Thursday, August 10, 2006
Bank of America ordered to defend role in lawsuit
A federal appeals court has ruled Bank of America Corp. and two other banks must defend themselves against a lawsuit related to a scheme that defrauded Orthodox Jews and others out of millions of dollars.
According to Reuters, a three-judge panel of the U.S. Second Circuit Court of Appeals has reinstated state law claims brought by dozens of investors alleging the banks were negligent.
Along with Charlotte, N.C.-based BofA (NYSE: BAC), the banks involved in the suit are HSBC Holdings plc (NYSE: HBC) and Sterling Bancorp (NYSE: STL).
The case involves David Schick, a New York real estate lawyer who in the early 1990s convinced investors he had devised a no-risk scheme to generate high returns by bidding on and subsequently selling pools of mortgages.
According to the appeals court, investors would advance funds to Schick, who would then claim to deposit them in escrow accounts at Fleet Bank, now part of BofA; Republic National Bank, now part of HSBC; and Sterling National Bank.
Instead, the court said Schick raided the accounts, stealing $82 million before his fraud was discovered.
According to the news agency, investors claimed the banks were liable because they failed to report overdrafts on Schick's accounts to a state bar committee overseeing client funds, even though he repeatedly bounced checks.
BofA spokeswoman Shirley Norton told Reuters the bank intends to vigorously defend itself in the case.
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2006/08/07/daily38.html
A federal appeals court has ruled Bank of America Corp. and two other banks must defend themselves against a lawsuit related to a scheme that defrauded Orthodox Jews and others out of millions of dollars.
According to Reuters, a three-judge panel of the U.S. Second Circuit Court of Appeals has reinstated state law claims brought by dozens of investors alleging the banks were negligent.
Along with Charlotte, N.C.-based BofA (NYSE: BAC), the banks involved in the suit are HSBC Holdings plc (NYSE: HBC) and Sterling Bancorp (NYSE: STL).
The case involves David Schick, a New York real estate lawyer who in the early 1990s convinced investors he had devised a no-risk scheme to generate high returns by bidding on and subsequently selling pools of mortgages.
According to the appeals court, investors would advance funds to Schick, who would then claim to deposit them in escrow accounts at Fleet Bank, now part of BofA; Republic National Bank, now part of HSBC; and Sterling National Bank.
Instead, the court said Schick raided the accounts, stealing $82 million before his fraud was discovered.
According to the news agency, investors claimed the banks were liable because they failed to report overdrafts on Schick's accounts to a state bar committee overseeing client funds, even though he repeatedly bounced checks.
BofA spokeswoman Shirley Norton told Reuters the bank intends to vigorously defend itself in the case.
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2006/08/07/daily38.html
Comments:
Post a Comment
