B of A to Pay $25.4 Million Owed Patrons : Reverses Position in 10-Year Fight With Cory on Dormant Accounts
In a major breakthrough, Bank of America abruptly agreed Friday to pay $25.4 million owed to customers whose dormant accounts were not paid interest and eventually were wiped out by illegal service charges.
The agreement represented the first time in a 10-year legal battle with state Controller Kenneth Cory that the financial institution has decided to make a payment for money owed customers whose inactive accounts were severely reduced or obliterated by illegal service charges.
Remaining in dispute, however, is an estimated $60 million that Cory insists the Bank of America still owes. The sum is tied up in separate litigation, whose settlement is not expected quickly.
The bank agreed in Superior Court here to make the $25.4-million payment after the filing of a motion by Cory last week that demanded immediate payment of $30.7 million. At the time, bank lawyers said they would not make any payments until the entire issue was finally resolved.
Asked about the reversal, bank attorney Richard Caine of San Francisco said that based on “further evaluation and analysis, we’ve determined that this is the appropriate action for the bank to take at this time.”
The $5.3-million difference between what Cory sought and what the bank paid will be added to the disputed $60 million, said Caine and Deputy Atty. Gen. Yeoryios Apallas, who represented Cory.
Judge A. Richard Backus gave Cory five days to submit to him for approval a “comprehensive” plan to reunite bank account owners with their property. In the meantime, the bank’s payment, to be made next week, will be held by the Sacramento County clerk.
Apallas said such a plan has been prepared but must “be fleshed out.” He said it will include a massive public information and advertising campaign, advising Bank of America customers that they may be owed money and instructing them on how to claim payment.
It is unknown how many people might be affected by resolution of the entire complex case, but Thomas F. Holland Jr., chief of the controller’s Unclaimed Property Division, estimated that the campaign would start two months after approval of the plan and indicated that about 500,000 bank customers “have money coming to them out of this payment.”
Apallas said that based on past experience, about half the $25.4 million will be returned to bank customers. In theory, the balance is held in perpetuity by the controller for the owners, but if it is unclaimed, the money will go into the general fund for operation of state government.
Apallas said he agreed “in the spirit of compromise” to accept the $25.4 million “as a partial payment.” Both he and Caine indicated that unless the bank’s “volunteer” payment was accepted, the bank would continue the protracted fight to hold onto it until the case is ultimately resolved.
In a 1981 order, the Superior Court determined that Bank of America had made illegal service charges on accounts that had been dormant for seven years. At the same time, it ruled that the bank illegally failed to pay interest. Often the accounts had been forgotten by their owners or the depositors had died.
Since 1976, such practices have been prohibited.
Under the state’s unclaimed property law, which is administered by the controller, banks and other financial institutions must attempt to locate the owners of such accounts. When the owners cannot be found, the accounts’ contents are forwarded to the controller, who then must try to reunite the sums with the owners.
Cory maintains that his office routinely returns more than $10 million annually to owners of unclaimed property. In the past, he has found such personalities as former Gov. Edmund G. Brown Sr., Bob Hope, Lucille Ball, Candace Bergen and former baseball great Willie McCovey.
Attorney Gary Near of San Francisco, who in 1974 filed a taxpayers’ suit against then-Controller Houston I. Flournoy for allegedly failing to enforce the unclaimed property law, insisted in court on Friday that the $25.4 million was “inadequate.”
He argued that the sum should be at least $30 million, as sought by Cory last week. Judge Backus turned him down but did set aside $2.5 million for attorney fees, which he earlier awarded Near.
Payment of the fees has been held up because Apallas has appealed the award to the 3rd District Court of Appeal, contending that Near’s lawsuit on behalf of two taxpayers merely piggybacked on Cory’s suit. Both Near’s lawsuit and Cory’s were merged early on.
Near insisted in court that he had “labored long and hard for 10 years” and accused Apallas of demonstrating “bad faith, nastiness and a mean spirit” in attempting to deny him attorney fees.
Apallas did not respond.