Magazine article American Banker

Court Spurns Bulk of Firstar's $13M Claim on Bankrupt Cattleman

Magazine article American Banker

Court Spurns Bulk of Firstar's $13M Claim on Bankrupt Cattleman

Article excerpt

A federal bankruptcy judge here recently rejected a bank's claim that it deserved nearly $13 million from the estate of a failed cattleman who is believed to have carried out an elaborate check-kiting scheme.

U.S. Bankruptcy Judge Robert Kressel awarded Milwaukee's Firstar Corp. only $170,208.

The judge ruled that Firstar had failed to get liens on the assets of southern Minnesota farmer John D. Morken in a timely manner and that it had turned a blind eye to some of Mr. Morken's dealings despite a "persistent, increasing balance of uncollected funds."

William Schulz, Firstar's general counsel, said he was "disappointed" by the award. "We disagree with the court's legal analysis, and we do plan to appeal," he said.

Judge Kressel was especially critical of Firstar's failure to catch the check-kiting scam earlier, saying the company had not questioned the cattleman's activities because it got nearly $1 million in overdraft fees during two years.

Firstar began its relationship with Mr. Morken in 1992, setting up a personal account and two corporate accounts: a funding account in Milwaukee and another, for disbursements, in Wausau, Wis.

During the first five months of 1994, Mr. Morken wrote $1.5 billion in checks on his personal account and $1.9 billion on his corporate accounts. About 80% of the total moved between the personal account and the corporate ones.

Firstar insisted it had been duped by Mr. Morken. But Judge Kressel found that Firstar had used "the advantages of the float" as a selling point with Mr. …

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