Canada’s BMO books $834 million charge over U.S. Ponzi lawsuit By Reuters

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(Reuters) – A jury in the United States on Tuesday found Canada’s Bank of Montreal’s U.S. unit liable to pay more than $550 million in damages over a Ponzi scheme operated by a Minnesota businessman, leading the bank to book an overall charge of C$1.12 billion ($834.2 million).

A federal jury in 2009 had found the businessman, Thomas Petters, guilty of orchestrating a $3.65 billion Ponzi scheme, and he was sentenced to 50 years in prison.

The lawsuit in Minnesota sought to recoup nearly $2 billion in damages based on sums transferred by Petters from an account at Marshall & Ilsley Bank, which Bank of Montreal bought in 2011 and assumed its liability.

Those sums became unavailable for repayment to creditors when the fraud was uncovered in 2008, a trustee said in a lawsuit.

The jury found the count against the bank which had alleged that the bank’s unit “substantially assisted or encouraged” the businessman Petters to commit the breach.

The Canadian bank said it would appeal the ruling to contest the jury’s verdict and award.

“We are disappointed with the jury’s verdict, which is not supported by the evidence or the law,” a spokesperson for the bank’s unit said in a statement.

As part of the provision, Bank of Montreal said it would book an after-tax charge of C$830 million during the fourth quarter.

($1 = 1.3426 Canadian dollars)

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