BAC Bank of America Corporation

By Peg Brickley

A bankruptcy judge in New York balked Friday at authorizing the questioning of Caribbean banking officials about $175 million deposited in the accounts of a private offshore bank in Anguilla.

At a court hearing in the newly filed chapter 11 bankruptcy of National Bank of Anguilla (Private Banking & Trust) Ltd., Judge Martin Glenn called for legal arguments on whether he has the power to order Eastern Caribbean Central Bank, National Bank of Anguilla and the new National Commercial Bank to answer questions put by William Tacon, the court appointed administrator of the private banking operation.

Officials with the banks couldn't be reached for comment Friday.

Mr. Tacon is in charge of returning money to some 819 depositors with the private bank, an offshore institution that catered to wealthy Americans, including some that "have or had" vacation homes on the tiny island.

The private bank's largest customer has $2 million to $3 million on deposit, the private bank's representatives told Judge Glenn.

Mr. Tacon is fighting to keep the names of depositors under seal in court papers but said Friday most of the funds deposited in the bank were in U.S. dollars and about half the depositors were U.S. citizens.

The affairs of the private bank became entangled in the slow-motion collapse of its parent, the National Bank of Anguilla Ltd.

Eastern Caribbean Central Bank authorities took over the National Bank in August 2013, a move designed to stabilize the operation, according to a statement from Victor Banks, chief minister of Anguilla. Officials got rid of the officials responsible for the private bank and directed that funds deposited with it should go to an account at Bank of America in New York.

"That's where our paper trail ends," James McCarroll, a lawyer for Mr. Tacon, told Judge Glenn at a hearing in the U.S. Bankruptcy Court in Manhattan. Mr. Tacon, who was appointed to oversee the private bank earlier this year, hasn't been able to get answers about what happened to the money once it got to the New York bank, Mr. McCarroll said.

National Bank of Anguilla was put in the hands of a receiver and shut down April 22. Its business was taken over by a new bank owned by the government of Anguilla, the National Commercial Bank of Anguilla Ltd.

The private bank has also shut down operations and is liquidating.

Mr. Tacon wants to question all concerned about the handling of the private bank's funds during the years when, he believes, both banks operated under the oversight of regulators, but were insolvent.

Friday, Judge Glenn said he isn't certain he has the authority to order Caribbean banking regulators to submit to a U.S. bankruptcy investigation. Mr. Tacon has already initiated legal action in Anguilla in his effort to follow the money, the judge noted.

"You're seeking to jump-start and bypass whatever discovery restrictions may apply in Anguilla by taking 2004 discovery in the case before me and I have concern about that," Judge Glenn said. By 2004 discovery, the judge referred to a powerful tool in U.S. bankruptcy law that allows those involved in a case to conduct investigations.

"We're hitting stone walls...left and right," Mr. McCarroll said, explaining the trouble Mr. Tacon has faced getting information in Anguilla.

Mr. Tacon, however, did win an order authorizing him to get the records from Bank of America that relate to transfers of deposited funds from the private bank. Some of that money may still remain in the New York account, he said.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

June 24, 2016 14:46 ET (18:46 GMT)

Bank of America (NYSE:BAC)
Historical Stock Chart
From Mar 2024 to Apr 2024

Bank of America (NYSE:BAC)
Historical Stock Chart
From Apr 2023 to Apr 2024