Lawsuit alleges that bank played role in major Ponzi scheme

A lawsuit was filed by a bankruptcy trustee that is taking part in ensuring the recovery of funds in the $3.65 billion Ponzi scheme that was initiated by Tom Petters, former CEO and chairman of Petters Group Worldwide, according to the Star Tribune.

The trustee said that M&I Bank, now owned by BMO Harris Bank, played a major role in "aiding and abetting" the Ponzi scheme while turning a blind eye to Petters' large financial deposits. Court-appointed trustee Doug Kelley filed this case in U.S. Bankruptcy Court in St. Paul, Minnesota, after his previous filings against organizations and businesses implicated with the major fraudulent activity.

"M&I was never provided a valid business reason for such a staggering amount," the lawsuit contended. "Without the substantial assistance that M&I provided, the Ponzi scheme would have been discovered earlier by law enforcement authorities and victims of the Ponzi scheme."

Kelley is seeking at least $68 million from the bank and damages may rise depending on the bank's knowledge of the criminal activity. The plaintiff has alleged that M&I ignored a number of red flags in order to protect their relationship with an important customer while Petters sent more than $35 billion through his account over a five year period.

Financial institutions need solid background checks on its customers

The first step to take to prevent Ponzi schemes is to perform a basic screening test before putting forward one's resources toward a potential client, according to an article from SitePoint. Having signed contracts is not enough to ensure that customers will hold true to their word, and spending years in court over a small dispute is not beneficial for any company.

A solid background check through a company's website and extensive media channels is necessary before going through on a project with a customer or client. Speaking with a business attorney from Phoenix law offices can also benefit companies attempting to avoid client disputes.

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