Biola’s lawsuit against the Bank of America and BNP Paribas claiming Biola was deliberately cheated on bond interest rates entered a new stage. While a Bloomberg report published in November claimed that presiding judge Manuel Real dismissed charges against BNP Paribas of France, as well as racketeering and fraud charges against Bank of America, he gave Biola 10 days to re-file with amended claims.
The re-filed claim focused solely on Bank of America, claiming fraud and unfair business practice, according to Sylvia Scott of Freeman, Freeman and Smiley, Biola’s lawyer. Charges against BNP Paribas were dropped completely.
An appeal was filed with the U.S Court of Appeals regarding the judge’s ruling for BNP Paribas in the initial court appearance, and there is a possibility that BNP will be brought back if the appeal process is successful.
“Since the trial date has not been set, [the lawsuit] could take as long as another year, but there is a chance that BNP will be brought back into the process, and we will have to go back and amend some of the claims,” Scott said.
Biola had entered into a rate-swap agreement with Bank of America and their partner, BNP Paribas, in 2002 and 2004, but the university later claimed they were deliberately overcharged on interest rates. Biola likely entered into the agreement in an effort to eliminate risk from fluctuating interest rates.
“BNP Paribas is gratified that the court agreed with its assessment of the complaint and has dismissed the complaint in its entirety against BNP Paribas,” said BNP spokeswoman Kerrie McHugh in a statement, according to the Bloomberg report.
Bank of America filed a motion to dismiss on Sept. 21, 2007, claiming that it didn’t deceive Biola about the interest rates. In the motion, the bank claimed, “This case is about nothing more than a borrower who is unhappy with deals it did several years ago and is now trying to get out of them.”
According to several Bloomberg reports, Biola sought to reclaim compensatory and punitive damages amounting to $20 million. The suit filed against Bank of America last July claims that the banks defrauded Biola by charging excessive interest rates on two bonds worth $82 million and that the banks conspired to share the profits from the excess rates.
Had the Internal Revenue Service not decided to audit the bond transaction, it is possible that Biola never would have analyzed their 2002 and 2004 finances and found the discrepancies. However, that didn’t save Biola from being fined an undisclosed amount for claiming a tax-free exemption on the bonds.
Biola’s relationship with the bank goes back over 20 years and, according Joe Mysak of Bloomberg.com, could have affected the decision of Biola not to shop around or investigate the bond closer. Mysak found that shortly before the transaction, the bank lauded Biola as “a loyal client and old friend” while Biola thought they had a “special relationship of trust.”
Biola has since changed banks to Union Bank of California, according to a memo sent to Biola faculty and staff, corroborated by Chelsea Shelby, coordinator of Trusts, Investments and Estate Services. While the seemingly connected timing of the switch was neither confirmed nor denied, Miriam Anderson, assistant to the vice president of financial affairs said “the university’s decision to change institutional banking relationships from Bank of America to Union Bank of California was a decision made as a part of the natural course of reviewing our financial services.”
According to Shelby, students who use wire transfers to send in registration fees will need to get the new wiring instructions from their account counselor or directly from her. She can be reached through BUBBS or extension 5081.
