Bankrupt Jefferson County, Ala. last week dismissed counter charges against the Bank of New York Mellon for withdrawing $584,742 from a construction fund.

The county sought contempt charges and punitive damages, claiming the trustee for the county’s defaulted sewer warrants had withdrawn the money in violation of the county’s bankruptcy petition.

On April 24, BNY Mellon returned the funds without an explanation about why they were removed in the first place.

In its counterclaim, Jefferson County said it uncovered proof that BNY Mellon took construction fund money and paid lawyers or expert witnesses to testify against the county.

Jefferson County said the construction funds were withdrawn before it had any notice or opportunity to object.

The allegations were made in a proceeding brought by BNY Mellon in February claiming the county is using sewer revenues for improper expenses, such as attorney’s fees for its ongoing bankruptcy case.

Judge Thomas Bennett has yet to rule on what sewer funds the county can use for operations, and the amount that must be set aside to pay debt service on the $3.14 billion of outstanding sewer warrants.

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