N.Y. Authorized To Release Funds Frozen at Nationar

A state court in Manhattan has authorized New York State Superintendent of Banks Neil D. Levin to release almost $40 million in frozen check proceeds to customers of the failed Nationar.

The 31 customers include 15 thrifts, two financial services companies, and seven retail companies. The largest recipients are Bank Leumi, with $8 million; GP Financial Inc., with $5.8 million; and First Dewitt Savings Bank, with $4.7 million.

The checks were in Nationar's possession at the time the check-clearing company was seized Feb. 6 by the state Banking Department after a run on the company's deposits threatened its liquidity.

The checks were transferred to other companies for further processing, according to Banking Department spokeswoman Katherine Hall.

Under the Uniform Commercial Code, the funds are not considered Nationar's property and must be returned before the formal claims process begins for creditors. That process is expected to begin after the frozen funds are disbursed, the superintendent said.

Also, state officials announced yesterday that Sector, Nationar's back- office computer software and support business for 33 bank clients, would be sold to Smith Technologies Inc.

And Smartline, the company's customer service and telemarketing operation, will be bought by ICT Group Inc.

Both transactions must still be approved by the state Supreme Court.

Nationar, which was owned by 67 savings banks around the state, was founded in 1933 as a liquidity source for the state's thrifts, providing check-clearing, data-processing, and other back-office services.

The company's check-processing operation has already been sold to Affiliated Computer Services Inc., with the checks clearing through Extebank, a state-chartered bank. The custody operation has been transferred to the Federal Home Loan Bank of New York.

The state is still seeking buyers for the company's trust relationships and its data processing operations, Ms. Hall said.

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