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The Great Bank Thievery 

The city and state say the Bank of America stole hundreds of millions -- even billions -- of dollars from the government. But didn't San Francisco finance officials know what was going on? And shouldn't B of A executives be under criminal investigation?

Wednesday, Dec 31 1997

Page 3 of 6

And the civil law violations alleged against BofA also have civil and criminal counterparts in federal banking and securities laws.

The task force the attorney general assigned to investigate Stull's claims has stated for the record that at least some of BofA's actions constitute the theft of public funds. As Patrick J. Mahoney, the deputy city attorney tasked with San Francisco's prosecution of BofA, recently wrote, "At the heart of this case is the charge that one of the nation's leading banks has wrongfully taken the public's money for a long time."

Yet the government attorneys in the Stull case resolutely duck the question of whether criminal charges might be filed against Bank of America or its officers and directors. The catchword seems to be "prosecutorial discretion"; that is, the authority a prosecutor has to decide whether civil, criminal, or no legal action best serves the ends of justice.

When asked about the possibility of a criminal probe, Deputy Attorney General Brian Taugher said that "certain of the bank's transactions" could open the bank to "criminal liability." Taugher said, however, it is harder to prove intent to defraud "beyond a reasonable doubt," as required in a criminal case, than to meet the lesser standard of guilt for a civil court judgment, which is based on "a preponderance of the evidence."

Although Stull filed his lawsuit some 30 months ago, City Attorney Louise Renne has yet to refer the case to District Attorney Terence Hallinan for review. (In a recent interview, Hallinan said he would "look into it" without giving any specific indication about how deep or long a look his office might give to the many and complicated offenses BofA is alleged to have committed.)

The Federal Reserve office in San Francisco declined to reveal whether an investigation has been or would be conducted. Neither the U.S. attorney nor the Securities and Exchange Commission responded to telephone inquiries.

There are many possible explanations for the apparent lack of criminal investigation of what would probably, if proven, constitute the largest white-collar theft in California history.

First, criminal inquiry could be proceeding, but in secret.
Then again, prosecutors could just be slow off the mark, and will eventually mount a serious criminal investigation.

Or the city attorney, district attorney, California attorney general, and U.S. attorney could all find, within their own judgment and discretion, that the violations alleged against BofA are best remedied in civil court, and that a criminal action would be expensive and difficult to win.

But there are other possible explanations -- less savory explanations -- for the lack of criminal prosecution of those responsible for the alleged theft of public funds described in Stull. It is a simple fact that the Bank of America has long been deeply entwined in the elite circles where California business and politics meet. (A minor but instructive example: Kathleen Brown, who served as state treasurer during the first half of the 1990s, is now a senior executive vice president with BofA. Brown is in charge of assisting "high-net-worth and emerging wealth clients in Southern California," according to a BofA press release.)

Criminal action against the bank or its leaders could be fraught with political risk. At the very least, prosecuting the Bank of America in criminal court would be politically embarrassing.

Such a prosecution would be embarrassing because, if BofA did everything it is alleged to have done, records now in the public domain show that the governments claiming to have been cheated by the bank knew -- or certainly should have known -- that they were being cheated.

In other words, if a prosecutor seeks indictment of BofA or its officials, that prosecutor might have a difficult time not looking very closely at officials in the government who appear to have signed off on, or ignored, the bank's alleged offenses.

Nestled inside 10 linear feet of San Francisco Superior Court filings, BofA corporate reports seem to tell a torrid tale of unbounded greed. They appear to show that BofA engaged in the systematic, calculated theft of public funds. Each charge in the constantly evolving lawsuit is backed by records selected from a Mount Everest of paper produced by the bank.

The vital question now before the court is: How much does the Bank of America owe to state and local governments? BofA admits it failed to escheat some unclaimed bond funds and inadvertently invoiced some fee overcharges to those governments. The bank says that these "discrepancies" were caused by "computer programming errors."

A few weeks after Stull's April 1995 filing, BofA began escheating small amounts of money to the state and returning small amounts of excess fee charges to local jurisdictions. To date, the bank has coughed up $48 million. But it has refused to make further payments and declines to reveal how it arrived at its $48 million figure.

BankAmerica says the plaintiffs are welcome to calculate how much they think they might be owed. To help them out, the bank has offered to produce documents that would, if lined up end to end, stretch for 100,000 miles. According to court records, Stull's original handful of evidence has already expanded to 600 million pages of documents.

"This is a classic defense strategy," Deputy City Attorney Mahoney says. "Drown the plaintiffs in meaningless documents and abdicate any responsibility for reviewing the records. ... The bank would like to prevent the public from knowing how badly it abused its trust. ... [BofA] knew it was stealing from the public."

The plaintiffs in the Stull lawsuit say that the bank cannot -- in reality -- calculate how much it owes them, because the bank systematically destroyed vital "paying agent" records. Every time the bank's auditors uncovered an "error," say the plaintiffs, the bank vaporized the trail of accounting records related to that "error."

In short, Stull claims, the bank hid its illegal transactions from municipal officials.

About The Author

Peter Byrne


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