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A southwestern Indiana bank has filed a lawsuit accusing a state board of unlawfully withholding hundreds of millions of dollars from Indiana financial institutions for decades.
The lawsuit was filed by Boonville Federal Savings Bank against the Indiana Board for Depositories, alleging the board has failed since 1985 to distribute excess funds held in the Indiana Public Deposit Insurance Fund, as required by state law. The case is pending in Marion Superior Court, where it was filed in late December.
The Public Deposit Insurance Fund was created in 1937 to protect public funds deposited in Indiana banks and credit unions. Financial institutions designated to hold public funds paid assessments into the fund, which is administered by the depositories board.
The Board of Depositories and Indiana State Treasurer Daniel Elliott issued a joint statement Monday, calling the lawsuit a “money grab” that would come at the expense of Hoosier taxpayers, local governments and community banks by seeking to reduce the very insurance fund that protects tax dollars from bank failures.
“The entire Board of Depositories team is fully committed to defending against this lawsuit and defending an important tool that has protected this state for nearly 100 years from being taken away from those who rely on it the most,” the statement said.
According to the lawsuit, the Public Deposit Insurance Fund has been tapped only three times in its history, paying out a total of $2.7 million.
The board stopped collecting assessments in 1985 after determining the fund had sufficient reserves, the lawsuit says. At that time, the fund held about $126 million. The complaint states the fund now holds more than $346 million
According to the complaint, state law requires that when the fund exceeds the reserve needed for losses, the excess must be distributed proportionally to the depositories that paid assessments. The lawsuit alleges the board has not distributed any excess funds to depositories in more than 40 years, despite continued growth in the fund through investment earnings
The lawsuit also alleges the board has failed to comply with other statutory duties, including regularly reassessing the fund’s reserve levels, issuing semiannual reports to the State Budget Committee, maintaining publicly available meeting records, and providing audited financial statements in recent years
The law firm of CohenMalad LLP, which is representing Boonville Federal, has asked the court to certify the case as a class action, order an accounting of the fund, declare that the board violated Indiana law, and require the distribution of excess funds, along with damages, interest, and attorneys’ fees.
The case is Boonville Federal Savings Bank vs. Indiana Board for Depositories, 49D01-2512-CE-060119.
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