The U.S. Department of Justice (“DOJ”) announced today that it entered into a $10,000,000 settlement with BMO Harris Bank, N.A. to resolve allegations that M&I Marshall & Ilsley Bank (“M&I Bank”), BMO Harris’s predecessor, aided and abetted one of the largest ponzi schemes in history. The case was brought to the DOJ by a whistleblower represented by Elias LLC under the Financial Institutions, Reform, Recovery and Enforcement Act (“FIRREA”) and the whistleblower provisions of the Financial Institutions Anti-Fraud Enforcement Act (“FIAFEA”).
Tom Petters orchestrated one of the largest Ponzi schemes in history, defrauding investors of over $3.5 billion. Petters misrepresented to investors that he ran a diverting business, where he claimed that he obtained electronic goods from wholesalers at a discount and sold them to big box retailers like Costco for substantial profits. In reality, Petters purchased and sold nothing, using the investors’ money to fund his lavish lifestyle and pay off prior investors. Petters was convicted in December 2010 on 20 counts of fraud, conspiracy, and money laundering, and was sentenced to 50 years in prison.
Petters ran his Ponzi scheme through a single small business account at an M&I Bank branch in a suburb of Minneapolis, Minnesota. From the early 2000s to 2008, Petters moved more than $35 billion of investor money through that account in ways that clearly indicated massive money laundering was afoot. For example, Petters often transferred hundreds of millions of dollars at a time to two shell entities, which would then re-transfer the money back into the M&I Bank account, often on the same day. These irregular transactions triggered thousands of suspicious activity alerts in the bank’s money laundering detection system. The bank, however, summarily closed the alerts without reporting the suspicious activity to law enforcement, as required by law.
M&I Bank also entered into several “deposit account control agreements” with Petters and investors, whereby the bank agreed to act as trustee for the investors, monitor Petters’ account, and ensure that when the fruits of their investments were deposited into the account, the bank would hold the money in trust for the investors. These agreements, however, were a sham. M&I Bank never implemented the processes and procedures needed to implement the agreements, and never performed under them.
Elias LLC represented the whistleblower in this action, a victim of Petters’ and M&I Bank’s actions. The firm submitted the whistleblower’s affidavit to the DOJ and worked closely with the DOJ in its investigation. The whistleblower was awarded $1,300,000 from the DOJ’s recovery, the largest FIRREA/FIAFEA whistleblower award ever reported.