Meritor Sues Salomon, Travelers
PHILADELPHIA - Meritor Savings Bank said it sued Salomon Brothers Inc. and Travelers Corp. for breaking an agreement to pay the bank money owed by four real estate partnerships.
The suit, filed in June in Philadelphia common pleas court, was disclosed along with the $6.2 billion-asset thrift's income for the third quarter. Meritor earned $57.6 million, or $1.35 a share, in contrast to a loss of $22.6 million, or 64 cents a share, a year earlier.
A $76.4 million gain from early retirement of debt generated the third-quarter profit. Nonperforming assets rose $61 million since June 30, to $457 million, with $59 million attributed to defaults by partnerships affiliated with Salomon.
Default Laid to Fraud
Meritor claimed the loans went into default last April because of fraud and other misconduct by Salomon and Travelers. The bank said Prospect Co., a Travelers subsidiary, guaranteed repayment of the loans.
A Travelers spokesman said the suit was without merit, but he declined to elaborate. A spokesman for Salomon said it would defend against the suit, but he declined to comment further.
Meritor is seeking undisclosed punitive and compensatory damages. The thrift has undergone a major restructuring in recent years after a failed nationwide expansion bid. Assets have fallen $300 million since year-end 1990.
They would have dropped another $400 million if it completed the sale of 15 branches of a savings and loan affiliate to First American Bankshares of Washington, which was canceled after it failed to win regulators' approval.