoff, noting that a debtor’s misconduct is attributed to the trustee because they represent the debtor.

The judges stated, “Even assuming that the bank aided the scheme to the degree that Kelley alleges, BMO cannot be more culpable than the entity that orchestrated the scheme.”

They emphasized that Petters Company, Inc. was established solely to facilitate the fraudulent operations.

In light of this ruling, BMO plans to reverse a C$1.19 billion ($875.5 million) provision related to the case, resulting in an anticipated after-tax recovery of C$875 million ($643.7 million) to be recorded in the fourth quarter as an adjusting item.

BMO expressed satisfaction with the court’s decision, stating it was “very pleased” with the outcome.

The bankruptcy trustee did not respond to requests for comment from Crain’s or Reuters.

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Citibank now fires a whistleblower for ‘underperformance’, after the former employee provided records requested by the OCC.

Citi has filed a countersuit against its former employee, Kathleen Martin, alleging that she was terminated not for refusing to falsify records for the Office of the Comptroller of the Currency (OCC), as she claimed in her lawsuit from May, but rather for being unable to properly fulfill the duties of her role.

Martin, who was let go from her position as Citi’s interim data transformation chair in September 2023 after nearly two years with the bank, had alleged in her lawsuit that she was fired for not agreeing to Chief Operating Officer Anand Selva’s request to conceal information from the OCC that would make the lender “look bad.”

In a revised lawsuit, Kathleen Martin has accused Citi’s Chief Operating Officer Anand Selva of intentionally deceiving the bank by wanting to misrepresent Citi’s compliance metrics to the Office of the Comptroller of the Currency (OCC).

Martin claims Selva sought to conceal information from the OCC that would have made the bank “look bad.”

However, Citi maintains that Martin’s termination in September 2023 was not due to her refusal to falsify records, but rather because she lacked the necessary “leadership and engagement skills” to effectively execute the role of interim Data Transformation Chair, which she had been appointed to after the previous chair, Rob Casper, departed the company.

Citi asserts that during Martin’s interviews and assessment for the interim role, it was identified that she needed to improve in areas like her “dogmatic nature, lack of innovation and lack of experience driving the execution of complex change across Citi.”

Once Casper left, Citi’s senior leadership, including COO Selva, determined that Martin could not successfully fulfill the demands of the interim chair position.

According to Citi, COO Anand Selva tried to help the plaintiff, Kathleen Martin, improve her performance in the interim Data Transformation Chair role.

Selva allegedly set up one-on-one meetings and working groups to facilitate better collaboration and working relationships with stakeholders.

Selva’s HR team also provided Martin with a senior mentor to support her development.

In May 2023, Citi leadership discussed a plan to improve Martin’s performance.

In July, Selva conveyed Martin’s mid-year review before she raised any concerns about his behavior.

Soon after, Martin contacted HR and expressed fears about her job security.

Citi claims that Martin “felt her position was at risk,” but the bank asserts that internal documents showed she “exceeded expectations” and that CEO Jane Fraser had commended her for her “gravitas” and ability to build “strong relationships” at the bank.

However, Citi says Martin failed to heed the feedback provided, and she was ultimately removed from the Data Transformation Chair role because she lacked the “executive level relationships” and leadership needed to successfully execute the data transformation efforts.

Citi says the data transformation work was too critical for the bank to tolerate Martin’s underperformance.

Citi denies Martin’s claims that she protested the reporting of a key metric accurately or that Selva objected to it.

The bank says Selva and Martin met in September 2023 to discuss reporting certain metrics using red, amber, and green scales.

Also Read: A Massive US Bank is Now Closing Credit Cards

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