Financial Firms to Pay $90 Million for Looted Trust Funds
In a closely watched Los Angeles class-action case, Bankers Trust Co. of New York, Wells Fargo & Co. and four other financial institutions have agreed to pay $90 million to help restore fiscal stability to scores of injured people whose reserves for future medical care and living expenses were looted from trust funds.
The settlement would provide 100% recovery for the current value of their financial losses, Los Angeles County Superior Court Judge Peter D. Lichtman told plaintiffs Wednesday. He is expected to approve the arrangement next month.
“I think this is the best result ever attained in a class-action case,” plaintiffs attorney Marc M. Seltzer said.
As part of the settlement, the financial institutions accused of contributing to the financial losses deny any liability for those losses, totaling more than $100 million in trusts. The companies also include Bear, Stearns & Co., Bank of America Corp. and U.S. Trust Corp.
“We have stepped forward so that people like Sylvia Rodriguez don’t have to suffer,” said attorney Charles A. Gilman, who represents Bankers Trust, referring to one of the plaintiffs, a paraplegic. “We want to make sure these people are paid in full and we’re going to take out the bad guys.”
The class-action lawsuit was filed in January 2001, two months after Stanwich Financial Services Inc. in Stamford, Conn., stopped paying disbursements of settlement proceeds to scores of people seriously injured in traffic and industrial accidents. The firm filed for bankruptcy reorganization in June 2001.
Rodriguez, who was injured in a 1979 car wreck, was among the 250 people who signed up with the company now known as Stanwich to provide them with regular payouts from large personal-injury settlements negotiated in the late 1970s and early 1980s.
The 47-year-old mother of three didn’t get her check in November 2000 and panicked. Without the settlement money, she said, she would have had to sell her house at any cost and pull her children out of college.
The default by Stanwich led to the discovery that an affiliate had used bonds to secure a line of credit from Morgan Stanley & Co., which later sold them for nonpayment.
Earlier settlements with Merrill Lynch & Co., Morgan Stanley and NAB Asset Corp. -- valued at $40 million to $45 million -- along with an advance from Bankers Trust, ensured that plaintiffs would be paid for their ongoing their medical care and living expenses.
Under the current agreement, Bankers Trust would contribute $53.6 million to the settlement, with U.S. Trust agreeing to pay $17 million; Wells Fargo, $7.3 million; Bank of America, $7 million; Bear, Stearns & Co., $4.8 million; and Settlement Services Inc., $600,000.
Gilman said those institutions would take the place of the individual plaintiffs in trying to recover some of the money from Stanwich.
