M&I Bank Faces Clawback Suit in Petters Case
Marshall and Ilsley Bank (M&I Bank) is the next target in a long list of “clawback” lawsuits through which the bankruptcy trustee in the Tom Petters case is attempting to recoup funds involved in fraudulent transfers.
The trustee, Doug Kelley, filed a complaint on Friday in U.S. Bankruptcy Court in Minnesota seeking to obtain approximately $3.7 million from the bank.
M&I Bank, which is based in Milwaukee, Wisconsin, has 26 offices in the Twin Cities and one location in Duluth, according to the bank's Web site. An M&I Bank spokesperson on Monday said that the company does not comment on pending litigation.
According to the complaint, Petters Company, Inc. (PCI), had a bank account at M&I Bank, and it was used by Petters and his associates to “funnel investor funds through the Ponzi scheme.”
Between 2004 and 2009, about $70 billion was transferred in and out of the M&I Bank account, according to the suit.
Petters and his associates overdrew from the account-sometimes in amounts exceeding $1 million-and M&I would lend the necessary funds to PCI to cover the overdraft. “M&I Bank knew or should have known that it was benefiting from fraudulent activity, or at a minimum, failed to exercise reasonable due diligence with respect to Petters and PCI in connection with the Ponzi scheme,” the suit alleges. The complaint does not accuse M&I Bank of criminal activity.
The suit filed Friday is one of many clawback claims filed this month by Kelley. Last week, Kelley filed a lawsuit seeking at least $105.4 million in “false profits” from local hedge fund Arrowhead Capital Management, LLC, and some of its affiliates.
Former Wayzata businessman Tom Petters was found guilty in December of 20 felony counts relating to fraud, conspiracy, and money laundering, for orchestrating a $3.65 billion Ponzi scheme that spanned a decade.
Petters, who maintains his innocence, was sentenced to 50 years in prison in April. His attorney filed a formal notice of appeal later that month.
Six of the seven co-conspirators who pleaded guilty to charges related to the fraud scheme-Deanna Coleman, Michael Catain, Larry Reynolds, Robert White, Gregory Bell, and Harold Alan Katz -have been sentenced within the past couple of months. A date has not yet been set for James Wehmhoff's sentencing.