Canadian bank hit with trading losses

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Bank of Montreal, Canada’s fourth largest bank, has been hit with natural gas trading losses of C$680 million, 50 percent more than its initial projection, forcing it to probe “potential trading irregularities.”

The bank also warned there could still be “subsequent significant gains and losses” to report. BMO said it has terminated two New York traders, David Lee and Bob Moore, who assembled the gas portfolio.

The losses stemmed from gas option positions taken out after Hurricane Katrina in 2005 and were linked to Optionable, a little-known New York commodities trading firm, which derived 30 percent of its revenue from BMO.

Optionable Chief Executive Officer Kevin Cassidy, reported by the Financial Post to have had a “close, personal relationship” with Lee, resigned in mid-May, following the departure of Optionable founder and former Chairman Mark Nordlicht.

Lawrence Gelber, attorney for Cassidy, said the losses resulted from BMO’s “independent and knowing choices” and not because of any act or failure to act by his client or Optionable. Reports have circulated that Cassidy served a prison sentence in the 1990s for tax evasion and credit card fraud.

—Gary Park