Wells Loses Bid for Damages from U.S.
WASHINGTON - A federal appeals court has rejected Wells Fargo & Co.'s efforts to collect more than $10.7 million in damages from the government in a breach-of-contract suit.
The U.S. Court of Appeals for the Federal Circuit said in its July 2 opinion that the bank cannot collect damages to compensate it for the money it could have made if the government hadn't broken its word.
A banking lawyer said the ruling could affect the 100 thrifts with goodwill claims. These thrifts argue that the government broke its promise to let them use a favorable accounting treatment for 40 years. They are seeking $10 billion in damages.
The lawyer said the Wells Fargo case may make it tougher for the thrifts to collect money for lost profits. But he said there are still dozens of other damage claims these institutions can rely upon.
The dispute arose from Wells Fargo's decision in the 1980s to finance High Plains Corp.'s construction of an ethanol plant. Farmers Home Administration agreed to guarantee 90% of the loan, provided the bank met several conditions.
When the deal went sour, Wells Fargo tried to collect from the government-backed agency. But it refused to pay, claiming the bank failed to meet all the conditions in its contract.
The appeals court ruled that the agency has to cover Wells Fargo's losses on the loan, which totaled $389,423. But it overturned a lower court's decision that the bank is entitled to recoup $10.3 million in profits it could have earned if the agency had paid up on time.
- Jaret Seiberg
$718,000 Penalty for Unauthorized Merger
WASHINGTON - The Federal Reserve Board fined the chairman of Bank of Commerce and Trust Co. in Wellington, Kan., $717,941 for violating the Bank Holding Company Act.
The Fed said W.C. Long Jr. merged Summer County Bancshares and Cedar Vale Bank Holding Co. without permission. It also said Mr. Long refused to undo the merger after an examiner notified him of the violation.
Mr. Long denied any wrongdoing, saying in an interview that he never merged the two companies. "A merger is when one corporate entity extinguishes another," he said. "I still owned 100%. There was no change of control down the corporate structure."
He said he will ask a federal appeals court to reverse the Fed's ruling.
- Jaret Seiberg
Chairman Is Fined; Bank Covered His Overdraft
WASHINGTON - The Federal Reserve Board ordered the chairman of State Bank of Texas to pay a $9,500 fine to settle charges that he violated the insider lending rules.
The Fed said William B. Black 3d, who also serves as president of the Houston-based bank, got into trouble when State Bank paid an overdraft on his checking account.
- Phil Olaya
Mr. Olaya is an intern with the Institute on Political Journalism, a program of the Fund for American Studies.