A lawsuit filed last week against Sumitomo Bank's California subsidiary by two of its employees could be just the start of a big legal battle, with charges ranging from racial discrimination to covering up problem loans.
"I would expect we'll see (additional suits) within a month," said Leroy S. Walker, the lawyer for the two workers.
The plaintiffs, who remain employed as loan examiners, accuse the Japanese-owned bank of a coverup. They say the bank misreported problem loans to regulators and destroyed records.
After allegedly being ignored by management when they first aired their concerns, Bruce Lenox, 47, and Charles Walch, 49, took their complaints to the Federal Deposit Insurance Corp.
Their suit, filed in Los Angeles County Superior Court, said San Francisco-based Sumitomo retaliated by denying them performance reviews, work assignments, promotions, and raises. The two officers also said they were treated unfairly because they are not of Japanese origin.
The $5 billion-asset bank denied the claims and said the two employees had threatened to go public with the allegations unless the bank paid them a total of $2.7 million, according to Sumitomo's lawyer. The plaintiffs were accused of trying to capitalize on similar complaints community groups have made against Sumitomo.
But the charges have resonated with other employees, both past and present, and will likely trigger additional litigation, said Robert Gnaizda, general counsel for the Greenlining Institute, a community activist group that has tangled with the bank. "I know of about a dozen whistleblowers with similar stories. And we don't know how many others are in the same situation."
Greenlining filed a complaint in December with the FDIC that the bank lent insufficiently to customers of non-Japanese origin and had negligible representation from other ethnic groups in its senior management.
In December, with 33 other activist groups, the institute filed similar allegations with the U.S. Department of Labor. The bank issued adamant denials after much negative publicity.
FDIC spokesman David Barr said the Greenlining complaint came in as part of a routine Community Reinvestment Act assessment. The examination is now complete but probably will not be made public until mid- to late August, he said.
Other Japanese bank units in California view Sumitomo's alleged problems as isolated. Of Sanwa Bank California's 3,000 employees, for example, about 2,000 are Caucasian or Hispanic, said bank spokesman Keith H. Karpe. It has worked with Greenlining during the past two years and earned an outstanding CRA rating last winter, he added.
The discrimination charges are ironic, given that many Japanese banks first opened in this country in response to service deficiencies and discrimination against Japanese customers by U.S. banks.
Sumitomo of California's parent, Sumitomo Bank Ltd. of Osaka, is the world's second-largest bank. Its California subsidiary would not reveal how many of its 1,600 California employees are of Japanese origin.
