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Subpoenas Sent in NationsBank Sales

May 29, 1998

RALEIGH, N.C. (AP) _ A federal grand jury in Florida has subpoenaed documents related to the sale of mutual funds by NationsBank, a lawyer said.

The U.S. attorney’s office in Tampa, Fla., said NationsBank is not ``presently″ a target of a criminal investigation.

NationsBank already has paid $6.75 million to settle civil complaints that it misled customers about the risks of the investments, which were not insured by the Federal Deposit Insurance Corp. The bank, based in Charlotte, N.C., did not admit or deny wrong-doing in the settlement earlier this month.

The subpoenas by the grand jury in Tampa, Fla., were issued to Jonathan Alpert, a Tampa lawyer who represents investors in a class-action lawsuit against NationsBank. The grand jury request, which was made May 8, was first reported Friday by The Charlotte (N.C.) Observer.

Dick Stilley, director of public relations for NationsBank, said Friday that the company’s lawyers had been assured by federal prosecutors in Florida that the bank is not a target of any grand jury investigation.

``Drawing unjustified inferences from the mere issuance of a subpeona can create damaging and misleading impressions and unduly concern customers and other members of the public,″ he said.

Spokesman Monte Richardson of the U.S. attorney’s office in Tampa said Friday that NationsBank was not ``presently″ a target of the investigation, and he supplied this definition of the status:

``Target is defined by the Department of Justice as a person or entity to whom the prosecutor or the grand jury has substantial evidence linking that person or entity to the commission of a crime.″

Alpert told The Associated Press on Friday that he intends to turn over about two dozen boxes of documents obtained from NationsBank during the litigation. He said that from the public record in the civil cases, the value of the material to a grand jury was evident.

``There were people, many of them elderly, who were switched into risky mutual funds when they had actually intended to make a deposit into a safe, FDIC-insured product,″ he said.

Alpert said he is cooperating with the U.S. attorney’s office, but he declined to say what the prosecutors were after.

NationsBank has not been served with any subpoenas. ``We have told the government that we will cooperate fully and provide any documents they deem appropriate for this preliminary inquiry,″ said Stilley.

Alpert said a second subpoena he received seeks documents on securities sales by Barnett Banks of Jacksonville, Fla., which NationsBank acquired in January. Barnett has not received any subpoenas, said Pat Sisley, a NationsBank spokeswoman.

NationsBank is in the midst of an attempt to merge with San Francisco’s BankAmerica Corp., a combination that would create the country’s largest bank. That deal is being reviewed by regulators.

On May 4, three federal agencies announced that NationsSecurities Inc., the bank’s brokerage arm, agreed to pay $6.75 million to settle allegations that it misled investors about the risks of two bank-managed mutual funds.

That was the first time the Securities and Exchange Commission fined a bank and its brokerage in a case involving deceptive sales practices on bank premises.

Three employees were also fined, including Charles King, NationsSecurities’ executive vice president for sales during 1993 and 1994, when the sales practices were alleged to have occurred.

NationsSecurities changed its name to NationsBanc Investments Inc. in January, and Sisley said reforms have been adopted to protect investors.

``Since 1994, we have significantly enhanced the systems of disclosure, supervision and compliance related to the brokerage affiliate,″ she said.

In 1994, after NationsBank and other banks began increasing sales of mutual funds, the FDIC issued guidelines on sales to ensure that customers knew that the stocks and bonds they bought from banks were not insured against losses.

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