By The Federal Deposit Insurance Corporation (FDIC) is facing a legal battle against nearly 170 former employees of First Republic Bank. These individuals are seeking to recover their retirement funds, which were deposited in a trust set up by the now defunct lender.
FDIC Cites Payment of Claims
The FDIC points out that it has already paid a portion of the claims made by the employees on their retirement funds through receiver’s certificates. In response, the FDIC accuses the plaintiffs of attempting to “jump the line” of First Republic creditors in order to recover unspecified cash amounts.
According to a filing by the FDIC, “Plaintiffs’ claims have also already been paid in full to the extent the law allows through the receivership administrative claims process.”
In contrast, Timothy Walsh, an attorney for the plaintiffs, argues that this assertion by the FDIC is disingenuous. He highlights that the receiver’s certificates mentioned in the filing are merely placeholders and may or may not be redeemed for actual monetary compensation.
“No one has gotten any cash. No one has gotten any payments,” states Walsh. He further describes the receiver’s certificate as a document that merely states the value of a claim without providing any tangible benefits. “It’s comical—they deem that payment in full,” he adds.
Plaintiffs Seek Injunction to Safeguard Funds
The original complaint, filed in California’s Northern District on December 5, requests an injunction to ensure that the disputed funds, which amount to around $150 million, are solely reserved for the benefit of the plan participants. The plaintiffs aim to prevent the FDIC from using this money to repay any other creditors of the bank.
Without intervention from the court, the plaintiffs argue that the FDIC could dissipate the assets earmarked in the trust at any time. They fear being pushed to the end of the line and ultimately receiving only a fraction of what they are rightfully owed.
Lawsuit Alleges FDIC Wrongfully Dominated Funds in First Republic Case
The plaintiffs in a recent lawsuit against the Federal Deposit Insurance Corporation (FDIC) allege that the agency wrongfully took control of funds from the nonqualified deferred compensation plan trust set up by First Republic. This move has left many former employees at risk of losing their hard-earned money.
According to attorney John Walsh, who is representing the plaintiffs, the employees’ contributions to the deferred compensation program varied greatly. Some individuals are seeking to recoup around $100,000, while others are seeking to recover millions. These funds, Walsh argues, should be treated as earned wages that have been deferred.
First Republic, along with Silicon Valley Bank and Signature Bank, succumbed to a bank run and a crisis of confidence in regional lenders. As a result, the FDIC stepped in and arranged for the sale of First Republic to JPMorgan Chase on May 1.
The plaintiffs claim that payments from the nonqualified deferred compensation plan trust stopped around May 18. They argue that the FDIC has taken wrongful control of these funds and improperly classified them as unsecured claims. This classification could potentially lead to the loss of all their money.
While the FDIC declined to provide further information about the case, the plaintiffs are a diverse group. Some are currently registered as investment advisors and brokers with JPMorgan, while others had different roles at First Republic. However, they all have one common factor – they were high earners at First Republic, with salaries ranging from $200,000 to $300,000.
Notably, this lawsuit does not involve any C-suite executives. Attorney John Walsh is determined to fight for the plaintiffs’ rights and hopes for a favorable outcome in their pursuit of recouping their hard-earned earnings.
JPMorgan Chase declined to comment on the lawsuit, pending further developments.
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