B of A to Pay State $53 Million in Cash, Land : Settlement Over Dormant Accounts OKd

Superior Court Judge A. Richard Backus approved a landmark settlement Monday that requires the Bank of America to pay $27.6 million in cash and real estate to depositors whose dormant accounts were eliminated by illegal service charges and on which interest was not paid.

The settlement between state Controller Gray Davis, the bank and attorneys representing taxpayers appeared to end a 13-year legal fight between the controller and the bank and was billed as the biggest such settlement of its kind in the nation.

The agreement totals $53 million, including the $27.6 million approved Monday and an initial payment of $25.4 million made by the bank in 1985. Of the total, about $6.4 million worth of environmentally significant land in Tehama and Sonoma counties was turned over to the state by the bank in lieu of cash.

Land Included

The settlement also proposes that the bank acquire within 90 days and turn over to the state about 3,000 acres of redwood forest in Santa Cruz County. The forest is valued at $10.8 million.

Under the state’s “unclaimed property” law, banks and other financial institutions are required to search for the holders of accounts that have been dormant for seven years. If the holders cannot be found, their names and contents of the accounts must be turned over to the state controller, who must also search for the missing depositors to “reunite” them with their money.

But in 1975, then-state Controller Ken Cory charged that banks, including the Bank of America, illegally wiped out dormant accounts with service charges before forwarding the depositors’ names to him. He also charged that they failed to credit the accounts with proper interest.

Banks and other financial institutions since 1976 have been required by law to notify the depositor in advance if such charges are levied against inactive accounts. The settlement involves dormant accounts from 1945 through 1983.

In 1980, Backus ruled in Cory’s favor, but it has taken eight years of litigation to arrive at a settlement of the amount owed the depositors.