WASHINGTON - The First National Bank of Chicago has reached an agreement with the Office of the Comptroller of the Currency to pay almost $8 million to 18 investors in its troubled Fund F real estate commingled fund.
Some of the investors, however, have not decided if they will accept the settlement money.
In 1992, the OCC alleged the bank did not return the investors' money within a year of their redemption requests, a violation of federal law.
As part of the agreement with the OCC, First National Bank of Chicago does not have to admit or deny the charges made against it, and the OCC withdraws those charges. The OCC grants trust and fiduciary powers to national banks.
Under the settlement, the investors would have to agree to:
dismiss with prejudice claims against the bank (meaning they can't take any more action against the bank); release the bank from all claims; waive their right to make a claim for reimbursement of legal fees; and promise to participate in an orderly liquidation of the remaining assets in the fund.
Doug Bennett, director of real estate with the $37.8 billion Florida State Board of Administration, Tallahassee, said his fund has not yet responded to the settlement, which was reached Jan. 25.
According to the Comptroller of the Currency, Florida will receive $2.1 million as part of the settlement, the largest of the 18 investors.
"We are attempting to determine what that represents," Mr. Bennett said. "It's not the balance of our investment in the fund."
According to the agreement, the money represents the proportionate distribution the investors would have received at the time of their request plus a "reasonable rate of interest on that value after the one-year notice and redemption period."
Similarly, Gary Karlin, director-trust investments for the $1.2 billion fund of Schering-Plough Corp., Madison, N.J., said his fund had not accepted the $1.4 million settlement it is slated to receive.
"We haven't received any money, and we have not agreed to do anything," said Mr. Karlin.
Other investors with large settlements include the $2.7 billion pension fund of BP America Inc., Cleveland, which would get $1.3 million if it accepts the settlement, and the $2.3 billion pension fund of Inland Steel Industries Inc., Chicago, which could receive $1.09 million.
Telephone calls to representatives of both funds were not returned.
BP America sued the bank in 1990 seeking to withdraw $17 million it invested in the fund. But at least one other investor that sued the fund - the $7 billion Illinois Municipal Retirement Fund sued in 1990 seeking $41 million - is not part of the settlement fund.
Telephone calls to Illinois Municipal were not returned.
First National Bank of Chicago officials limited their comments to a prepared statement read by a spokeswoman. In part, the statement read:
"The bank, without admitting or denying liability, will offer certain redeeming beneficiaries a share of a $7.8 million settlement fund, if they choose to settle private litigation with the bank.
"Those who choose not to take a share of the settlement fund are free to pursue such private litigation," said First National Bank of Chicago spokeswoman Lisabeth Weiner, reading from the statement.
"No Fund F funds will be used to create the settlement fund," said Ms. Weiner, reading from the statement. "Creation of the settlement fund will have no financial impact on the bank's earnings because of the availability of reserves established in connection with the Fund F dispute."
Fund F had a net asset value of $275 million on Sept. 30, 1994, the latest date for which there are figures. The fund reported property sales of about $50 million, and it has been paying out withdrawal requests.
The fund had a net asset value of $550 million and 45 investors, when the withdrawal requests first became litigious in 1990.
The bank countersued six of the investors in 1990, seeking court permission to restructure the fund into three categories of investors: those that would stay in the fund for five years; those that would receive cash from the sale of specific properties; and those that would take properties in lieu of cash.
The bank lost that appeal.
