SAN FRANCISCO - Bank of America and Alaska last week announced a $35.6 million agreement to settle allegations that the bank overcharged bond issuers in the state for trustee services, mishandled unclaimed funds owed to bondholders, and kept inaccurate records.
The allegations involved 30 bond issuers and about 900 debt offerings from 1958 through 1995, for which Bank of America or its affiliates served as trustee for bondholders, according to James L. Baldwin, Alaska assistant attorney general.
The state asserted the bank kept principal and interest payments left unclaimed by bondholders instead of turning the funds over to the state treasurer as required by Alaska's constitution.
Attorney General Bruce Botelho said in a prepared statement that the settlement involved "the return of money rightfully belonging to the public."
Thursday's announcement came two weeks after the parties reached the agreement on July 12, which ended six months of mediation.
Shirley Norton, a spokeswoman for Bank of America, denied any wrongdoing by the bank.
"The bank and the state of Alaska believe that the settlement confers substantial benefits on the parties and averts the enormous time and expense that would have been incurred in litigation," Norton said.
In addition to the monetary settlement, Alaska has agreed to release Bank of America from any further liability and any potential claims.
The state and other local government agencies will share the proceeds once legal costs are deducted. Half of the recovery designated as unclaimed property will go into the state treasury. Bond issuers will divide the remaining 50% based on a formula of what they placed with Bank of America.
Bank of America in 1999 paid $187.5 million in settlement fees to California and more than 200 municipal bond issuers for similar incidents. That process helped lead to the settlement in Alaska.
"Shortly before California reached a settlement in 1999, we were contacted by parties to that mediation who indicated they uncovered some evidence that our bonds were subjected to similar treatment," Baldwin said.
More recently, Delaware County, Pa., indicated in late May that it is seeking a class-action suit against First Union Corp. to obtain as much as $200 million in unclaimed bond payments from a time span of 30 years or more.
