Former First Republic workers sue FDIC over withheld retirement pay

First Republic Bank

18/12/2023 20:37

By Douglas Gillison
       Dec 18 (Reuters) - Nearly 170 former employees of
California's failed First Republic Bank have sued the U.S.
Federal Deposit Insurance Corporation (FDIC), alleging that the
regulator is improperly holding up at least $150 million in
retirement funds, a plaintiffs' attorney said on Monday.
    The lawsuit marks the latest fallout for the FDIC from three
bank failures earlier this year that cost the agency's deposit
insurance fund about $32 billion and have drawn scrutiny by
lawmakers.
    The lawsuit was filed on Dec. 5 in the U.S. District Court
for the Northern District of California but has not been
previously reported.
    With assets of more than $200 billion, First Republic in May
became the largest bank to fail since the 2007-2009 global
financial crisis, despite efforts by major banks including
JPMorgan Chase & Co  JPM.N  to right the ship, including a $30
billion infusion of deposits in March of this year.
    As receiver, the FDIC in May sold virtually all the bank's
assets to JP Morgan, which assumed all deposits as well.
    In their complaint, the former employees allege that in
mid-May the FDIC ceased paying into a deferred compensation plan
that First Republic had earlier established for them in a trust.
They say the FDIC instead began treating them as unsecured
creditors, meaning they could be left with nothing. 
    "It's really inequitable. The employees are the ones that
kept the bank healthy and profitable," said attorney Timothy
Walsh of Winston & Strawn. His clients did not include any of
the top executives whose alleged mismanagement contributed to
First Republic's demise, Walsh added.
    "They should not be penalized in this process."
    Walsh said the FDIC's resolution of First Republic 
protected the Wall Street banks that injected deposits, while
the former employees' retirement funds were much smaller. First
Republic's failure cost the FDIC about $15 billion, according to
a recent estimate.
    The FDIC is also facing litigation from the former parent
company of Silicon Valley Bank, which is seeking the return of
about $2 billion the agency seized after the bank's collapse.
    The FDIC declined to comment. JPMorgan did not respond to a
request for comment.

 (Reporting by Douglas Gillison
Editing by Bill Berkrot)
 ((douglas.gillison@thomsonreuters.com; Reuters Messaging:
@douglasgillison))