The Great Bank Thievery

The city and state say the Bank of America stole hundreds of millions -- even billions -- of dollars from the government. But didn't San Francisco finance officials know what was going on? And shouldn't B of A executives be under criminal investigation?

This spring, San Francisco City Attorney Louise Renne held a press conference to announce the city had joined a lawsuit that accuses the Bank of America of cheating California governments out of hundreds of millions -- and perhaps billions -- of dollars. The most succinct explanation of BofA's supposed wrongdoing is contained in court papers the city filed several months later.

"The Bank's acts," city attorneys wrote, "can be likened to an accountant who commingles his own money with client funds and then loses control of the client's records. The accountant deals with the problem by shredding the client's bills, canceled checks, and check registers. The accountant then waits to see if the client notices. If the client doesn't, then the accountant keeps all of the money. If the client complains, the accountant demands the client prove how much is owed."

The lawsuit the city joined does indeed allege a truly astonishing pattern of utterly brazen thievery. In the suit, a former Bank of America executive, the city, the state, and more than 200 other jurisdictions have come together to accuse the largest bank in California -- and one of the state's major political power centers -- of 274 paragraphs full of fraud, theft, and conspiracy, as well as the willful destruction of evidence detailing that fraud, theft, and conspiracy. If it gets to trial and if the bank loses, the suit could seriously affect -- perhaps even bankrupt -- BankAmerica, the holding company that owns BofA.

The state, for its part, claims BofA should repay California governments somewhere between $1 billion and $3 billion. And the law under which the suit was filed allows for a tripling of damages.

But the lawsuit's ramifications stretch beyond the civil courthouse and involve more than the financial health of a major bank. As the litigation against Bank of America proceeds, a mountain of bank and government paperwork is coming into the public domain as evidence in the case. That paperwork is making three things increasingly clear:

If the civil violations alleged against Bank of America are true, they probably also constitute the largest criminal conspiracy in California history.

No one appears to be making any attempt to hold the bank, its officers, or its directors criminally accountable for what are alleged to have been huge, repeated, and intentional embezzlements of public funds.

And for years city financial officials either knew or should have known that the Bank of America was improperly taking large amounts of money that belonged to San Francisco taxpayers -- and those officials did absolutely nothing about it.

Educated in economics and philosophy at San Diego State University during the Vietnam War, Patrick Stull took a job at the Bank of America in 1978. He had just escaped the "conservative" clutches of Ross Perot's Electronic Database Systems Inc. Stull thought the folks at San Francisco's BofA were much hipper than Perot. "I was a good BofA employee," says Stull, now 50.

An expert in cash management, Stull soon became a vice president and in the late 1980s was assigned to help "clean up" BofA's Corporate Trust Division in San Francisco. Among other things, the trust division handled the municipal bond accounts of many of California's local governments, including the city of San Francisco. In general terms, the division took care of the details of municipal borrowing, making sure principal and interest payments went to the institutions and people who bought bonds sold by local governments to finance roads, sewers, airports, and other capital projects.

If the tasks were routine, the amounts of money were not. A river of some $100 billion in public bond funds streamed through the trust division between the late 1970s and the early 1990s, court records say.

Late in the last decade, the bank was converting from an antiquated data-entry record-keeping system to Bondmaster, a computer program that tracks payments made by the bank on behalf of municipal bond issuers. "The place was a total disaster," Stull recalls. "There was no organization, no controls; posters of unclad women adorned the walls."

Although aware generally of problems with the handling of bond accounts, Stull says, his role in the trust division make-over did not bring him into contact with anything that he considered unethical or illegal. He left the bank suddenly in 1990 when a severe family health problem compelled him to rethink his life. (He requested that the details of that problem not be revealed.)

Stull set up a consulting firm, The Municipal Group, and began advising municipalities on cash management. In that role, he began encountering Bank of America, one of the state's main depositories for government funds. Over time, Stull says, he discovered that BofA was overcharging these cities for trustee services and investing public money entrusted to it in improper ways -- such as in the bank's own money market funds, a placement that raises conflict-of-interest questions. Stull also realized that BofA was holding onto public money it was not entitled to keep.

Stull advised the cities of Anaheim and San Jose and other clients to try to recover BofA overcharges. San Jose did sue, but settled for relative peanuts in 1994, releasing the bank from further claims in return for $260,500.

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