Dividends and BMO to take billion dollar charge after losing Ponzi lawsuit

We all know who Bernie Madoff is – he was the former head of the SEC and a Wall Street Investment firm that was producing consistent returns for years no matter how the markets fluctuated. In the end it was all an elaborate scheme to bring in new money to get Peter to pay Paul and it worked for 15 years. Bernie ended up in jail for 50 years.

In Minnesota, another Ponzi scheme was run almost as big as Madoff, before it collapsed in 2008. Thomas Joseph Peters was convicted of a $2 billion fraud and is in jail. Mr. Peters company declared bankruptcy and has been in the courts since.

In an article by James Bradshaw and David Milstead of the Globe and Mail, the lawsuit alleged that Milwaukee based Marshall and Ilsley Bank and a smaller bank helped facilitate a Ponzi scheme run by Mr. Peters between 1999 and 2008.

The issue is the corporate model the bank understood what Mr. Peters company did and what Mr. Peters actually did such as the bank moved tens of millions in and out of corporate and personal accounts were not measuring up to one another.

The Judge found that although the Bank of Montreal bought the Milwaukee based bank in 2011, M&I destroyed computer bankup tapes in 2010 and 2011 that likely contained documents and some tapes that contained evidence. The bank falsely told the judge all the tapes were gone.

A jury found the present owner of the bank, Bank of Montreal needs to pay a fine which amounts to $1.1 billion.

Linking to dividend paying stocks, when a company goes into bankruptcy it will take a long time before there is any type of payout. If you own such an investment you need to cut your losses and move on. In the above case, it is now almost 2023, the bankruptcy was 2008 and only cents on the dollar will be recovered. Every downturn in the economy shows there are frauds in every state and many people are just trying to make a little bit more. It is easier to buy a profitable company that has paid dividends over the years and let the company do the work legitimately. Losing money takes the compound interest of real gains and as an investor you love compound interest. Years ago, the author was helping managing my parent’s funds, my investments were in the growth side of the market, my parents were in dividend funds, who was making more money with less risk? my parents, I switched over to enjoy compound interest.

There are more questions than answers, till the next time – to raising questions.

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