A multibillion-dollar lawsuit alleging the Bank of Montreal destroyed evidence in a case involving a decade-old Ponzi scheme is scheduled to go to trial on Oct. 7, according to court documents filed Monday.
Meanwhile, in a move that is common at the pre-trial stage, a federal judge in Minnesota who is overseeing the case is urging both parties to reach a settlement. The trial has already been delayed months because of the COVID-19 pandemic.
The potential $1.9 billion legal exposure, plus interest, punitive damages and attorneys’ fees,
It’s unclear if BMO or the bankruptcy trustees bringing the suit are open to a settlement.
“Given the matter is before the courts, it would not be appropriate to comment,” a BMO spokesperson said Monday in a statement.
One individual with knowledge of the case, who spoke on condition of anonymity, said that it makes sense that a settlement conference would occur, given how much money is on the line.
“All of the major pre-trial arguments have been resolved and the parties are now headed for a trial with billions of dollars at stake," this person said.
Banks often try to clear up major legal troubles before merger deals are approved.
For instance, Cadence Bancorp in Houston last year
BMO inherited the legal problems when it acquired Marshall & Ilsley Bank in 2011. Milwaukee-based M&I was alleged to have turned a blind eye as Thomas Petters, who was a client of the bank, attempted to hide his Ponzi scheme by moving money between his accounts.
But in a 2019 ruling, a U.S. Bankruptcy Court judge said that BMO “lied to its counsel, lied to the Court, and lied to Plaintiff” as it “dragged its feet or fought production of relevant information” about emails and other communications between Petters and his bank that were thought to be destroyed.
BMO has said that it aims to close the deal for Bank of the West by the end of 2022. It’s unclear if the case will be resolved in time for regulators to rule on the merger within that time frame.
A virtual public hearing on the proposed merger
The bankruptcy trustees have estimated that the case could be tried in two and half weeks, while BMO has said a trial could last six to eight weeks, according to a June 1 filing in the case.
BMO told American Banker earlier this year that it “continues to vigorously defend itself against unmeritorious allegations about the banking relationship between a company engaged in fraud and a bank that BMO acquired several years after public disclosure of the fraud.”
