In another piece of post-merger house-cleaning, Bank of America -- which recently consolidated with North Carolina -- based NationsBank- has agreed to pay $19 million to settle two class actions accusing a bank acquired by BofA of improperly investing customer funds.
U.S. District Judge Charles Legge gave preliminary approval to the settlement on Tuesday.
The investments were actually made in the 1980s by Security Pacific National bank, a bank BofA acquired in 1992. Lawyers for the plaintiffs say that the bank invested $14.6 million in trust funds into three real estate partnerships.
Two of the ventures-apartment buildings in Seattle and Southern California - recovered after losing value when the real estate market tanked in the late 1980s. But a third investment - a Fresno office building - went belly up, said plaintiff's attorney Gilmur Murray of the Mills Law Firm in Greenbrae.
Murray said the plaintiffs in the cases - Fisher v. Bank of America, 96-0203, and Van Zwanenberg v. Bank of America, 97-4253 - weren't told in advance about the banks decision to invest the money in real estate. The cases were scheduled to go to trial in October. Murray said he also alleged that the bank had conflicts of interest relating to the investment. For example, he claimed that the developer of one of the buildings paid BofA a fee for investing in the development.
But the bank, in a written statement, denied any wrongdoing, and said that the investment of the trust money in the real estate ventures was appropriate.
"The bank believes that these were proper investments, and I don't think they ever came up wit substantial evidence that there were conflicts of interest," said Heller Ehrman Charlson, who represented BofA in the cases. "But the bank for a variety of reasons elected to settle the matter and is very pleased with the settlement."
Charlson said the bank's merger on Sept. 30 with NationsBank figured into the timing of the settlement.
"That was a factor," he said, "but not the factor.