BMO Harris Bank, N.A. paid $10 million to resolve allegations that it violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by engaging in fraud related to the multi-billion-dollar Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters.
Petters was convicted by a federal jury in December 2009 of orchestrating a massive Ponzi scheme that obtained billions of dollars and property by inducing investors to lend money to his company, Petters Company, Inc. (“PCI”).
Aided and abetted by multiple co-conspirators, Petters diverted the funds to other purposes, such as making lulling payments to investors, paying off those who assisted in the fraud scheme, and financing Petters’s extravagant lifestyle. For his conduct, Petters was sentenced to 50 years in prison.
The United States alleges that M&I Bank participated in a related fraudulent scheme by entering, at Petters’s request, “deposit account control agreements” that promised certain of Petters’s investors that M&I Bank would monitor PCI’s depository account held at M&I Bank on their behalf and protect the proceeds of their investments with Petters.
The bank representatives who signed the agreements, however, knew that the agreements in fact provided the investors with no protection and would not be performed. The United States alleges that M&I Bank’s fraudulent conduct facilitated the continuation of Petters’s scheme and resulted in millions of dollars in losses to the Petters investors who signed the fraudulent agreements.
“People who commit white collar crimes often use the banking system to facilitate those crimes,” U.S. Attorney McGregor W. Scott said. “This significant civil penalty underscores the continued commitment to use all of the tools at our disposal to hold accountable financial institutions that participate in wrongful activity.”
This investigation was initiated by a whistleblower declaration submitted to the Eastern District of California and the whistleblower will receive a share of this settlement, as provided for in the Financial Institutions Anti-Fraud Enforcement Act.
The claims settled by this agreement are allegations only, and there has been no determination of liability. The settled claims relate exclusively to conduct by M&I Bank prior to its acquisition by BMO Harris in 2011.
Mandatory Facts:
Defendant/Respondent: M&I Marshall & Ilsley Bank
Criminal Charges: Financial Institution Fraud
City and State: Sacramento, California
Date: December 2009
Sentence: $10 million civil penalty
Dollar Amounts: $10 million settlement
Key Facts
- State: California
- Category: Financial Institution Fraud
- Source: DOJ Press Release â†â€â€
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