A federal court in California has ordered a bank to repay $6.9 million in deposits and interest that the Resolution Trust Corp. accidentally overpaid to the bank seven years ago.
The decision by the U.S. District Court in Los Angeles requires Rosemead, Calif.-based First American Bank to return $3.6 million in excess deposits that the RTC provided as part of the bank's 1989 purchase of First California Savings, a failed thrift.
The bank must also reimburse the RTC for interest the agency would have received on the deposits since the Oct. 30, 1989, transaction, at a 10% annual rate. That's about $60,000 per month.
Officials at the Federal Deposit Insurance Corp., which took over the responsibility for affairs related to the RTC in 1996, declined to comment on the case. First American president and chief executive William L. O'Mara said he was unhappy with the decision, but didn't want to comment further.
In 1989, First American had paid $32,500 for $198 million in deposits from the Resolution Trust Corp. No assets were purchased at the time, though the bank did buy some loans later.
Government officials alleged in the case that First American breached its contract with the RTC by failing to reconcile its books after the transaction to ensure that the proper funds had been transferred. Officials contended that was part of the agreement the agency had with the bank.
At the time, the RTC was less than two months old and was still understaffed, overworked, and inexperienced. So officials relied on acquiring banks to ensure that the transaction was in order and that any discrepancies were brought to the agency's attention, explained FDIC spokesman David Barr.
Instead, RTC officials didn't discover the problem until they looked at the books when the receivership formally ended in January 1994.
Bank officials have argued that the statute of limitations on the case had already expired, but the FDIC claims that the statute had been extended by agreement with the bank.
First American has now asked the court to reconsider, claiming it has new evidence showing that RTC attorneys also believed the statute of limitations had expired, Mr. O'Mara said. A hearing has been scheduled for Dec. 23 on the motion.