A lawsuit alleging BankAmerica Corp. overcharged hundreds of California municipalities as their bond trustee isn't directly affecting business, but it's not helping public relations.
More than 250 California municipalities have joined San Francisco since it filed suit in May. San Francisco Superior Court Judge A. James Robertson 2d asked the plaintiffs to provide more specific information about their complaints last week.
The suit alleges BankAmerica overcharged the municipalities and the state for services between 1985 and 1995.
Though San Francisco estimated its losses at between $12 million and $17 million, Marc Slavin, a deputy city attorney, said the total amount claimed by the municipalities may be closer to $1 billion.
BankAmerica spokesman John Keane said the company is optimistic. He denied that the lawsuit was hurting business. "I think our public relations issue has been very credible," he said.
When the suit was filed BankAmerica said it would prove it was acting appropriately. Even if it lost, the company claimed, the cost wouldn't be material to earnings.
But that was when the plaintiffs sought damages of no more than $17 million, a drop in the bucket for $258.4 billion-asset BankAmerica.
Still, Wall Street analysts aren't following the suit, and said they are not concerned about it. "I don't see it as a huge deal," said Mike Abrahams, an analyst with Sutro & Co. in San Francisco.
One reason for the lack of concern is that BankAmerica sold its bond trustee business in 1995 to First Bank System, now U.S. Bancorp, of Minneapolis.
BankAmerica is a large municipal bond underwriter, but that business is not likely to be affected. "Their underwriting department is too powerful to be hurt," said Zane Mann, owner and publisher of the newsletter California Bond Adviser.
"The broker-dealer industry doesn't give a damn about the lawsuit," Mr. Mann said. However, the suit has clearly created bad blood between BankAmerica and the California cities. It may also cause distrust among bondholders who believe they may have been shortchanged, Mr. Mann said.
Mr. Slavin, the deputy city attorney, said San Francisco has had a long and favorable relationship with BankAmerica, but that this has changed.
He said the suit "should raise a question in the mind of every depositor of that bank (about) how their money is being managed."
The city has about 70 relationships with BankAmerica, he said.
Judge Robertson set a date of April 1 to hear from an expert accounting witness. BankAmerica wants to prove that it has settled its claims. It has already paid $5 million to cities that claimed they were owed money.
