3 Groups Challenge Bank Merger Cite Case Alleging Nationsbank Fraud
Jim Gallagher Of The Post-Dispatch, St Louis Post-Dispatch (MO)
Three community activist groups filed challenges Wednesday to NationsBank's planned purchase of Boatmen's Bancshares.
They raised issues of securities fraud against NationsBank in Texas. They complained that the bank charges high interest for consumer loans through its finance company and rejects too many minority mortgage applicants.
The groups asked the Federal Reserve Board to reject the North Carolina bank's application to buy Boatmen's. Leading the challenge is Inner City Press/Community on the Move of New York City. Also signing on were the Mid-South Peace and Justice Center of Memphis and the New Mexico Alliance. "This is something we expected," a NationsBank spokeswoman said, noting that Inner City has filed protests against several major bank mergers. The groups note that in August, NationsBank agreed to pay $275,000 to settle fraud charges brought by the Texas State Securities Board. Last spring, NationsBank had agreed to pay $30 million to settle a class-action suit stemming from the same events. The Securities Board charged that NationsBank stockbrokers, operating out of NationsBank branches, used deception to sell shares in two term trusts. According to the board, customers were told the funds were safe alternatives to bank certificates of deposit, and that "the only way an investor could lose money would be if the government went broke." In fact, the funds were "high-risk, volatile investments" in derivatives. Bank employees were trained to refer people with high account balances to the brokers, according to the board. Florida authorities are also investigating the practices of NationsBank's securities operation, called NationsSecurities. The community groups claimed that the Boatmen's purchase will "turn Nati onsBank's selling machinery loose upon Boatmen's existing customer base, and other consumers in Missouri, Kansas, Oklahoma, Arkansas and New Mexico." NationsBank said there was no deception. "We maintain that we abided by the letter and spirit of the rules," said a spokesman. The community groups also complained that NationsBank operates a finance company, called NationsCredit, that offers loans at higher rates to people who wouldn't qualify for bank loans. Much of NationsBank's lending to black people is done at higher interest rates through its finance company, the community groups charged. "They're much more likely to operate a NationsCredit office in a minority community than a branch," charged Matthew Lee, director of Inner City. …