Weather | Sports | Forums | Comics | Classifieds | Calendar | Movies
Years after settling fraud charges with the former NationsBank for $30-million, the plaintiffs have yet to be paid.
By JEFF HARRINGTON
© St. Petersburg Times, published June 15, 2000
Nick Velebit feels as if he was tricked twice.
Once, about seven years ago, when he lost more than $14,000 in savings by trusting a NationsBank broker who told him a securities investment was safe. And more recently when he believed the oldest promise of all: The check is in the mail.
Velebit, 63, is among thousands of former NationsBank customers still waiting for the payout from a $30-million class-action settlement reached with the bank in 1997, before it became Bank of America. The settlement, the largest of its kind, was to be divvied up among mainly elderly bank customers who were duped into buying mutual funds and stocks they thought were insured by the federal government.
But more than seven months after the last of the settlement funds was supposed to have been distributed, none of the money has been released.
"I really, really need the money," said Velebit, a retired plastic cutter who faces foreclosure on his St. Petersburg home.
Living on $544 a month in Social Security, Velebit was counting on the settlement check to arrive by November when his first $568 monthly payment was due. Before leaving for a foreclosure hearing Tuesday, Velebit predicted he is within 45 days of losing his house.
The financial straits of other claimants in their 80s and 90s is just as dire. Some are struggling with high medical bills; some are on fixed incomes.
Leilani DeMint, the lead plaintiff in the class-action case, died in March without receiving any of the thousands of dollars she was promised.
"I'm very, very frustrated at this point and very upset," said Tampa attorney Jonathan Alpert, who led the fight against NationsBank. "There are people that have seen their nest eggs essentially wiped out who have been waiting."
Alpert and other attorneys involved in the case now expect a final list of claimants to be presented by late July to U.S. District Judge Steven Merryday in Tampa, who presided over the class-action. But neither the attorneys nor the company overseeing the distribution will predict when the judge will rule and payouts will begin.
DeMint filed suit against NationsBank and its securities subsidiary in 1994 after she read a St. Petersburg Times story about a NationsBank broker who told the newspaper the company was using misleading practices. Broker David Cray lost his job after the story was published and later sued NationsBank.
DeMint's and Cray's cases captured headlines nationally and ultimately resulted in similar lawsuits against other banks and investigations by regulators.
In 1998, NationsBank agreed to pay $6.75-million to settle charges by the SEC and other regulators that it had misled investors about investment risks. NationsBank neither admitted nor denied wrongdoing.
Under the class-action settlement, customers who bought mutual funds directly from NationsBank between August 1991 and June 1996 were supposed to receive cash reimbursements equal to at least 50 percent of what they lost. For customers who bought stocks, the amount could be slightly less.
In 1998, NationsBank put aside the money in a fund they cannot touch. The Garden City Group, a New York administrative group, was charged with disbursing the settlement.
Garden City continues to use an old taped recording at its headquarters, telling plaintiffs that they have until May 8, 1998, to submit proof of claims and to expect distribution 12 to 18 months after that date. That would have set the distribution at last November, at the latest.
"It is not possible to determine any (payout) amount at this time," the recording says.
Neil Zola, Garden City Group's senior vice president and general counsel, said the proposed list of payout recipients is now being circulated, but he would not speculate about any delays before he joined the group six weeks ago.
In general, Zola said it can take longer than expected to include everyone who thinks they may have a claim. Those whose claims are rejected have a right to appeal. In a large and complicated case like this, he said, such due process takes time.
"The idea is to make sure all the claims have been processed and that any contested claims have been resolved," he said. "You don't want to be in position of going halfway through a distribution and having to refigure (settlement amounts)."
Out of 529,000 letters sent to prospective class members, 18,578 proof of claims were filed. Garden City accepted 7,198 of those. Most of the rejected claims either had missing information or duplicated previously filed claims. More than 6,400 claims were rejected on the basis there was no loss.
As for now, Zola said, the ball is, and has been, in the hands of the attorneys.
Steve Rodd, a New York lawyer and co-counsel with Alpert, in late March received Garden City's proposed payouts. Alpert, who was unaware Rodd had been reviewing the paperwork, received the list Wednesday after the Times called Garden City about the issue.
Alpert and Rodd are checking payout figures and trying to resolve disputes over some clients they think were wrongly rejected.
A final list is expected to be ready for Judge Merryday by late July. If the judge has any concerns, however, he could hold off on approval.
For eager claimants like Nick Velebit, that means it's still uncertain when checks will be in the mail.
"The timing (for the payout) is as soon as it's going to get done on God's green Earth," Alpert said, "because enough is enough."