SAN FRANCISCO — After an arena in Washington State defaulted earlier this month, investors still got paid, but it is unclear who made the mistake.
Initially, the Washington treasurer’s office sent an e-mail to lawmakers saying that because of human error, U.S. Bank erroneously paid some holders of $42 million of notes issued by the Greater Wenatchee Regional Events Center Public Facilities District, though the district failed to make the principal payment that was scheduled Dec. 1.
U.S. Bank denies making a mistake, saying it is only the safekeeping agent of the note funds that must be moved from the trustee to the payment agent to the safekeeping agent.
U.S. Bank spokeswoman Nicole Sprenger said the Depository Trust & Clearing Corp., the payment agent, did not file a default notice with their system that would have prevented the payments from being made.
“They failed to issue that proper notice prior to the payment date,” Sprenger said. “Had the notice been in there, it would not have paid bondholders.”
Sprenger said investors agree to terms with the bank that allow them to get back accidental payments.
Edward Kelleher, a spokesman for the Depository Trust & Clearing Corp., said it has a well-publicized policy of not making principal and interest payments unless they have been paid.
“We did not fund it because we were not paid on time,” Kelleher said. “We did not receive a notice of default until several days later.”
He said he could not comment on why U.S. Bank made the payments.
Sprenger said Bank of New York Mellon Corp. is the trustee for the notes.
In an e-mail to state lawmakers, assistant treasurer Wolfgang Opitz said his office has been told investors across the country had been paid, including Central Washington University and Douglas and Franklin counties in Washington. They had also been told the bank was working to take back the funds.
The Securities and Exchange Commission has opened an investigation into the default.