UNITED STATES DISTRICT COURT MAY 13 2002securities.stanford.edu/filings-documents/1011/BAC... ·...
Transcript of UNITED STATES DISTRICT COURT MAY 13 2002securities.stanford.edu/filings-documents/1011/BAC... ·...
RECEIVEDUNITED STATES DISTRICT COURTEASTERN DISTRICT OF MISSOURI
Eastern Divisio n
IN RE BANK OF AMERICA CORP. ) MDL No. 1264SECURITIES LITIGATION ) Judge Nangle
ALL CASE S
OBJECTIONS TO PROPOSEDCLASS ACTION SETTLEMENT
MAY 13 2002U . S . DIsIuICf COUR T
F, ASTERN, DISTRICT Qf MOST; LOUI S
COME NOW David P . Oetting, Michael Koehler and Kevin Kloster, th e
Plaintiffs' Class Representatives (the "Class Representatives") of the NationsBan k
Classes and file their Objections to the proposed Class Action Settlement Agreement . In
support thereof, and as more fully set forth in the accompanying Memorandum, the Clas s
Representatives state :
1 . The proposed settlement in this cause fails to meet the legal prerequisites of
fairness, adequacy or reasonableness to the NationsBank Classes as mandated by law .
The specific circumstances under which the proposed settlement was reached are set forth
in the Memorandum, which also details the specific failures, insufficiencies, an d
inadequacies of the proposed settlement to the NationsBank Classes .
2 . The amount of the proposed settlement to the NationsBank Classes is inadequate ,
It amounts to only a few cents per share given the vast number of shares outstanding .
3 . The amount of the proposed settlement is hundreds of millions less than th e
amounts counsel for the NationsBank Classes agreed was a "reasonable" and "adequate "
settlement amount less than 24 hours before the proposed settlement was reached .
MAY 14 2002 1e:30 3147258788 PAGE.41
4. The proposed settlement was reached without the knowledge of the Class
Representatives and some of the attorneys, who left the mediation because they
understood and agreed that it was over without any resolution, or even serious discussion .
5. The amount of the proposed settlement to the NationsBank Classes is inadequat e
relative to the amount proposed for the BankAmerica Classes .
6 . The amount of the proposed settlement to the NationsBank Classes is inadequate
given the factors important to the Court in determining the reasonableness of th e
settlement . Those include : a) the strength of the case as evidenced by prior Court rulings
and SEC decree ; b) the potential recovery of $7 .5 billion ; c) a strong and solven t
defendant .; d) insurance coverage ; and e ) Plaintiff's attorney 's opinions about the
substantially higher settlement value of the case just prior to the . proposed settlement .
WHEREFORE, the Class Representatives request the Cou rt :
A. Upon proper hearing , sustain the instant Objections ;
D . Upon proper hearing, enter such Orders as are necessary and just to adjudicate
the instant Objections and alleviate the inherent unfairness, inadequacies an d
unreasonableness of the proposed settlement agreement ;
C. Enter its Order directing the parties to prepare for trial and setting a new tria l
date .
D . Enter such Orders as the Court deems just . under the circumstances .
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Curtis, Oetting, Heinz, Garrett, & Soule, P .C .
ByMil h 1l A . Margo '#374713t S . Bemiston , Suite 200Clayton, Missouri 63105(314) 725-8788(314) 725-8789 (fax )
CERTIFICATE OF SERVIC E
A true and correct copy of the foregoing was mailed via U.S . Mail this J,~ dayof 2002 to:
Martin M . GreenJoe D. JacobsonJonathan F. AndresGreen Schaaf & Jacobson, P .C .7733 Forsyth Blvd ., Suite 700St. Louis, Missouri 63105
Arthur N. AbbeyStephen T . RoddJames S . NotisAbbey Gardy, LLP212 East 39th StreetNew York, NY 1001 6
Warren StemWachtell Lipton Rosen & Katz51 West 52nd Stree tNew York, NY 10019-6150
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MAY 14 2002 10:31 3147258788 PAGE.43
RECEIVEDUNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI MAY 13 ?O OZEastern Division U. 5 ()lalrclt-i (:UUItT
WTERR .PISIffi r ( Of. MO
IN RE BANK OF AMERICA CORP . ) MDL No . 1264SECURITIES LITIGATION ) Judge Nangle
ALL CASES
MOTION FOR PRELIMINARY HEARING
COME NOW David P . Oetting, Michael Koehler and Kevi n
Kloster, (the "Class Representatives") by counsel, pursuant t o
Rule 23( e) and request that the Court enter its Order setting a
preliminary hearing previously set by the Court . In suppor t
thereof, the Class Representatives state :
1 . The Court previously set May 30, 2002 as the hearing
date for objections to the proposed settlement ;
2 . The Class Representatives were invited to participate ,
and did participate, in the mediation held in this case in Ne w
York on January 28-31 . Each of the Class Representatives objec t
to the amount of the proposed settlement as inadequate and th e
circumstances that led to the alleged settlement .
3 . Mr . Koehler, who participated in the mediation and who
desires to be heard regarding his objections to the settlement ,
will be out of the country, in Russia, on May 30, 2002 . Mr .
Koehler, who lives in Texas, is available for a hearing on Ma y
16, 17, 20 and 21, 2002 .
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MAY 14 2002 10 :30 3147258788 PAGE .37
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WHEREFORE , the Class Plaintiffs request the Court Order
that a preliminary hearing be held at which time the Clas s
Representatives can present this Court with the reasons the
proposed settlement of this case should not be approved by th e
Court .
CURTIS, OETTING, HEINZ,
GARRETT &,WLE, P ,-C')
Mitchell A, Margo, ,##3742
130 S . Bemiston, #20 0St . Louis, Missouri 63105(314) 725-878 8(314) 725-8789 fax
CERTIFICATE OF SERVICE
A true and correct cop of the foregoing was mailed via U .S .Mail this 13 day of y , 2002 to :
Martin M . GreenJoe D . JacobsonJonathan F . AndresGreen Schaaf & Jacobson, P .C .7733 Forsyth Blvd ., Suite 700
St . Louis, Missouri 6310 5
Arthur N . AbbeyStephen T . RoddJames S . NotisAbbey Gardy, LLP
212 East 39th StreetNew York, NY 1001 6
Warren SternWachtell Lipton Rosen & Katz
51 West 52nd Stree tNew York, NY 10019-615 0
MAY 14 2002 10 :30
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3147258788 PAGE .38
r s
UNITED STATES DISTRICT COURTEASTERN DISTRICT OF MISSOURI
Easte rn Divisio n
IN RE BANK OF AMERICA CORP. )SECURITIES LITIGATION )
MEMORANDUM
RECEIVED
MAY l 3 2002
MDL No . 1264u . S, DISTRICT CQU11TJudge Nangle trs'rERVISthCT Pt MqALL CASES ~~
COME NOW David P . Oetting, Michael Koehler and Kevin Kloster, Clas s
Representatives of the NationsBank Plaintiffs Classes (the "Class Representatives") and file this
Memorandum in support of their Objection to the Proposed Settlement as set forth in the
Stipulation dated March 8, 2002, as subsequently revised ("Stipulation") and the Agreement of
Compromise and Settlement .
Procedural History and Fact s
The procedural history of this case is fairly set .forth in Plaintiffs' Stipulation , paragraphs
A through S, with the exception of paragraph Q . The focus of the dispute is the mediation that
occu rred in New York City from January 28-31, 2002 .
At hearing the evidence will show the following : The Class Representatives were asked
to participate in the mediation arranged by counsel for NationsBank and counsel for Defendants .
The mediation was held at the New York City law offices of Wachtel, Lipton, with Nicholas H .
Politan serving as the mediator, ("the Mediator") . The NationsHank attorneys participating wer e
Martin Green, Joe Jacobsen, Jonathan Andres, Martin Chitwood, Edward Nicholson and Jule s
Brody (together with Class Representatives, "NationsBank Group") .
Prior to the mediation, each of the Class Representatives was asked to review two larg e
volumes of pleadings recently filed in the case together with certain depositions taken in th e
case .
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The NationsBank Group met on Tuesday morning January 28, 2002 before arriving a t
Wachtel Lipton . At the mediation, the NationsBank Group was sequestered in a separate
conference room. Some months prior to the mediation a demand had been made by the lawyers
for the NationsBank Classes in the sum of Two Billion Two Hundred Fifty Million Dollars
($2,250,000,000). While the Class Representatives were unaware of the demand at the time it
was made, there had been no official counteroffer prior to the mediation . During Tuesday session
of the mediation, Plaintiffs received no offer from Defendants . Throughout the course of the day,
it became apparent to the NationsBank Group that the only negotiations taking place were
between the Defendants and their insurers .
Early Wednesday, it was reported by the Mediator that it had been determined that th e
mediation could not proceed without the presence of Mr. Abbey , the BankAmerica Class
counsel . Mr. Abbey was summoned to the mediation and appeared later in the morning . Still, no
offer was made by the Defendants .
The Mediator presented himself to the NationsBank Group and probed about what i t
would take to settle the case . Initially the demand of Two Billion Two Hundred Twenty Five
Million Dollars ($2,250,000,000) was reiterated and the Mediator scoffed at the figure .
Subsequently, he opined that One Hundred Million Dollars ($100,000,000) was a lot of money .
The NationsBank Group clearly and unambiguously indicated that the case would be tried if that
were the offer. Mr. Oetting then queried the NationsBank counsel about their views regarding
settlement of the case . The various defenses of Defendants and the possible pitfalls of Plaintiffs'
case were raised one by one . As Plaintiffs' counsel were asked about the odds of prevailing on
each one, the Mediator interrupted and pronounced that it di .d not matter what the lawyers think ;
that the trial judge or appellate court could rule against us on any point and/or the jury coul d
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. . . . .. . . . . ... ... . w. . . .v . w . ., , .- a. ■ na,. . uiz VVG 1VVV' It lY
render an adverse verdict . Mr. Oetting responded that if there were no opinions about th e
viability of Plaintiffs' case and Defendants' defenses then he had no opinion about settlement an d
gave no authority to settle . The Mediator glared at Mr . Oetting across the table, pointed hi s
finger at him and said, " I'm going to get you ." Still no settlement offer was forthcoming from the
Defendants .
Later, a similar discussion ensued leading to an exchange that proceeded in a similar
manner . The Class Representatives tried to find out what each of the six Plaintiffs ' attorneys
thought was a reasonable settlement . This discussion took place beoause the Mediator had
announced that he would not convey any offer unless it . appeared to him that the offer, if any, and
the demand were close enough to settle .
The Mediator again interrupted the discourse between the Class Representatives and thei r
counsel and pronounced that it did not matter what the lawyers thought and that we might as well .
ask defense counsel what they thought . Mr. Oetting replied that he wasn't privy to the defense
counsel, he wouldn't trust what they said anyway, and that Plaintiffs' counsel had been working
on this case for more than three years, were experienced in securities litigation and had as good
an opinion about the settlenieut of the case as anyone . The Mediator again interrupted and
protested that the lawyers' opinions did not matter. Mr. Oelting replied that he had been
practicing law for 25 yeiirs and clients asked him to help evaluate their case or situation all the
time - - that it was part of the job . Mr. Oetting pointed out that this time he and the other Class
Representatives were the clients and the clients had a right to know their lawyers'
recommendations regarding settlement. Finally, the Mediator allowed the conversation to
proceed .
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Upon inquiry of the minimum amount the Plaintiffs should take in settlement at the
mediation, the lawyers gave the following responses :
Joe Jacobson : $1 per share or about $980 million .Martin Chitwood : $600 million, perhaps $500 million, about 50 cents per shareJonathan Andres : 75 cents per share or about $750 millio nMartin Green : 75 cents per share or about $750 millio nJules Brody : $2 per share or about $2 billion, maybe $1 .5 billionEd Nicholson : $700 million
See Exhibit A .
No offer was forthcoming . While Mr. Oetting was absent , the Mediator excoriated th e
NationsBank Group in front of Mr . Koehler and Mr. Kloster, questioning their competence in the
matter and challenging even their presence at the mediation . Further, the Mediator told Mr .
Koehler that there was no difference between One Hundred Million Dollars ($100,000,000) and
Seven Hundred Million Dollars ($700,000,000) in response to the discussion ensuing among the
NationsBank Group . Discussion amongst The NationsBank Group regarding the relative merit s
of the claims of the BankAmerica Classes was to the effect that the BankAmerica Classes shoul d
get less than 20% of any global settlement with the consensus being about 10% .
At this point Mr. Nicholson left the meeting for another matter . By mid-afternoon, th e
remaining NationsBank Group concluded: (a) that the mediation was going nowhere ; (b) that
they had been misled in two respects ; first that the Defendants had not made arrangements with
their insurers, rendering our involvement a waste of time, second, that the mediation could not
proceed without Mr . Abbey; and (c) that the Mediator was antagonistic to the Clas s
Representatives and refused to have them present any longer . Based on nearly two full days of
mediation the NationsBank Group decided to terminate their participation in the mediation . No
offer had been forthcoming .
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Mr. Chitwood left the mediation. Mr. Oetting left, and Mr. Kloster left (having to change
his plane reservation from Thursday to Wednesday) . Mr. Koehler also left the mediation, but not
the City as he was scheduled to go to New Jersey on Friday . The remainder of the NationsBan k
Group stayed to bid adieu to various parties . Subsequently, Bruce Oetter, a Defendant's counse l
left and took the same plane to St . Louis as Mr . Octting and Mr, Kloster, He generally confirme d
that the Defendants were having difficulty with the insurers .
Two days later, on Friday, February 1, 2002, Mr . Oetting wrote to Mr . Andres forwarding
expenses for the trip and reflecting on the failed mediation . (Exhibit B ) . On Tuesday, February
5, 2002, Mr. Oetting received a memo from Mr . Green dated February 4, 2002, enclosing a
Memorandum of Understanding dated January 31 , 2002 (MOU) agreeing to a proposed
settlement of Three Hundred and Thirty Three Million Dollars ($333,000,000) to th e
NationsBank Classes and One Hundred Fifty Seven Million ($157,000,000) to the BankAmeric a
Classes . (Exhibit C)
.. In subsequent phone conversations , Messrs . Oet.ting, Kloster and Koehler confirmed tha t
none had been told about the MOU until several days after it was prepared and signed .
On February 9, 2002, an article appeared in the St . Louis Post-Dispatch in which a n
officer of BankAmerica was quoted as saying that the Bank had settled the case for an amoun t
which had been reserved for during the fourth quarter of 2001 (Exhibit U) . This was confirme d
in the BAC annual report for 2001 (Exhibit E) .
On Monday, February 11, 2002, Mr . Oetting wrote to Mr . Green in an attempt to
determine what had occurred . (Exhibit F)
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Since the proposed settlement was penned, there have been a variety of efforts t o
persuade the Court that the Class Representatives or others actually approved the propose d
settlement or subsequently supported it . (Exhibits G, H, I and J) . 1
During the course of the mediation on Tuesday and Wednesday numerous comment s
were made by nearly every attorney that if any offer was made by the Defendants below th e
approximately One Billion Dollar ($ 1,000,000,000) level that the Nationsl3ank Group wa s
prepared to proceed to trial on April 8, 2002 .
Throughout Tuesday and Wednesday, on several occasions the Class Representative s
reminded the NationsBank Group and the Mediator that the settlement, if one were to occur,
should be paid in SAC shares rather than cash . This position had been enunciated since the early
stages of the case . Each Class Representative was firm about this for the reasons that the original
transaction was done in shares, the tax consequences were probably more favorable and, most of
all, the drain of cash from the Bank would harm the operations of the Bank . The Mediator
dismissed this out of hand and simply said this would not happen . It is unknown whether the
Mediator ever passed along this demand to the Defendants but no offer was ever made which
included shares .
I As the Court is aware, the 1789A opted out of the NationsBank classes in order to pursue its claimsseparately, but elected to remain in the BankAmerica class despite the fact that they had nearly an equal number ofshares in each pro-merger bank . Apparently, FSBA has reached a settlement with Defendants for their separateNationsBank claims for an undisclosed, confidential amount . The amount of that settlement has direct bearing on thefairness of this proposed settlement .
G
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Analysis
1 . The Factors for the Court in Determining that the Total Amount of th e
proposed Settlement is Inadequate :
Class Action litigation is different than other litigation in that there may not be a meeting
of the minds between the parties for a settlement to occur . In theory, at least, anyone can propose
a settlement to the Court . It is then up to the Court to examine the proposal and field whatever
objections may arise . Ultimately, it is up to the Court to approve or disapprove the proposed
settlement . The concurrence of a party is not required despite the fact that the party can be
bound. Rule 23(e) . It is the Class Representatives' belief that based upon the dealings and
understanding among the NationsBank Group, the settlement was strong-armed, is not fair to the
NationsBank Classes, was clearly not agreed to by the Class Representatives and was contrary to
the agreement reached among the NationsBank Group the afternoon of January 30, 2002 .
In deciding whether to approve a proposed settlement , the Court is not called upon t o
conduct a mini -trial on the merits of the case . Reed v General Motors Corp ., 703 F 2d 170, 172 ,
(5th Cir. 1983) ; Ohio Public Interest Campaign v . Fisher Foods , Inc ., 546 F Supp .1, 5, (DC Ohio
1982) . Here, in fact, a mini-trial to a great extent already has occurred in the form of th e
Securities and Exchange Commission determination and rulings of the Court . While the SFC
determination may not be directly admitted in evidence in a jury trial, it cannot be ignored in the
context of'settlement . It serves as a reasonable milepost on the issue of liability for the
NationsBank Classes . 2
2 It does not appear that the same can be said with respect to the claims of the BankAmerica classes .
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Additionally, the proposed settlement was reached close in time to the scheduled tria l
date of April 8, 2002 . Many rulings of the Court had been made previously and the Cour t
indicated on March 15, 2002 that, at the time of the mediation , it was about to issue certain other
rulings which would have affected the mediation . All of these factors would have affected the
outcome of the mediation and the Court's rulings thus far would be characterized as favorable t o
the NationsBank Classes .
The notion that the settlement was "strong-armed" is supported by the fact that the Ban k
had decided what it was going to pay at least a month before the mediation---and that's what
they paid--Three Hundred Thirty-Four Million Dollars ($334,000,000) . This amount, it was
revealed , was the amount the Bank had charged to earnings and taken as a rese rve in the fourth
quarter of 2001 . There was no negotiation or change of position on the Bank's part . The only
apparent negotiation was between the Bank and the insurance company . After that was
established , the only discussion left was to divvy the already inadequate amount between Mr .
Abbey's clients and Mr. Green's clients .
2. The Division of the Settlement Funds is Unfair to the NationsBank Class
To give one-third (l/3)3 of the settlement proceeds to a group that was so insignificant t o
the litigation that its lawyer wasn't even invited to the mediation is unfair . That proposed
division results in a settlement that everyone agreed the clay before would cause the NationsBank
Classes to terminate the mediation and proceed to trial .
3 On a per share basis, approximately 40% of the settlement amount is allocated to the BankAmerica Classes .
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While Mr. Green lauds the Mediator as not being evaluative in his mediation efforts, thi s
is not an accurate depiction . The mediator was evaluative by obfuscating the judgments made by
Plaintiff's counsel, arguing that they really didn't know their own case, and trying to convince all
in attendance that the lawyers' opinions (lid not matter . Nullifying the hest judgment of experts
in the field who have three years of experience in the specific case is, indeed, being . evaluative,
and judgmental . The Mediator stepped into the case at the last minute, with little background in
the specific case or any particular expertise in the field, generally .
3 . It is the Court' s Province to Analyze a Proposed Settlement :
A class action cannot be dismissed or compromised without the approval of the Court. In
addition, notice of any proposed dismissal or compromise must be given to all the class members
in whatever manner the Court might direct, pursuant to Rule 23(e) . The purpose of Rule 23(e) is
to protect members of the class from unjust or unfair settlements . When a proposed settlement is
not negotiated by a Court-designated class representative the Court must be "doubly careful" i n
evaluating the fairness of the settlement to Plaintiffs class . Ace Heating & Plumbing v . Crane
Co., 453 F 2d 30, 33 (3d Cir. 1971) .
The question of whether an evidentiary hearing is necessary before the approval of a
proposed settlement, and the extent of the testimony , depends on the circumstances of each case .
Some courts have utilized two settlement hearings : one to detenninc whether the proposal was
within a reasonable range so that notices should be sent , and another to determine the fairness of
the offer .itself. Horton v Merrill Lynch, Pierce, Fenner & Smith, Inc . 855 F Supp . 825, 828
(DCNC 1994) . The trial judge must suppo rt his conclusions approving or disapproving a
proposed settlement by a memorandum opinion in order to aid appellate review . Malchman _v
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Davis . 706 F 2d 426, 434 (2d Cir . 1983); In re Corrugated Container Antitrust Liti ation 643 F
2d 195 , 212 (5''' Cir. 1981) .
The trial court should, in reaching its determination , extend to any objector leave to be
heard , to examine the witnesses , and to submit evidence on the fairness of the settlement . But the
cou rt also must limit its proceedings to whatever is necessary to aid it in reaching an informed,
just and reasoned decision . Flinn v FMC Corporation , 528 F2d 1169, 1175 (4th Cir . 1975, cert.
den . 96 S . Ct . 1462 (1976) .
A court faced with a proposed class action settlement must compare its terms with th e
likely rewards the class would have received following a successful trial of the case ; the court,
however, must not try the case in settlement hearings . Reed v General Motors C orp 703 F 2d at
172 . Courts are expected to explore the facts sufficiently to make intelligent determinations
concerning the adequacy and fairness of a proposed settlement . There must be some evidentiary
foundation in support of the settlement and the proponents of a settlement hear the burden of
proving that the proposal should be approved . Ohio Y Fisher. 546 F . Stipp . at 5 .
The Court only has power to approve the proposed settlement in whole, to reject th e
proposed settlement without recommendation or modifications, or reject the proposed settlement
but with suggestions and recommended changes . Bowling v Pfizer , 143 FRl) 141, 151 (DC
Ohio 1992) . When determining whether a proposed class action settlement is fair and
reasonable , important indicia of the propriety of the settlement include : the absence of any
indication of collusion, protracted negotiation , the ability and experience of Plaintiffs' counsel,
extensive discove ry preceding settlement, and the fact that counsel for all parties , including the
objectors, had access to the materials produced in discove ry. Weinberger v Kendrick , 698 F2d
61, 73-74 (2d Cir . 1982) .
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Here, there is no dispute about the where the Class Representatives' objections lay: each
of them relied on the opinions of their experienced counsel . On Wednesday, the minimum
settlement was one thing ; on Thursday, without any changes to the facts of the case or the strong-
points of Plaintiffs' claims and the alleged weaknesses, the. answer was suddenly between 20
percent and 50 percent of that amount, without notice, discussion or subsequent explanation .
4. Other Settlements :
In the world of class action securities cases in which settlements have been approved, th e
cases can be distinguished by whether there is a high percentage settlement or a low percentage
settlement . In cases where there is a low percentage settlement, a number of factors typically are
present : a) insolvency of Defendant, b) weakness of Plaintiffs' case either based on theory or
proof or availability of defenses and/or c) the absence of objections to the settlement . Examples
of these include : In re Mego Financial Corp ., Securities Litigation, 213 F3d 454, 458-459 (9th
Cir. 2000) (16 .7%); Lyons v . Scitex Corp . , 987 F. Stipp . 271, 277 (DCNY 1997) (6-11%) ;
Behrens v . Wometco Fntemrises, Inc ., 118 FRD 534, 538-539 (DCFL 1988) (5 .7%), Feinberg v .
Aiberilia Corp , 966 F. Supp. 442, 444 (DCLA 1997) .
. On the other hand, when such factors are not present, the settlements are not so low .
Examples of these include : In .re McDonnell Douglas Equipment Leasing Securities Litigation,
838 F . Supp. 729, 737-738 (DCNY 1993) (50%) ; In re Bausch & Lornb jnc. Securities
Litigation , 183 PRD 78, 81-82 (DCNY 1998) (42%) ; In re Cendant Corp, Securities Litigation,
109 F. Supp. 3d 235, 255-262 (DCNJ 2000) (37%); and Slade v . Shearson IIammill Co ., Inc . 79
FRD 309, 313 (DCNY 1978) (75% and 30%), Lowenschuss v . C.G. Bluhdom, 82 FR .D 712,
715-716 (DCNY 1979) (51-63%) .
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a
Undoubtedly, each case has its own unique facts and circumstances making precise
comparisons on a case-to-case basis difficult . The focus ultimately is upon the specific case
itself,
. Many factors point in favor of a significantly higher settlement in this case, all of which
are notably absent from the notice of settlement recently distributed to members of the classes :
(a) The Court denied Defendants' Motion for Summary Judgment as to the Nationsl3ank classes ;
(b) The Defendants' entered into a July 30, 2001 Consent Decree with the Securities an d
Exchange Commission following its investigation of the alleged violations in which the essential
elements of NationsBank claims were found to be valid ; (c) The potential recovery according to
Plaintiffs' expert is Seven Billion Five Hundred Million Dollars ($7,500,000,000); (d) A strong
and solvent Defendant4 ; and, (e ) Plaintiffs' attorneys ' repeated comments about the strength of
the case . s
The demand outstanding prior to the mediation was Two Billion Twenty-Five Million
Dollars ($2,250,000,000) . On the second clay of mediation, the Plaintiffs' counsel each said the
case should settle only for amounts ranging from Six hundred Million Dollars ($600,000,000) to
One Billion Five Hundred Million Dollars ($1,500,000,000) . The attorney who said Si x
Hundred Million Dollars ($600,000,000) left the mediation, believing it was terminated . The
lawyer who signed the MOU signed for one-third of what he said the minimum settlement
should be 24 hours earlier . The settlement amount, 4 .4% of the maximum recovery, is precisely
what the Defendant had reserved and decided to pay one month earlier . A party that wasn't even
4 One need only look at the severance package given to CFO David Coulter as part of the merge . Mr. Coulter alonereceived tL reported approximately One Hundred Million Dollars ($100,000,000) or one-third (1/3) of what theroughly 160,000 NationsBank shareholders together will share under the proposed settlement . See Exhibit Kattached hereto and incorporated by reference .5 The attorneys' comments are borne out by the recent settlement of a case with similar theories to his one . In a caseagainst Bank of America the Plaintiffs' settlement was 100 cents on the dollars as opposed to 5 cents on the dollarhere . See Exhibit L attached hereto and incorporated by reference .
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V 4
invited to the mediation walked away with a sum equal to 50% of NationsBank Classes '
settlement . The settlement amounts to much less than a quarterly dividend for each shareholder .
For the foregoing reasons, the Class Representatives of the NationsBank Classes reques t
that the Court not approve the proposed settlement and allow the case to proceed to trial .
Curtis, Oetting, Heinz, Garrett, & Soule, P .C .
Byitchell A . Margo #3742
130 S . Bemiston , Suite 200Clayton, Missouri 63105(314) 725-8788(314) 725-8789 (fax)
CERTIFICATE OF SERVIC E
A true and correct copy of the foregoing was mailed via U.S . Mail (his Is day ofil1/G>7~ , 2002 to :
Martin M. GreenJoe D. JacobsonJonathan F . Andre sGreen Schaaf & Jacobson, P .C .7733 Forsyth Blvd ., Suite 700St. Louis, Missouri 63105
Arthur N . AbbeyStephen T . RoddJames S. NotisAbbey Gardy, LLP212 East 39th S treetNew York, NY 1001 6
Warren StemWachtel( Lipton Rosen & Katz51 West 52nd StreetNew York, NY 10019-6150
1 3
MAY 14 2002 13:56 3147258786 PAGE.14
EXHIBIT
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MAY 14 2002 7A : ;)3
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CURTIS, OETTING, HEINZ, OARRETT & SOULS, P .ATTORNEYS AT LAW
130 SOUTH 9EMISTON , SUITE 200
ST. LOUIS, MISSOURI 63105
DAVID P . GETTING (3141 723 .878 8
rACSIMILE 1314) 725 .676 8
www,cohga .corn
.February 1, 2002
i14 662 1606 :#14/43
EHAuL Aoon n
doe lingo cchp.com
Jonathan Andre sGreen Schaaf & Jacobson DON PC7733 Forsyth, Suite 700St. Louis, Missouri 63105
Dear Jonathan ,
The following are my expenses for the mediation trip for reimbursement :
1 . Air $449 .502. Hotel $710.603. Meals $180.004. Cab $ 70.005. Misc. 50.00
$1,460.10
T think the effort was useful, even though it did not result in a settlement.
Very truly yours ,
David P . OettingDPO/mj lEnclosures
MAY 14 2002 10:23 3147258788 PAgP 1i
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MARTIN M . GREENJOE D. JACODSON
DAVID T. BUTSCHJONATHAN P. ANDRESALLEN P. PRESSFERNANDO BERMUDEZMARSHALL R. HOEKEL
GREEN, SCHAAF 8 JACOBSON, P . C.
ATTORNEYS AT LAW
511ITF 70 0, PIERRE LACLEDE CENTER
7733 FORSYTH BOULEVAR D
5T LOUI5 (CLAYTON), MISSOURI 63105
(314) 862 .680 0TELECOPIER (314) 862-160 6
February 4, 2002
Hand DeliveredDavid P. Oetting, Esq .Suite 200130 South BemistonClayton, MO 63105
Re : BankAmerica Corp. Securities Litigatio n
Dear David :
GEORGE E. SCHAAF(IB30 .1995 )
COUNSELHOWARD KANEFIELD
Thank you for your letter setting forth your expenses to New York . We will seethat they are promptly paid .
The case was settled late Thursday afternoon for a total of $490 million, of which$333 million, after expenses, will be distributed to the members of the NationsBankClass, and the balance to the members of the Old BankAmerica Class. I believe yourcomments and efforts at the mediation were helpful in concluding this matter .Although we have already conferred with Judge Nangle about the settlement, weanticipate that the distributions will not take place for approximately 90 days . If youwant more detail, please call any one of the three of us at your convenience . I shouldcaution you, however, that the terms of the settlement are strictly confidential untilthe final settlement agreement is executed which should be in 2-4 weeks . In thatrespect and for your eyes only, I have enclosed a copy of the Memorandum ofUnderstanding which was signed last Thursday .
Yours very truly ,
P4~- 'Martin M. Gree n
MMG/dmEnclosure
MAY 14 2002 10:23 3147258788 PAGE.15
. _ __ _ , .. .,. .. ... . , . ... .. . . .. . .~ .. . . . .I- ~ inL. . Q uUL 1QUUOFiolgo
S
Memorandum of Under standin
CONFIDENTIA L
Counsel for all BankAmerica classes, counsel for all Nationsl3ank classes an d
counsel for all defendants have agreed in principle to settle all class claims asserted in th e
litigation entitled In Re BankAmeric', Corporation Securities Litigation, MDL 1264 (the
"Action"), on the following terms and conditions :
1 . Subject to approval of the Court and the execution of a stipulation of
settlement (the "Stipulation"), Bank of America Corporation ("Bank of America") shall pay
$333,200,000 in full settlement and satisfaction of all claims asserted by the NationsBank classe s
and $156,800,000 in frill settlement and satisfaction of all claims asserted by the BankAmeric a
classes .
2. Upon final approval of the settlements, each of the classes shall provide
full releases in customary form releasing and discharging all defendants, etc ., from any liability
for any claim that has been or could have been asserted in any capacity, individual or derivative,
in any of the consolidated actions comprising the Action or any facts, events or occurrences
relating to D .E . Shaw & Co. and/or the merger of BankAmerica Corporation and NationsBan k
Corporation including, without limitation, any acts, omissions, statements, or representations i n
connection with either the merger or D .E . Shaw .
3 . The settlement contemplated by this Memorandum of Understandin g
("MOU") is subject to the following conditions :
a. 1 xecution within four weeks of the Stipulation ;
MAY 14 2002 10;233147256788 PAGE .16
~L~ ~ ~~w Llf1L- 01'! OOL LOUV -f'J . "/ -z'
.,IL
b. By the close of business on February 6, 2002, defendants' reaching
an agreement satisfactory to them with their insurance carriers and brokers with respect to
coverage of the settled claims ;
c. Receipt by all parties of the written recommendation of th e
Honorable Nicholas Politan, who acted as mediator in connection with this settlement, that the
settlement be accepted by all parties and insurers as fair, reasonable and adequate ;
d . Approval by the Executive Committee of Bank ofArrmerica, which
approval will be promptly sought ;
C. Final judicial approval of the fairness of the settlements ; and
f. Satisfaction or waiver of all covenants set forth herein .
4. The pa rt ies and their counsel shall treat this settlement as confidential
pending completion of the Stipulation or mutual consent or as may be required by law in the
judgment of counsel to the party, provided that all parties shall advise Judge Nangle of the
settlement contemplated by this MOU as promptly as practicable , and defendants shall have the
right to discuss the settlement in connection with insurance matters and to make a brief publi c
announcement concerning this MOU .
S . Except as otherwise provided herein, all parties shall cease litigation
efforts immediately except as may otherwise be directed by Judge Mingle ; provided, however,
that defendants may continue to defend claims (hat have been or may be asserted by Florida Stat e
Board of Administration or persons other than the parties hereto .
•2-
3147258788 PAGE.1?
MAY 14 2002 10 :24
. _ __ .. . .. .. .- ..... . . . .. . .. . . . . . . . .r w . ~ .u- viz VvG iVVV-lr .LV/XV
e
6. Plaintiffs' counsel and plaintiffs will render no assistance to any person o r
entity asserting any claim against any defendant with respect to any matter related to the Action,
and (hall use their best efforts to assure that any expert or consultant retained by them shall
refrain from rendering any such assistance
7 . The settlement payments shall bear interest at the 90-day ' treasury Bill
rate, as adjusted from time to time, commencing upon the execution of the Stipulation .
8 . All fees, including attorneys ' fees, expenses of notice and other
administration expenses , shall be paid out of the se tt lement funds, and defendants shall have n o
liability therefor .
9. Counsel for all parties shall endeavor to make suitable arrangements fo r
return or destruction of confidential discovery materials, in accordance with order of the Court .
10 . Defendants will take no position with respect to any application for
atto rneys ' fees or expenses filed by any plaintiffs' counsel , provided that such application seeks
reimbursement only from the sett lement funds described herein .
11 . All parties shall use their best efforts to consummate the settlement
described herein .
12 . In the event that the settlement contemplated herein is not approved by the
Court, this agreement will terminate and he null and void and will be without prejudice to an y
claim , defense or position that has been, or may be, asserted by any party in this or any othe r
action .
13, Defendants are entering the settlement without any admission of liability ,
and continue to deny any liability in the actions .
-3-
MAY 14 2002 10:24 3147258788 PAGE.18
. ,
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4-
14 . Plaintiffs' counsel shall have sole discretion to prepare a plan or plans of
allocation . Defendants' obligation to make settlement payments shall be limited to the amount s
set forth herein, notwithstanding any objection or appeal to or from any plan of allocation o r
award of'attorneys' fees and expenses in connection with the settlement .
15 . Defendants' obligation to fund the settlements of each of the
BankAmerica classes and the NationsBank classes is conditioned upon final approval of th e
settlement of the other .
16 . Nothing herein shall be construed to require either one notice for bot h
settlements or separate notices ; that issue will be left for agreement in connection with execution
of the Stipulation .
17. The settlements contemplated herein shall be without the right of members
of the classes certified in the Action to exclude themselves from the settlement or Fina l
Judgment contemplated by this MOU .
18. Bank of America shall advance up to $5 million in payment of costs of
notice and settlement administration prior to final approval, to be credited against the settlement
funds and to be refunded by plaintiffs' counsel in the event that either settlement does not receiv e
final approval by the Court .
19 . Submission or approval of a plan of allocations shall not be a condition o f
the settlement, and the parties will submit separate orders or judgments with respect to th e
-4-
MAY 14 2002 10 :24 3147258788 PAGE .19
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consummation of the settlement and the plan of allocation .
Dated : January 31, 2002 A BB ZAF
B LLLP /,,
A~lhdr N . A be2i2 East 39" StreetNcw York, N Y 1001 6
Attorneys for BankAmerica Classes
GREEN SCHAFF & JACOBSON, PC
N--'JoeForsythe Boulevard
Suite 700Clayton, MO 63 105
Attorneys for Nationsf3ank Classes
WACH ,ROSEN&KATZ
By .. ,/ k A/ ,. '/ Warren R . Stem
fJ 51 West 52nd Stree tNew York, New York 10019
Attorneys for Defendants
-5-
MAY 14 2002 10:24 3147258788 PAGE.20
DU11NL DA1'U1WAYYOUR WEEKLY STOC KS GUIDE PoS~D~SP9fG1 All p .~
DavidNicklau sIndJeu~pmS-d d~ceo` _
2001 ECONOMIC CRALIENGE
Most contestants had noidea recession was at han d
Most of you didn't see the nation's re-cession cooling.
It you did, you mlgitt have been ableto walk away the winner of our 2001Economic Challenge. Nlnetean of our20 contestants were too optimistic aboutthe economy's ability to grow last year.
Grose domestic product, the value ofall the goods and services the nationprodaces, grew just 0 .1 percent be-tween the fourth quarter of 2000 andthe fourth quarter of 2001 .
A majority of our forecasters expect-ed sonic north of 2 percent - andthey probably thought they were beingCautious, because the economy hadgrown by 5 percent in 2000 ,
We also asked people to forecast theunemployment rate, which ended theyear at S.8 percent; the Consumer Price'Index, which rose 1 .6 percent.' and theDow Jones industrial average, whichfell 7 percent last year. closing at10,021 .50 . .
Our winner, Christopher Goldsbury ofChesterfield, thought the economywould grow by 1 .1 pervenr last year -much too optimistic, in hindsight . Hethought Inflation would be 2 .3 percent,which also proved to be too high. But hehit the unemployment number on thenose, and his Dow prediction of ID,250was pretty close .
For the record, Bill Westmcycr wasthe only contestant who foresaw a se-vere slowdown . He thought GDP wouldshrink by 0 .5 pircent last year. RutWestmeyer incorrectly predleted thatInflation would go to zero, and he wasmuch too pessimistic about the Dow.
The two experts we consulted didn'tdo any better than the readers who en-tered our contest. Chris Ververes ofMacroeconomic Advisors thought theeconomy would grow by 2 .8 percent lastyear, and John Blixen, formerly of Mis-elsslppi Valley Advisors Inc ., thought Itwould grow by 2 percent.
"Even the experts were way off intheir foreeaete last year," said HallongQlan, aseletant professor of economicsat St. Louis Uhlverelty. "That's whyeveryone loot so' much money .In theetoek market ."
Moat contestants in our 2002 Ecanom-ic Challenge think t 'd economy willbounce bitek this year, but we alsoheard I om a few extreme pessimists . Ayeer:f om now, we'll find out who'sright .
Dow Jones industrial avereQ e9980 -
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Standard t Poor's 50 01200 - Dally chvex f,eoa.22
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Gold per ounce312 - Dally closes 303,101 rotDAr6 c101 E
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Bank of America willpay $490 million to .settle shareholder suit■ Clayton law firm pursued the case,In which the banking company wasaccused of hiding losses when Itmerged with NatlonsBank.
BY Jut GALIAottsaOf IAc fbx•akpnrcp,
After pressure from a law firm inClayton Bank of America Corp . saidFriday it will' pay $490 million to set-de allegations that executives hidlosses from shareholders before thebank merged with NationsBank Corp.in 1998 .
Marlin Green, a lawyer In Claytonwhose firm led the shareholders' suit,said the settlement ranked among thelargest ever in such a dispute in theUnited States . "It really made us hap .py" he said.
Green said some NalionsBank share-holders could expect to receive aboutSo cents per share if the settlement Isapproved In federal court . Thelawyers' fats are to be decided later bya j udge.
Shareholders accused BankAmericaof concealing a write-off of $372 mil-Ilon stemming from a loan to a hedgefund, D .E . Shaw & Co . of New York .Some plaintiffs' lawyers said bunk cx-ecutives hid the losses because theydidn't want to derail NationsBank'spurchase orBankAmerlca .
Although billed as a mer'ger of bank-ing equals, NationsBank executivesemerged on top after the merger . Thecombined company took this Rank ofAmerica name .
The settlement includes $333,2 mil-Eon for formerNstlonsBank slinreltnld•era and $156.8 million for formerBankAmerica shareholders . In tradingF riday, Bank of America's shares rove$1 .65, or 2 .8 percent, to $60 .60 .
Investors Kaye been sensitiveabout corporate disclosure In thewake of the collapse of Enron Corp .,the biggest U.S. bankruptcy.
"While we believed our actions In1998 were totally appropriate, wealso felt it was best to pet two litiga=lion behind us," said Ken Lewis,Bank of America's chairman and
chief executive officer,The bank said the settlement will be
paid from litigation reserves andwon't affect its financial results . TheCharlotte, N .C.-based bank didn't ad-mit wrongdoing.
"The litigation settlement is anoth-er positive development for Bank ofAmerica," said Frank Barkocy, dirtc-tor of research for Keefe ManagersInc ., which manages $150 million Inassets and owns Bank of Americashares . He said he believes the bank'sprofits will rise as tike nation's econo-my recovers this year.
Shareholders tiled more than 30Lawsuits across the country after thebank's earnings dropped 50 percentin the third quarter of 1998, In partbecause of the $372 million write-offon a $1 .4 billion loan to D .E . Shaw.
Shaw bet Incorrectly that rates onrisky bonds would fall and that rates onldelter quality U .S. Treasuries wouldrise. The opposite occurred, hurtingmany so-called bind-arbitrage traders.
The situation ltd to the resignation ofDavid Coulter, elutirntau of the oldBank of America .
A panel of federal Judges ooneuli•dated the lawsuits Into a single actionhere . Green's firm, Green, Schaaf &Jacobson, was selected lead counselby the federal court .
The suits claimed BankAmerica ex-ecutives niade misleading statementsabout BankAmerica's Investments orloans to hedge funds before it com-bined with NationsBank on Sept. 30 .1998 . The cults followed reports thatBankAmerica knew about the lossesas early as August 1998 and waited todisclose them for fear that It mightlost Its entire $1 .4 billion loan .
The bank set aside $334 million i nthe fourth quarter in cover litigationexpenses, Including the settlementannounced Friday. About 40 percentof the settlement will be covered byinsurance, said bank spokesmanRobert Stickler.Pose-Dispatch wire strvlces con-
tributed to this raDort.11rrpor4r elm aelisIt,ar ,
rkwatn IIn Pllaelur~y u Wt M1oh.esnmrime .., 214440•a320 -
MAY 14 2002 10:25 3147258788 PAGE.21
ank of America .
MAY 14 2002 10 :25
,r~„ avvv •n'a. C.i zv
EXHg j
Bank ofAmerica Corporation 2001 annual report .• . . -
3147256766 PAGE .22
alleged violations of consumer protection, securities, environmental, banking and other laws .
In view of the Inherent difficulty of predicting the outcome of such matters, the Corporation cannot state what the eventual outcome of pending
matters will bet however, based on current knowledge. Management does not believe that liabilities arising from pending litigation, if any, will have a
material adverse effect on the consolidated financial position, operations or liquidity of the Corporation .
The Corporation and certain present and former officers and directors have been named as defendants in a number of actions filed in several
federal courts that have been consolidated for pretrial purposes before a Missouri federal court, The amended complaint in the consolidated actions
alleges, among other things, that the defendants failed to disclose material facts about BankAmerica's losses relating to D .E . Shaw Securities Group,
1 .P. ("D .E . Shaw") and related entities until mid-October 1998, in violation of various provisions of federal and state laws . The amended complaint
also alleges that the proxy statement-prospectus of August 4, t 9 98 (the "Proxy Statement`), falsely stated that the merger between Nationsbank
Corporation (NatonsBank) and BankAmerica would be one of equals and alleges a scheme to have NatlonsBank gain control over the newly merged
entity. The Missouri federal court has certified classes (the "Classes") consisting generally of persons who were stockholders of NationsBank or
BankAmerica on September 3o, 1998, or were entitled to vote on the merger, or who purchased or acquired securities of the Corporation or its
predecessors between August 4 .1998 and October 13, 1998 . The amended complaint substantially survived a motion to dismiss. Discovery has been
completed . A former NationsBank stockholder who opted out of the NationsBank shareholder Class has commenced an action in the Missouri federal
court (the "Opt-Out Action") asserting claims substantially similar to the claims related to D .E . Shaw set forth in the consolidated action. Similar
class actions have been riled in California state courts . Plaintiffs in one such class action, brought on behalf of California residents who owned
BankAmerica stock, claim that the Proxy Statement falsely stated that the merger would be one of equals. Plaintiffs In that matter have recently been
included In the federal action as part of the BankAmerica shareholder Class and will not be proceeding in California state court . Other California state
court class actions (the "Other Actions") were consolidated, but have not been certified as class actions . The Missouri federal court enjoined prosecution
of those consolidated cases as a class action . The plaintiffs who were enjoined appealed to the United States Court of Appeals for the Fighth Circuit,
which upheld the district court's injunction. Those plaintiffs have sought review in the United States Supreme Court .
Subsequent to December 31, 2001, the Corporation announced that It had reached an agreement in principle to settle the Class actions . The pro-posed settlement provides for payment of $333 million to the NationsBank Classes and $257 million to the BankAmerica Classes . The proposed settle.
ment Is subject to a number of conditions, including judicial approval . The Corporation agreed to the proposed settlement without admitting liability.
The proposed settlement will be paid from existing litigation reserves and Insurance and will not have an Impact on the Corporation's financial results .
On July qo, zoot, the Securities and Exchange Commission Issued a cease-and desist order finding violations of Section c3(a) of the Securities
Exchange Act of 1934 and Rules 13a•i .13a-s1,13a-13 and 12b-2o promulgated thereunder, with respect to BankAmerica's accounting for, and the
disclosures relating to, the D .E . Shaw relationship . The Corporation consented to the order without admitting or denying the findings . In the Matter
of BankAmerica Corp ., Exch . Act Rel . No . 44613, Acctg & Audit . Enf. Rel . No . 1249, Admin . Proc . No . 3 .10541 .
Terrorist Attacks of September ii, 2001The Corporation incurred certain costs and losses associated with the terrorist attacks of September tt, 2001, such as property losses and costs tore-establish business operations . Management believes That these costs and losses will not be material to the Corporation's financial position or resultsof operations .
Note 13 Shareholders' Equity and Earnings Per Common Shar e
On December 11, 2001, the Corporation's Board of Directors (the Board) authorized a new stock repurchase program of up to rho million shares of the
Corporation's common stock at an aggregate cost of up to $io .o billion . No shares had been repurchased under the 2001 program at December 31, loot .
On July 26, 2000, the Board authorized a stock repurchase program of up to too million shares of the Corporation's common stock at an aggregate
cost of up to $7 .5 billion . At December 31, 2001, the remaining buyback authority for common stock under the 2000 program totaled $2 .1 billion, or
two million shares . On June 23, 1999, the Board authorized the repurchase of up to 130 million shares of the Corporation's common stock at art aggregate
cost of up to $to .o billion . The 1999 stock repurchase plan was completed In zooo . During 2001, the Corporation repurchased approximately 8z million
shares of its common stock In open market repurchases at an average per-share price of 357,58, which reduced shareholders' equity by$4 ,7 billion .
During 2000, the Corporation repurchased approximately 68 million shares of its common stock In open market repurchases at an average per-share
price of $48.17, which reduced shareholders' equity by $3 .3 billion . Management anticipates It will continue to repurchase shares at least equal to shares
issued under its various stock option plans .
Other shareholders' equity at December 3t, 2000 consisted of premiums written on put options of $ty million and restricted stock award plandeferred compensation of $5 2 million . At December 3 1, 2000, other shareholders' equity consisted of premiums written on put options of $zo million,restricted stock award plan deferred compensation of $114 million and a loan to the employee stock owneisllip plan (ESOP) trust of $32 million .
In September 1999, the Corporation began setting put options on its common stock to independent third parties . The put option program wasdesigned to partially offset the cost of share repurchases . The put options give the holders the right to sell shares of the Corporation's common stockto the Corporation on certain dates at specified prices . The put option contracts allow the Corporation to determine the method of settlement, an d
BANK Or AMERICA loot ANNUAL WORT
10 4
MAY 14 2002 10:26 3147258788 PAGE.23
va . vvc avuv ~ rrc.z/ zv
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DAVID P . OETTING
CURTTS, OETTING, HEINZ, GARRETT &ATTORNEYS AT LAW
130 SOUTH eEMISTON, SUITE 7,00
ST. LOUIS, MISSOURI 63105
(314) 725 .6788
FACSIMII .E (3141 72$ .878
www•cohgt, .corn
February 11, 200 2
Martin Gree n(irccn Schaaf& Jacobson 1)UN PC7733 Forsyth, Suite 700St. Louis, Missouri 6310 5
Re : Bank of America Securitie s
Dear Martin,
SOULE, P. C .
Via Fax 314-862-1606
EM.Au.Ananassdoeuing0rnhg9.com
I am concerned about the settlement that was apparently entered into on ThursdayJanuary 31, 2002 late in the day . Messrs . Kloster, Koehler and I have spoken over the past sixdays and have tried to determine what occurred . None of us were contacted by any of the sixlawyers on the mediation legal team before the settlement was entered into on January 31 andthere has been a paucity of contact since then. The three of us each feel this is out of characterwith respect to the lawyers with whom we are most familiar, i .e . me with you, Joe and Jonathan,Koehler with Jules, etc .
Upon review of the Memorandurn of Understanding and reflection on a number ofcomments made by the mediator, when I "connect the dots" the only conclusion that makes anysense is that the mediator strong-armed the settlement once he had eliminated the three plaintiffs
from the process . This hypothesis is supported by the stipulation that the mediator provide a"fairness opinion" of the settlement while the plaintiffs' approval is neither mentioned or
required. In fact the only mention of the plaintiffs is to put us under a gag order, along with the
attorneys and experts .
While in the normal course I would desire to speak to you to review this matter, I havethe distinct impression that you too have been gagged, in which case I would approach JudgeNangle .
Any thoughts?
DPL/mjl
Very truly yours ,
David P . Oet.ting
MAY 14 2002 10:26 31472527RR FAr,F ~d
,i PM 2 FAX NO. 2126978747
JIN'TW.1G-TYINB ~c CA}'YUCCI LLP;l'i ~'aten~YS .' J..w
Nn-v! Nhmr,Nicw''1'o»n 1017 L,Iju)0
TRIA1110N 11! (012) 00-1-7 ZOO
Tr :r .Irr)oPPnlru ( c 1 Q)uO4.7272
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?~It~,' 1'~~nr► Apt'il I . 2002
VIA U i'l 8 1 11 XPkdl ;SS MAJI.,tt' li'& )JI~JYll ,l!; .-..~J,r2+:figl 0)1
I iOlinrnlile Johlt V. Nan IcSenior t .111it+ ;d 1 Intl: f.)iSlrict Jid'cltuitccl states I)istricl Court _`iouthcrn I )islrict of (JcorgiaP.(i I)o ►x K21+7
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EXHIBIT
G
hHrxcmTnt,r
T. imAn ssrxWe9IJucrjTox,D.C
R(.: r ► r, r~t .lt t,tt;nmrale.~~( ~r~ Securities Litigation , bdDL No. 1264
l)c+R1 Ji1dgc t`drrligle :
I'urscr :ntt 1c0 Your I1or►or's Order of March 15 , 2002, this will confirm that ourchtut, Ro hcrt tlcpworth , who hus heen ,Iclively and tenaciously involved as a lead plaintiff forrltc Natinnsf{nuk Classes, has b .tc'n fully appiiscd of the $490 million settlement in this litigation .Az; Your I lonor i ;4 aware, Mr . tlcpworlh is a suplusticatcd investor , who suffered the singleLrr1 ;u~-1 flrtaricidl lass oI'r ►II the lend plaintiflc . Throughout the litigation , Mr. Hepworth hasr.OJI sulted with consiv el cnnccrninl,; prosecution of the case, strategic decisions and prospects forscttlcancrll .
Must recently, Mr. I lepworth has engaged in several discussions with counselcr.lncei rling thu complex financial issues which would be presented at trial if a resolution was notrcach,;d, mid die nuii r w advantages, associated with a settlement at the agreed -upon levels .Mr. I Iepworth Intl . Lisa dfscut;sccl with counsel the anticipated amount of settlement funds to bedistrihuled to inves tors in relation to iho level of losses they have suffered . In light of those(Iisewi, ;iona mid based on his ,;ubst ;~ ►Iti,tl financial background, Mr. }lepworth fully andwhnlcllcattcrtly slippuris (lie scrllctnont .
Artdi(ionally, Mr. I kpwodir has advised us that, if the Court so requests, he isrw~~~lrhJe ro tlltund Iltu Cnal scttlcnic ►tt hcariuu- on may 30, 2002 .
AI1?iri.(Ir . All ('o irn%eI 4via V rn csiruile )
David 00611t," . Bful ,
MAY 14 2002 10:26 3147258788 PAGE.25
DONALD H . CLOONeYTib4o1Nr R. ANo84soN
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11A. .i -- a /a --0 aCLOONEY & ANDERSON
A'T'TORNEYS AT LAWSurre 200
319 NoRrx PotRnt Sr.Sr . Louis, M ►ssotnu 63102-1929
(314) 231-585 5FAx (314) 231-6909
EXHIBIT
March 25, 2002
S
Honorable John NangleSenior United States Dist rict JudgeUnited States District Cou rtSouthern District of Georgi aP.O. Box 8287Savannah, GA 3141 2
Re: Bank America Litigation
Dear Judge'Nangle ;
Pursuant to your Order of March 15, 2002, 1 contacted my client, Kevin Kloster, one of theClass Representatives of the Nations Bank classes, in regard to his feelings concerning the settlementof the Nations Bank and Bank America litigation.
In my conversations with Mr . Kloster, he did state that he was satisfied with the $490 Millionsettlement although lie had concerns about the "dilution" of the settlement with respect to thepercentage split of the proceeds between the classes, the tax consequences of any settlement, the factthat to some extent the NationsBank plaintiffs are being paid'•with money that already belongs tothen, and attorneys fees .
After a review of the above-stated matters, my client gave me authority to report to the Court,that based upon my recommendation as his attorney, and taking into consideration the uncertainty oflitigation, he is satisfied with the $490 Million settlement .
Sincerely,
Donald H . Clooney
DHC/slb
MAY 14 2002 10 :263147258788 PAGE .26
r. .
STULL, STULL & BRODYATTORNEYS AT LAW6 EAST 45[h STREET
NEW YORK, N.Y. 1001 7
TELEPHONE212-687-7230
March 26, 200 2
Honorable John Nangl eSenior United States Dist rict JudgeUnited States District CourtSouthern District of Georgi aP .O. Box 8287Savannah, GA 3141 2
Re : In re BankAmerica Securities Litigatio n
Dear Judge Nangle :
TELECOPIER212-490-2022
Our client, J . Michael Koehler, one of the NationsBank Lead and Class Plaintiffs, is inagreement with the views of Kevin Kloster as articulated in Donald H . Clooney, Esq.'s March25`' letter to Your Honor . Additionally, Mr. Koehler feels that the mediator did not give dueweight to the positions of the NationsBank Lead Plaintiffs and Class Representatives . Under thecircumstances of the mediation, which the Court is familiar with, this resulted in an arbitraryallocation between the BankAmerica and NationsBank Classes .
Sincerely yours,
Jules Brody
MAY 14 2002 10127 3147258788 PAGE.27
a
CERTIFICATE OF SERVIC EA copy of the foregoing was served by U.S . Mail, this _2(t` day of March, 2002, to the
following counsel of record :
Martin M . Green Kristin L . Myle sJoe D . Jacobson David 11 . FryJonathan F . Andres Munger, Tolles & Olson, LLPGreen Schaaf & Jacobson, P .C. 33 New Montgomery St ., Suite 19007733 Forsyth Boulevard, Suite 700 San Francisco, CA 94105Clayton, Missouri 63105
Stuart M. GrantMartin D . Chitwood Grant & Eisenhofer, P .A .Edward Nicholson 1220 North Market Street, Suite 50 0Chitwood & Harley Wilmington, DE 19801-25992900 Promenade 111230 Peachtree Street, NE Clinton A . Krislo vAtlanta, Georgia 30309 Krislov & Associates, Ltd .
Civic Opera BuildingAndrew J . Entwistle 20 North Wacker Drive, Suite 135 0Vincent R . Cappucci Chicago, Illinois 6060 6Entwistle & Cappucci, LLP299 Park Avenue, 14th Floor Ronald L . OlsonNew York, New York 10171 Munger, Tolles & Olson, [LP
355 S . Grand Avenue, 35th Floo rDaniel W. Krasner Los Angeles, CA 9007 1
Robert Abram sWolf Haldenstein Adler Freeman & Herz Brian McGovern270 Madison Avenue McCarthy, Leonard, Kaemmcrer, Owen, Lamkin &New York, New York 10016 McGovern, L .C.
16141 Swingley Ridge Rd ., Suite 300Warren Stem St . Louis, MO 6301 7
Wachtel[ Lipton Rosen & Katz51 West 52nd Street Barry A . ShortNew York, NY 10019 .6150 Lewis Rice & Fingersh, L .C.
500 N . Broadwa yArthur Abbey Suite 2000
James S . Notis St. Louis, MO 63102
Abbey Gardy, LLP212 East 39th Street David OettingNew York, NY 10016 Curtis Oetling Heinz Garrett & Soul e
130 South Bemiston, Suite 20 0John Michael Clear Clayton, MO 63105Bryan Cave, L .L .P.211 North Broadway, Suite 360 0St . Louis, MO 63102-275 0
A copy of the foregoing was sent to Senior Judge John F . Nangle, P .O. Box 8287, Savannah, GA31412 .
MAY 14 2002 10 :27 3147258788 PAGE .28
02 2002 10 :52 FR GREEN,SCI F&JACOB50N314 862 160b 1 U Yloa(tom
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SUITE 700, PIEk1L Ltiu.MO1 C*WT !
7733 POPJ7Th BOULLVARD.MAATIW M GP.RWJOt D. JACOB50W $T. LOU13 (CL.rroN), Mrs ouRI 6310 6
hAVID T. RVTSC HJONATHAN F. AWDP.L (314) 862.6800ALLEN P. FRl95 Ta cois& (314) 862.1606PWINANDO BBRMUDB LMARJHN.L L HOWLMATTHEW 1L r EEL ns
April 1, 200 2
By F. to (912) 650-401 7
Honorable John F . NangleSenior United States District JudgeUnited States District CourtSouthern District of GeorgiaP.O. Box 8287Savannah, GA 3141 2
Re: In re BankAmerica Corp. Securities Litigation, MDL No . 1264
Dear Judge Nangle :
r .196/F94
0e014e L xHAAF(1930 .1996 1
COUNSEL
HOWARD I(ANEFIELD
Pursuant to your order of March 19 . 2002, 1 am submitting finalized drafts of thefollowing items: (1) proposed class notice; (2) proposed summary class notice; and (8)proposed claim form . I am also submitting a revised stipulation of settlement. Eachof these documents incorporate the changes directed by the court, either at thehearing March 15 or in the order of March 19 .
We propose to place the NationsBank settlement funds in an account with Bank ofAmerica, or with a similar, major financial institution, such as Citibank, J . P .Morgan Chase, U .S . Bank, N.A., or Northern Trust, with the size and stabilitynecessary to ensure the safety of the funds deposited . The account will bear interestand will be a direct obligation of the depository entity . We can set up the account sothat all payments require the signature of two partners of our firm, or any otherprocedure the Court may require .
You have requested information concerning the costs of notice and administration .The original notice of pendency of class action cost $592,845 to print, mail andprocess . The notice of settlement and the claims administration are jointlyestimated to cost $4,590,000 . (These two items are both included in the expensefigures contained in the proposed class notice,) This estimated $4,590,000 is brokendown an follows:
MAY 14 2002 10:27 3147258788 PAGE.29
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V
Hon. John F. NangleApril 1, 2002Page 2
• Printing, mailing and bulk delivery of the class notices . . . . .. . . . . . . . . . $480,000• Publication in newspapers and other media . . . . . . . . . . . . . . . . . . . . . . . . $110,000• Reimbursement to brokerage houses for distribution of notices . . . . . . . . $100,000• Claims administration and distribution (est . 300,000 at $13 each) . . . $3,900,000
If undistributed settlement funds remain following distribution, a seconddistribution is estimated to cost approximately $875,000 ,
The Court also requested a statement of the position of each lead plaintiff regardingthe proposed settlement . Kevin Kioster and J . Michael Koehler, both of whom axeclass representatives who participated in the mediation, approve of the settlement .David P. Oetting is the only NationsBank lead plaintiff to oppose the settlement .Joseph Hempen, the final class representative, has not responded to any contacts bycounsel in over six months . We do not know what his views may be .
In addition to the four class representatives, the court had previously appointedthree additional lead plaintiffs who were not also appointed class representatives .Robert Hepworth fully supports the settlement . Pamela Wootton neither stronglysupports nor opposes the settlement. In Joe Jacobson's most recent communicationwith her, Ms. Wootton was informed of the views of Messrs . Getting, Kloster, andKoehler, and expressed her present inclination to defer to the views of the classrepresentatives who participated in the mediation . Earl Gates, Sr ., who had been illin recent months, died the weekend following execution of the memorandum ofunderstanding, and we are unable to offer a statement on his views .
Finally, I would like to confirm that the total amount of the settlement and thedivision of that amount between the NationsBank and BankAmerica classes wasthe result of vigorous negotiation among counsel, each of whom firmly assertedtheir respective positions. Neither the amount of the settlement nor its divisionreflect any weighing by the mediator . At no time did the mediator advocate anyparticular allocation of settlement proceeds between the NationsBank an dBankAmerica classes . The mediator worked strictly as a facilitator of communi-cations, and I do not want the Court to be left with the misapprehension thatformer judge Politan acted as an evaluator or as a quasi-judge in any respect .
Sincerely ,
)40k A~ae--Martin M. Green
MAY 14 2002 10:28 3147258788 PAGE.30
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Hon. John F. NangleApril 1, 2002Page 3
cc: David P. OettingCounsel for defendantsCounsel for the classes
** TOTAL PAGE .04 **
MAY 14 2002 10:28 3147258788 PAGE.31
V iz a + I - urruu + % , U 1 % V L I U LINL- 014 OOG "10U1]•+90L/'J
BofA lhelps with Coulter's future to tune of $103M - 1998-11-09 - San Francisco Busines .. . ape-1 nf4_
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BofA helps with Coulter's future to tune of $103 M
Greet Crysta l
A couple of days ago, while sitting on the exercise bike, I heard theopening lines of a commercial : "Did you retire today? 1-low can Bank ofAmerica lielp with your future? "
Well, David Coulter"retired" Oct . 30, and theBank of America i shelping with his future - -bigtime. On that day ,Coulter, who is ayouthful 51, started todraw down a pension o f$4,975,625 per year fo rthe rest of his life .Moreover, should he die fbefore his wife, the latterstands to receive apension of $3 .7 millionfor the rest of her life - -75 percent of Coulter's pension benefit .
TECHNOLOGYUPDATES VIA EMAIL .
f rluk here to find out morn j
Assuming that Coulter lives for 28 more years, the life expectancy of a51-year-old, he will be drawing a total pension benefit of'$139 .3 million,and that excludes any further benefit his wife might receive, Furtherassuming that his wife outlives hint by five years, we estimate the totalpresent value of the combined pension benefit to be $62 .3 million .
Coulter came into this pension largess, of course , by helping to engineerthe merger of his company into Charlotte , N.C.-haled Nationsl3ank . Hebecame No . 2 executive at the combined bank, with a vague unde rtakingthat it was the board ' s "presen t intention " for him to succeed CEO HughMcColl Jr . at some unce rtain future date .
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MAY 14 2002 10 :28 3147258788 PAGE.32
BofA,hejps with Coulter's future to tune of $103M - 1998-11-09 - San Francisco Busines . . . Page 2 of4. ,, c , -
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I sort of figured that Coulter wouldn ' t stay long in the new combinedcompany . His pension guarantee was available to him upon terminationfor any reason , so it wasn't necessa ry for him to be fired to start receivinghis $5 million per year. Moreover, the pension he was promised wasalmost nine times that to which he was entitled just before the merger .With that sort of arrangement, you could have used his new employmentagreement as a selection device. That is to say, you would fire him forstupidity if he didn't quit very soon after the merger !
But as it turned out, Coulter did not I EII,yIL N F:I+ J~_ MLERT $
have to quit . His employment was ended d Sign up to receive free daily businessby McColl just 20 days after the merger, updates by email every weekda y
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America caused the new bank to take an related topics . companies.
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Coulter's dumping was another piece o fgood luck for him, because it triggered the golden parachute provisionsof his employment agree-ment. So now, beside his munificent $5 millionper year pension, Coulter stands to receive :
x Five years of salary at the rate of $ 1 .5 million per year, or $7.5million. Interestingly, Coulter's base salary for heading the oldBankAmerica during 1997 was $987,500 . So when the mergercame along, he got a 50 percent raise for taking a smaller job .
x Five years of bonus, based on his bonus for 1997, which was $4 .25million . The grand total here : $21 .25 million .
x $16 .8 million of free stock. Coulter was awarded 300,000restricted shares upon consummation of the merger . As a result ofhis being shown the door, all the restrictions lapsed .
x A minimum of $2 .4 million of exercise gains on options granted in1997. In that year, Coulter received three different option tranchestotaling 1 .94 million shares . All of his shares contained strikeprices (i .e ., the price the executive must pay to exercise the option)that were substantially above the then market price of the stock .But there was an escape clause buried in the plan document :Should there be a change in control, Coulter could swap his 1 .94million out-of-the-money option shares for 720,000 so-calledLimited Stock Appreciation Rights (LSARs) . These LSARspermitted him to lower his strike price back to the level of themarket price that existed at the time the 1997 options wereoriginally granted . However, lie doesn't have to take those LSARs .He can hold on to his option on 1 .94 million shares and gamblethat, over time, the price of BankAmerica stock will rise to a givehim even more money. To be conservative, we assumed that hewould avail himself of the LSARs and would therefore receive a
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MAY 14 2002 10:28 3147258788 PAGE.33
Bofi . helps with Coulter's future to tune-of $103M - 1998-11-09 - San Francisco Busines . . . Page 3 of4
gain of $2.4 million. ConsAdvi c
The total of these severance benefits works out to $48 million . If we add ausinthe $54.9 million increase in his pension present value (i .e ., the $62.3 5nlermillion present value of the new pension less the estimated $7 .3 presen tvalue of his vested pension before the mcrger), .we obtain a totalseverance package of $102 .9 million . And all that for 20 days of work!That works out to around $5 million per day .
Coulter was a credible, though not outstanding, performer during hisbrief tenure as CEO of the old BankAmerica from Jan . 1, 1996 to Oct . 1,1998 . Between Dec. 31, 1995 and Sept . 30, 1998, the old BankAmerica'scumulative total shareholder return (i .e ., .stock price appreciation andreinvested dividends) was at the 79th percentile of the S&P 500 group ofcompanies during the same period . However, when compared to a groupof 21 major banks during the same period, his performance ranked onlyat the 60th percentile .
As CEO, Coulter was well paid, and now that he has been tired, he hasbeen extraordinarily paid . It is hard to remember any other executivewho has received so much severance pay, even including Walt Disney'sMichael Ovitz, who, I estimated, received a severance package with apresent value of no more than $74 million . Moreover, in the case ofOvitz, there was no need to "gross him up" for golden parachute excesstaxes . Since BankAmerica rather than Coulter will be paying these taxes,the final tab for Coulter's severance will be considerably north of $103million .
How could all of this have happened? How could the shareholders of thenew BankAmerica have been required to shoulder such a huge burden ofcost for what turned out to be 20 days of work? We can only presumehere that McColl desperately wanted a deal and that Coulter, along witha handful of his top subordinates, extracted a huge price for succumbingto McColl's advances .
The world has come a long way since the first golden parachutecontracts were designed . Back in those days -- the mid-1980s -- therewas the worry that senior executives would torpedo a merger that was inthe long-term interests of shareholders out of fear that they might findthemselves out on the street. The golden parachute was designed to givethem at least a modest safety net so that they could act in the bestinterests of the shareholders .
But now we have moved to the opposite side of the spectrum . CEOs likeCoulter are literally bribed (although we don't mean illegally bribed) tosee things in a certain way -- perhaps even in a way that is detrimental tothe long-term interests of their company's shareholders and to the long-term interests of the communities in which they operate . (There was theexpected uproar in San Francisco when the locals learned that th eheadquarters of their premier company was going to be moved to some
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MAY 14 2002 10:29 3147258788 PAGE.34
BofA,)ejps with Coulter's future to tune of $103M - 1998-I 1-09 - San Francisco Busines . . . Page 4 of 4
cotton field in the South, )
Something has gone terribly wrong here.
Graef Crystal is an executive compensation consultant who writes amonthly column for the'Business Timos .
~41
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CHARLOTTE, N .C„ May 01, 2002 (AP Online via COMTEX) - Checks are being mailed to settle alawsuit that claimed Investors were misled about the value of bond funds sold by a bank that mergedinto the Bank of America .
About $14 .5 mllllon is being distributed to the federalgovernment and investors after the resolution of twolawsuits related to the value of NallonsBank funds .
NationsBank and BankAmerica Corp . formed Bank ofAmerica in 1998, The Investiga ti on concluded that bankemployees failed to inform investors of the risks of the bondfunds . The bank did not admit any wrongdoing ,
The checks started going out Monday after yea rs of legalbattles and work to determine how much individualinvestors were owed, said Assistant U .S. Attorney MichaelRunyon . He Is based in Tampa, Fla ., where many of theInvestors live .
"This is real, and we're Just thrilled to get this money out toinvestors," Runyon said .
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Often civil settlements result in small amounts of the money L'am 'being returned to investors, but, in this case many will receive full refunds, Runyon said .
Many of the investors were elderly customers who traditionally kept money in federally insuredaccounts, he said .
Investors experienced losses when sharp Increases in Interest rates lowered the value of two funds ;Na ti ons Government Income Term Trust 2003 and Nations Government Income Term Trust 2004 .
Nationwide, 2,230 investors will divide restitu tion of $0.13 million , The balance of the $14 .5 million fund,contributed by NallonsBanc Enterprise Inc ., which was a subsidia ry of NetlonsBank , will be paid toregulators for cou rt fees and penalties .
The group also paid a civil fine of $6,75 million in November 2000 to federal regulators ,
MAY 14 2002 10:29 3147258788 PAGE.36