NEW ORLEANS (CN) - The Federal Reserve Bank of Atlanta cannot account for $795,000 it should have received from minority-owned United Bank and Trust in the days after Hurricane Katrina, the United Bank claims in Federal Court.
The Federal Reserve cannot account for $372,000 it should have received from the minority-owned bank in a single week just after Katrina, and another $422,000 went missing later that winter, United Bank claims in Federal Court.
Because the transactions occurred "mere days" after Hurricane Katrina, which devastated New Orleans, the charges were not immediately detected. And United Bank says that neither it nor its processor received any documentation of the losses.
United Bank describes itself in the lawsuit as "one of Louisiana's leading minority-owned community banks."
On Oct. 19, 2005, six weeks after the hurricane, United Bank relayed a cash letter to the Federal Reserve with more than $121,000 in deposits. It says this cash letter was either "misposted or misrouted." The money was never credited to United Bank's account, and the Federal Reserve never notified United Bank that the checks contained in the cash letter were being dishonored.
In March, five months later, the same thing happened again, to more than $300,000 in cash, the bank says. One of the checks included in that drop was to be drawn upon the Whitney National Bank. This check was subsequently verified with tracer data and clearing receipts, and was proven to have cleared at the Whitney Bank the same month it was sent to the Federal Reserve.
"The Whitney Bank check was received and cleared through the Federal Reserve," the suit states. "(T)he inescapable conclusion is that the Federal Reserve necessarily received each of the checks that were transmitted" in that particular drop. But money was not applied to United's bank account.
United Bank says that it first became aware that some of its transactions were not showing up with the Federal Reserve during its 2008 first-quarter audit. When it was clear that not all transactions were being credited, United Bank unsuccessfully sent letters and documentation to the Federal Reserve, and later to the Federal Reserve's backer, the Kansas Bankers surety company. Kansas Bankers responded by canceling United's surety bond.
United Bank claims the Federal Reserve violated its own policies, and seeks damages for breach of good faith and fair dealing, violation of Louisiana law, and breach of contract and fiduciary duty. It is represented by James Garner of New Orleans.
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