Bank of America 2004 Annual Report Download - page 129

or denial of wrongdoing, includes disgorgement and civil penalties
for Fleet Specialist totaling approximately $59.1 million, a censure,
cease and desist order, and certain undertakings, including the
retention of an independent consultant to review compliance sys-
tems, policies and procedures. Separately, putative class action
complaints seeking unspecified damages have been filed in the U.S.
District Court for the Southern District of New York against Fleet
Specialist, FleetBoston, the Corporation, and other specialist firms
(and their parent companies) on behalf of investors who traded
stock on the NYSE between 1998 and 2003, and were allegedly dis-
advantaged by the improper practices of the specialist firms. These
federal court actions have been consolidated. A multi-defendant
motion to dismiss has been filed. The settlement with the SEC and
NYSE does not resolve the putative class actions, although a portion
of the payment is expected to be allocated to restitution for allegedly
disadvantaged customers.
Foreign Currency
Bank of America, N.A. (USA) and the Corporation, together with Visa
and MasterCard associations and several other banks, are defendants
in a consolidated class action lawsuit pending in U.S. District Court for
the Southern District of New York entitled In re Currency Conversion
Fee Antitrust Litigation. The plaintiff cardholders allege that Visa and
MasterCard, together with their member banks, conspired to set the
price of foreign currency conversion services on credit card transac-
tions and that each bank failed to disclose the applicable price in com-
pliance with the Truth in Lending Act resulting in damages to the class
of an unspecified amount. By decision dated July 3, 2003, the court
granted the motion of the Corporation and Bank of America, N.A. (USA)
to compel arbitration of the claims asserted by Bank of America, N.A.
(USA) cardholders. However, the court denied a motion brought by all
defendants to dismiss the antitrust claims, so Bank of America, N.A.
(USA) and the Corporation remain as defendants with respect to
antitrust claims alleged on behalf of certain co-defendants’ card-
holders. By order dated October 15, 2004, the court granted plaintiffs’
motion to certify a class of cardholders of the defendant banks who
used MasterCard or Visa-branded credit cards for one or more trans-
actions denominated in foreign currency.
In re Initial Public Offering Securities
Beginning in 2001, Robertson Stephens, Inc. (an investment banking
subsidiary of FleetBoston that ceased operations during 2002), BAS,
other underwriters, and various issuers and others, were named as
defendants in purported class action lawsuits alleging violations of
federal securities laws in connection with the underwriting of initial
public offerings (IPOs) and seeking unspecified damages. Robertson
Stephens, Inc. and BAS were named in certain of the 309 purported
class actions that have been consolidated in the U.S. District Court for
the Southern District of New York as In re Initial Public Offering
Securities Litig. The plaintiffs contend that the defendants failed to
make certain required disclosures, manipulated prices of IPO securi-
ties through, among other things, alleged agreements with institutional
investors receiving allocations to purchase additional shares in the
aftermarket, and false and misleading analyst reports. On October 13,
2004, the court granted in part and denied in part plaintiffs’ motions
to certify as class actions six of 309 cases filed. The underwriter
defendants are currently seeking a discretionary appeal of that
decision in the U.S. Court of Appeals for the Second Circuit. Discovery
is proceeding in the underlying actions.
In addition, the plaintiffs have reached a settlement with 298 of
the issuer defendants in which the issuer defendants guaranteed
that the plaintiffs will receive at least $1 billion in the settled actions
and assigned to the plaintiffs the issuers’ interest in all claims
against the underwriters for “excess compensation.” On February 15,
2005, the court conditionally approved the settlement, with a fair-
ness hearing still to be scheduled. The plaintiffs have not reached a
settlement with any of the underwriter defendants, including
Robertson Stephens, Inc. and BAS.
Robertson Stephens, Inc. and other underwriters also have
been named as defendants in class action lawsuits filed in the U.S.
District Court for the Southern District of New York under the
antitrust laws alleging that the underwriters conspired to manipulate
the aftermarkets for IPO securities and to extract anticompetitive
fees in connection with IPOs. Those antitrust lawsuits have been
dismissed. Plaintiffs have appealed that decision to the Court of
Appeals for the Second Circuit.
Miller
On August 13, 1998, Bank of America, N.A.’s predecessor was
named as a defendant in a class action filed in Superior Court of
California, County of San Francisco entitled Paul J. Miller v. Bank of
America, N.A. challenging its practice of debiting accounts that
received, by direct deposit, governmental benefits to repay fees
incurred in those accounts. The action alleges fraud, negligent mis-
representation and violations of certain California laws. On October
16, 2001, a class was certified consisting of more than one million
California residents who have, had or will have, at any time after
August 13, 1994, a deposit account with Bank of America, N.A. into
which payments of public benefits are or have been directly deposited
by the government. The case proceeded to trial on January 20, 2004.
On February 15, 2004, the jury found that Bank of America, N.A.
violated certain California laws and imposed damages of approxi-
mately $75 million and awarded the class representative $275,000
in emotional distress damages. The jury also assessed a $1,000
penalty as to those members of the class suffering substantial eco-
nomic or emotional harm as a result of the practice but did not deter-
mine which or how many class members are entitled to the penalty.
On December 30, 2004, the trial court issued a final ruling on
claims tried to the court at the conclusion of the February 2004 jury
trial. The ruling awards the plaintiff class restitution in the amount of
$284 million, plus attorneys’ fees. The ruling also concludes that any
class members whose account was wrongfully debited and suffered
substantial emotional or economic harm is entitled to an additional
$1,000 penalty, but did not determine which or how many class
members are entitled to the penalty, and includes injunctive relief,
which is temporarily stayed.
Once the jury verdict and final decision are entered as a
judgment, Bank of America, N.A. will appeal to the California Court
of Appeal, First Appellate District and move to stay the injunction
pending appeal.
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