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A state trial judge in West Palm Beach, Fla., has refused to summarily dismiss a breach of fiduciary duty lawsuit against Bank of America that claims the bank’s trust department deceptively steered trust funds into the bank’s mutual funds without regard for the beneficiaries’ financial interests. Boca Raton lawyer Paul Geller, who is co-counsel for the plaintiffs, said in an interview that “the bank chose to put the family’s money in its own funds rather than others that might have charged lesser fees and been better-managed.” But Miami lawyer Peter Homer, who represents the bank, said that “Bank of America acted properly in accord with federal and state statute and in the best interests of its clients.” The plaintiffs’ lawyers argue that the alleged breach of fiduciary duty is evidenced by the disclosures concerning Bank of America in the ongoing probe of Wall Street investment houses by New York Attorney General Eliot Spitzer. Spitzer has charged that the bank’s handling of its Nations Fund mutual funds was characterized by favoritism to large investors. “This was a double whammy for my clients,” said plaintiffs’ attorney Richard Greenfield of Maryland. “They were sold out as trust beneficiaries and as small investors.” Bank representatives insisted the Spitzer charges and the Williams case are “separate, distinct and unrelated.” They described efforts to link the two as “opportunistic and unconscionable.” Bank of America reported $2.74 billion in earnings in the second quarter of 2003. With more than 4,000 locations in 21 states, its private bank division alone boasts $150 billion in assets under management. The Palm Beach County Circuit Court suit, which was filed in December and for which class certification has been sought, was brought by the three children of the late Heberton and Jean Williams, who were Pennsylvanians with a second home in Palm Beach County. H. Craig, Elinor and Constance Williams are represented by Richard Greenfield, a partner at Greenfield & Goodman in Royal Oak, Md., and Geller, a partner at Cauley Geller Bowman & Rudman in Boca Raton. The plaintiffs say Bank of America engaged in deceptive behavior to generate fees for money management and investment advice in addition to the bank’s trustee fees. They allege that the bank routinely mishandled trust accounts in this way. According to their complaint, at least 5,000 other trusts with more than 10,000 beneficiaries were similarly injured. “My clients were promised customized management of their trust funds,” Greenfield said. “But Bank of America used the trust as a cookie jar for its own enrichment.” The suit includes counts for breach of fiduciary duty, breach of contract and unjust enrichment. Greenfield declined to say how large his clients’ trust account had been or to estimate potential damages. Defendants in the suit are Bank of America and Bank of America Corp., both based in Charlotte, N.C. They are represented by partner Peter Homer and associate Kevin Jacobs of Homer Bonner & Delgado in Miami, and by attorneys from Reed Smith in Pittsburgh. A defense motion to transfer the suit to probate court was denied by Circuit Judge Jorge Labarga in April. DECEPTIVE FORM? Following the death of Heberton Williams, the Williams trust was established in 1977 with a Palm Beach County bank that, through a series of mergers, eventually was acquired by Bank of America. Until her death in April 2001, Jean Williams served as co-trustee. In the spring of 2000, according to court documents, Bank of America began a program to move its smaller trust accounts into its Nations Fund group of mutual funds. Letters of notification were sent to the co-trustees and beneficiaries of the trusts, recommending the conversion. Court documents submitted by Bank of America show that Jean Williams and other family members received notice of the proposed conversion of the family’s trust and that Jean Williams signed a consent to the conversion. “The transaction was described to them clearly and in detail,” Homer said. But Geller said in an interview that the notifications were deceptively designed and “full of doubletalk.” In their motion to dismiss, the defense argued that the bank’s transfer of trust funds to investment vehicles managed by the bank, and for which the bank collected additional fees, was expressly permitted by the Williams’ trust agreement and by Florida statute 737.402. The bank also argued that the Williams’ suit is barred by the statute of limitations. As to the unjust enrichment claim, the defendants alleged that any fees for managing the mutual fund investments were discounted from the bank’s trustee fees. In August, Judge Labarga rejected Bank of America’s motion for summary judgment. Geller said there is “always an inherent conflict of interest” when a bank’s trust department directs trust accounts into investments managed by other arms of the bank. “It could only be done with a waiver signed by beneficiaries who were fully informed of all the implications,” Geller said. “Bank of America’s customers were anything but [fully informed].” Attorneys for the plaintiffs argue that such alleged double-dipping was endemic to the banking industry in the late ’90s. Greenfield said he’s currently developing similar suits against other major banks that have a significant presence in South Florida.

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