Court orders trial on buyout by NationsBank

November 24, 1994|By Bloomberg Business News

DALLAS -- NationsBank Corp., fighting a suit claiming the bank company used ill-gotten information to buy the operations of First RepublicBank Corp., must face a jury trial, a Texas appeals court ruled.

The suit, filed in a Dallas state court in June 1992, alleges that NationsBank's predecessor, NCNB Corp., and Chairman and Chief Executive Hugh McColl Jr. unlawfully obtained the acquisition plan to be used by Lone Star Partners in its attempt to buy the insolvent bank subsidiaries of Dallas-based First RepublicBank.

The July 1988 acquisition of First Republic's 40 failed banks doubled NCNB's assets to nearly $60 billion and vaulted it from obscurity to national banking prominence.

NCNB had dropped out of the competition for the failed bank in 1988, when it estimated it would have to bid about $1.5 billion, the suit alleges.

NCNB, however, allegedly obtained control of the bank for between $250 million and $300 million using Lone Star's proprietary plan, the suit said.

The terms of the acquisition included a private ruling by the Internal Revenue Service that let NCNB use as much as $2 billion in First Republic tax-loss carry forwards to offset NCNB's future earnings.

"We are asking for the title to the Texas bank that we should have been allowed to purchase from the FDIC, but for the fraud of NCNB," said Carl David Adams, Lone Star's attorney. "Most of NationsBank's wealth will be in the hands of a Texas jury."

The Nov. 15 court order overturns a lower court decision dismissing the suit.

A NationsBank representative said the company wouldn't comment on the pending litigation.

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