BMO Triumphs as US Court Voids $564M Verdict in Ponzi Scheme Case

Core Viewpoint - Bank of Montreal (BMO) achieved a significant legal victory in the Petters Ponzi scheme case, with the U.S. Court of Appeals overturning a previous jury verdict that required its subsidiary, Harris Bank, to pay $564 million [1][3]. Background of BMO's Lawsuit - The lawsuit involves a Ponzi scheme orchestrated by Thomas J. Petters and associates, who misled investors into believing they were financing consumer electronics purchases, while actually using new investors' funds to pay returns to earlier ones [2]. - Douglas Kelley, the court-appointed receiver, filed the lawsuit against BMO, alleging that M&I Marshall and Ilsley Bank (a predecessor of BMO) was aware of the scheme and ignored warning signs [2]. Recent Development in BMO's Lawsuit - The U.S. District Court in St. Paul ruled in favor of BMO, dismissing the case brought by trustee Douglas Kelley, as the court found that the trustee represented Petters Co., which was equally or more at fault than M&I [3]. - The ruling was based on the legal doctrine of "in pari delicto," which states that a party cannot seek recovery if they are equally at fault [3]. How BMO Will Benefit From Latest Verdict - Following the favorable verdict, BMO plans to reverse its current provision of CAD$1.19 billion ($926.2 million), which includes accrued interest related to the case, leading to an after-tax recovery of CAD$875 million ($644 million) to be recorded in the fourth quarter [4]. - Over the past six months, BMO's shares on the NYSE have increased by 2.1%, contrasting with a 5.9% decline in the industry [4].