B of A Appeal of Ruling on Its Inactive Deposits Fails

SACRAMENTO —  An appellate court Monday gave state Controller Kenneth Cory a major boost in his 10-year effort to force the Bank of America to pay certain depositors between $23 million and $82 million or more.

The state 3rd District Court of Appeal basically sided with Cory in finding that the world’s biggest commercial bank illegally made service charges on inactive savings accounts and failed to pay interest on the accounts.

Thomas Montgomery, Bank of America assistant general counsel, said it was undecided whether the bank will appeal the ruling to the state Supreme Court. A Cory lawyer said he was pleased with the appellate court’s decision.

Deputy Atty. Gen. Yeoryios Apallas, who has represented Cory in the civil case since 1975, estimated that the bank was liable for at least $82 million in funds owed bank depositors under the state’s unclaimed property law.

Montgomery, on the other hand, estimated the sum at about $23 million.

A resolution of the conflicting sums will be up to a special master judge appointed to review both the state’s accounting of the money owed and an accounting made by the bank. His task could take months to complete.

Turn Over Funds

Under the unclaimed property law, banks and other financial institutions must turn over to Cory funds that have been left unclaimed for at least seven years in various forms of savings accounts or travelers checks. The banks first must make an effort to contact the owners.

Cory likewise must make an effort to reunite the money and the owners. He maintains that Bank of America and other banks have made little effort to do so.

While banks have been unsuccessful in tracking down some depositors, Cory has found such relatively high visibility people as former Gov. Edmund G. Brown Sr., Lucille Ball, Candace Bergen, Anthony Quinn and even Cory himself.

During a Sacramento Superior Court trial, which he won in 1980, Cory charged that the Bank of America illegally deducted service charges and withheld interest from inactive accounts before forwarding them to the state. In some cases, he said, the accounts were obliterated by service charges.

Bank of America appealed several findings in the Superior Court’s ruling to the 3rd District Court of Appeal, among them that the bank pay a 25% penalty. The appellate court agreed that such a penalty was improper.

However, the court rejected the bank’s contention that a three-year statute of limitations be applied to the case, which would have significantly reduced the bank’s liability. Instead, the court ruled that no statute of limitations applied and that the state can collect for as far back as bank records exist.

The court also agreed with Cory that the bank should pay 12% interest on unclaimed deposits reported to the state after 1976. Previously, the interest rate was 7%.

Apallas, who said that during a review of the bank’s records he discovered that a savings account of his Greek immigrant parents had been service charged into extinction, said he believed that when the case is eventually resolved, the bank’s liability will exceed $82 million, a point disputed by the bank’s Montgomery.