BMO Harris Bank, which could be on the hook for billions of dollars in a
The Chicago-based bank faces the possibility of an astronomical payout after a federal judge found that BMO Harris intentionally destroyed evidence that it knew was harmful to its defense.
Assuming the case goes to trial, the jury will be instructed that it can draw an adverse inference about the evidence destruction, according to the judge’s ruling. The case is scheduled to go to trial on Oct. 7 in Minneapolis.
“BMO Harris undisputedly destroyed dozens of email backup tapes containing multiple years’ worth of unique digital information,” wrote U.S. District Judge Wilhelmina Wright, upholding a bankruptcy judge’s 2019 decision.
Certain records were destroyed by a predecessor bank, Marshall & Ilsley, though Wright's opinion also noted that BMO Harris has subsequently been unable to locate additional records that were once in its possession.
“The record reflects that BMO Harris’s personnel knew that the backup tapes likely contained unique and relevant information from pre-March 2005 that was not preserved elsewhere,” Wright wrote.
The case involves a Ponzi scheme that Thomas J. Petters ran between 1994 and 2008. In 2010, Petters was
While the Ponzi scheme was still operating, Petters used fraud and misrepresentations to obtain billions of dollars from investors, according to the judge’s ruling last week. Funds went into and out of an account that his company had at National City Bank, which was acquired in 2001 by Marshall & Ilsley. In 2011, BMO Harris acquired Marshall & Ilsley.
In the lawsuit, the bankruptcy trustee for Petters’ company alleges that BMO Harris’s predecessor banks failed to respond to irregularities — facilitating and legitimizing the Ponzi scheme. BMO Harris denies the allegations.
Earlier this year, in a move that is common in advance of trials, the judge
Part of what’s at issue are six email-backup tapes found in 2014 that can no longer be located.
In her July 18 decision, Wright wrote that she was not persuaded by the bank’s argument that the destroyed evidence is either duplicative or marginally relevant.
“The record reflects that, when deposed, numerous BMO Harris employees could not recall numerous important details from the time period relevant,” the judge wrote in a decision that upheld a bankruptcy judge’s 2019 ruling.
“One BMO Harris employee, who was a business banker during the relevant time period, could not remember all of the details from that time period and testified that the best source of information from that time period would have been her emails,” the judge wrote.
A BMO Harris spokesperson said that the bank “respectfully disagrees” with the judge’s decision.
“BMO Harris will continue to defend itself vigorously in this litigation involving a fraud perpetrated by Tom Petters between 1994 and 2008, before BMO Harris acquired M&I in 2011,” the spokesperson said in an email. “BMO Harris looks forward to presenting the case to the jury.”
Lawyers for the bankruptcy trustee — who is seeking $1.9 billion in compensatory damages, in addition to punitive damages, attorneys’ fees and prejudgment interest from the bank — declined to comment.
An Oct. 7 trial date looms in a case involving allegations of document destruction. The high-stakes lawsuit could complicate BMO's pending acquisition of Bank of the West.
The stakes are high for BMO Financial Group, the Toronto-based parent company of BMO Harris.
In the 2021 fiscal year, the Canadian banking company reported net income of $6.04 billion in U.S. dollars, based on Monday’s exchange rate. During the same fiscal year, BMO Financial reported net income from U.S. personal and commercial banking of around $1.7 billion.
The legal fight is unfolding as BMO Harris seeks to finalize its pending acquisition of Bank of the West — a deal that would give the Canadian-owned bank a sizable presence in California and an entree into other Western states. BMO Harris
