SunTrust Banks Inc. is preparing to pay $6 million to $8 million to settle a lawsuit in California that contends its Florida subsidiary provided trust services for an investment scheme that ultimately proved fraudulent.

The lawsuit named SunTrust in Florida and Bank One Corp.'s Texas subsidiary as defendants. A proposed settlement filed in Los Angeles Superior Court in May said SunTrust would pay investor-plaintiffs in the class action $6.25 million, plus attorney's fees. In addition, SunTrust would set aside $5 million of the $18.2 million collateral for the securities to be paid to registered investors.

In the proposed settlement SunTrust denied any wrongdoing, and said it has no liability to the investors. A final settlement could be reached by the end of next week. Lawyers for SunTrust and Bank One did not return phone calls seeking comment.

The lawsuit is the latest example of a financial institution being held partly responsible for the actions of a business partner or affiliate. Last August Bear, Stearns & Co. agreed to fork over $38.5 million to settle criminal and civil charges that it had facilitated improper trading in customer accounts that were managed by a client of its clearing operations, A.R. Baron & Co.

The dispute with SunTrust and Bank One arose three years ago after 1,800 people were left holding worthless securities sold to them from 1994 to 1997 by First Lenders Indemnity Corp., a now-defunct company that was backed by a man who had served prison time for federal bank fraud. This man was operating under an assumed name, Jonathan Pierpont Boston.

First Lenders sold about $73 million of securities. Most of the investors, court documents said, were elderly or lower-income people living in California, Texas, and Florida.

Court documents said about 475 investors bought the securities that had SunTrust named as the trustee. The bulk of the investors bought their securities earlier, when Bank One Texas was trustee.

The lawsuit said Mr. Boston and his company were operating a Ponzi scheme, using money from later investors to pay off earlier ones and diverting funds to their personal use. The suit also said the securities were illegal because they were not registered with the Securities and Exchange Commission.

SunTrust and Bank One got pulled into the problem by agreeing to act as trustees for the securities, court documents said. The investors have alleged that by acting as trustees for the notes despite being aware of Mr. Boston's past links to crime, the two banking companies gave a patina of respectability to what turned out to be worthless investments.

An attorney for Bank One said company policy forbids comment on pending litigation.

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