Banks May Lose $51 Million in Heller Bankruptcy Dispute

From: The Recorder, January 6, 2009

A “clerical error” could cost Bank of America and Citibank $51 million if Heller Ehrman has its way in bankruptcy court.

Bank of America, acting for itself and as an agent of Citibank, terminated both institutions security interests on Aug. 3, 2007, according to public records obtained from the California Secretary of State. The banks admit they made a mistake, and still want to be considered secured creditors, but courts haven’t looked kindly on similar errors in the past.

A secured creditor must “perfect” its security interests with uniform commercial code filings and file updates every five years. The bank last submitted such a “continuation” in 2005, so another filing wasn’t needed until 2010. On Oct. 1, a week after Heller said it would dissolve, the bank filed a “correction statement” saying the 2007 filing was a “clerical error.” On Monday, the bank declined to discuss how or why the error occurred, or who made it — the 2007 filing required no signature.

For the full article click here.