FL Suit Says Bank of America Actions Led to Schools Missing Out on Money

You know - until you really start tracking these things, you don't realize how many ways things can go wrong for a bank. (See my previous entries). Follow the link for the whole story with details.

Law.com - Fla. Suit Says Bank of America Actions Led to Schools Missing Out on Money:

Coral Gables, Fla., lawyer Ervin Gonzalez has filed a whistleblower lawsuit alleging that Bank of America executives illegally deprived Florida public schools of revenue.

Gonzalez is representing Joseph McCann and Richard Sorenson, who worked in the bank's Florida operations department for several years. They filed their qui tam suit in Leon Circuit Court last June, but it was only unsealed in January after the state decided not to intervene in the action.

According to the suit, bank executives evaded a state law that requires certain unclaimed bank funds to be turned over to the Florida Department of Education.

Instead, the Charlotte, N.C.-based bank allegedly used the funds for an "executive bonus pool". Gonzalez said in an interview that the misdirected amount may total tens of millions of dollars.

"Denying this money that the children of Florida need for their education is inconceivable to me," he (Gonzalez) said. "Fortunately, someone had the courage to come forward and say this isn't right and must be stopped."

Bank of America has moved to dismiss the suit, arguing that the plaintiffs lack standing to bring the action. An attorney for the bank said there is no private right of action under the Florida Disposition of Unclaimed Property Act.

The suit... alleges that Bank of America committed fraud against the state by failing to properly process checks in its role as a check clearinghouse from the early 1990s through at least 2003.

Gonzalez said the bank's senior managers told employees not to notify banks that were owed money due to processing errors. Instead, they allegedly were told to contact only those banks that owed Bank of America money.

Instead of turning the money over to the state, the lawsuit contends that the unclaimed credits were converted by Bank of America into profit and placed in an "executive profit-sharing pool."

The suit alleges that Bank of America's breach of duty as a clearinghouse is a violation of the Florida Disposition of Unclaimed Property Act. As a result, Gonzalez said, the bank "owes tens of millions of dollars to Florida schools."

The FDUPA states that banks, insurance companies and other holders of unclaimed credits must, after an expiration of five years, give the funds to the Florida Department of Banking and Finance.

The department is authorized to make a one-time attempt to notify the owners of the unclaimed credits. If the owners fail to respond, the credits are transferred to the Abandoned Property Trust Fund.

The trust fund finances the operation of the Unclaimed Property Program and pays out owner claims. The remaining unclaimed funds are transferred to the Florida Department of Education to support public schools.

In the 2005 fiscal year, unclaimed credits totaled $208.1 million. Of that amount, $106.1 million went to the Department of Education. The balance went to paying claims and to operating expense

"Trust me that none of these other banks would be shy about reclaiming money if they felt they could," Wells said. "But the fact is they know they have no claim and agreed to the accounting adjustments. And there is no way the state of Florida would have refused to prosecute this case if they felt it had merit."

Well folks - this will be another interesting BofA case we'll just have to follow to see what becomes of it.