PNC Bank 2013 Annual Report Download - page 226

financial markets in 2007 and 2008, the market for ARCs
became illiquid; that PNC and NatCity knew or should have
known of the increasing threat of the ARC market becoming
illiquid; and that PNC and NatCity did not inform Fulton of
this increasing threat, but allowed Fulton to continue to
purchase ARCs, to Fulton’s detriment. In its complaints,
Fulton alleges that it then held ARCs purchased through PNC
for a price of more than $123 million and purchased through
NatCity for a price of more than $175 million. In each
complaint, Fulton seeks, among other things, unspecified
actual and punitive damages, rescission, attorneys’ fees and
interest.
In the case against PNC (Fulton Financial Advisors, N.A. v.
PNC Capital Markets, LLC (CI 09-10838)), PNC filed
preliminary objections to Fulton’s complaint, which were
denied. NatCity removed the case against it to the United
States District Court for the Eastern District of Pennsylvania
(Fulton Financial Advisors, N.A. v. NatCity Investments, Inc.
(No. 5:09-cv-04855)), and in November 2009 filed a motion
to dismiss the complaint. In October 2013, the court granted
the motion to dismiss with respect to claims under the
Pennsylvania Securities Act and for negligent
misrepresentation, common law fraud, and aiding and abetting
common law fraud and denied the motion with respect to
claims for negligence and breach of fiduciary duty. Fulton
filed an amended complaint in December 2013, reasserting its
negligence and breach of fiduciary duty claims and adding a
new claim under the Pennsylvania Securities Act.
FHLB
In October 2010, the Federal Home Loan Bank of Chicago
brought a lawsuit in the Circuit Court of Cook County,
Illinois, against numerous financial companies, including The
PNC Financial Services Group, Inc., as successor in interest to
National City Corporation, and PNC Investments LLC, as
successor in interest to NatCity Investments, Inc. (Federal
Home Loan Bank of Chicago v. Bank of America Funding
Corp., et al. (Case No. 10CH45033)). The complaint alleges
that the defendants have liability to the Federal Home Loan
Bank of Chicago in a variety of capacities (in the case of the
National City entities, as underwriters) under Illinois state
securities law and common law in connection with the alleged
purchase of private-label mortgage-backed securities by the
Federal Home Loan Bank. According to the complaint, the
Federal Home Loan Bank purchased approximately $3.3
billion in mortgage-backed securities in total in transactions
addressed by the complaint, approximately $345 million of
which was allegedly in transactions involving the National
City entities. The complaint alleges misrepresentations and
omissions in connection with the sales of the mortgage-backed
securities in question. In its complaint, the Federal Home
Loan Bank seeks, among other things, rescission, unspecified
damages, interest, and attorneys’ fees. In November 2010, the
defendants removed the case to the United States District
Court for the Northern District of Illinois. In January 2011, the
district court remanded the case to the Circuit Court of Cook
County. The plaintiff amended its complaint in March 2011
and filed a corrected amended complaint in April 2011. The
corrected amended complaint does not identify any additional
transaction for which the plaintiff seeks recovery from PNC
nor does it add any additional substantive allegations. In May
2011, the defendants filed a motion to dismiss the corrected
amended complaint. The motion was denied in September
2012.
W EAVERING M ACRO F IXED I NCOME F UND
In July 2010, PNC completed the sale of PNC Global
Investment Servicing (“PNC GIS”) to The Bank of New York
Mellon Corporation (“BNY Mellon”), pursuant to a stock
purchase agreement dated February 1, 2010. In July 2009, the
liquidators of the Weavering Macro Fixed Income Fund
Limited (“Weavering”) issued a Plenary Summons in the High
Court, Dublin, Ireland, in connection with a European
subsidiary of PNC GIS’s provision of administration services
to Weavering. The Plenary Summons was served on the PNC
GIS subsidiary (GIS Europe) on or about June 30, 2010. In
May 2011, the liquidator served a Notice of Intention to
Proceed and Statement of Claim, which alleges, among other
things, that GIS Europe breached its contractual duties to
Weavering as well as an alleged duty of care to Weavering,
and investors in Weavering, and makes claims of breach of the
administration and accounting services agreement, negligence,
gross negligence, breach of duty, misrepresentation and
negligent misstatement. The statement of claim further alleges
that investors in Weavering lost approximately €282,000,000
and that, in addition, expended approximately €98,000,000 in
brokerage and exchange commissions, interest, and fees as a
result of the transactions at issue. The statement of claim
seeks, among other things, damages, costs, and interest. In
January 2012, upon application by GIS Europe, the court
issued a judgment ordering a hearing on certain preliminary
issues (a “modular trial”). In March 2012, the plaintiff
appealed this judgment to the Supreme Court of Ireland. In
December 2012, the Supreme Court reversed the order of the
High Court and directed that no modular trial take place at this
stage of the proceedings. In October 2013, GIS Europe made a
motion to, among other things, dismiss or stay the action due
to the plaintiff’s failure to comply with its discovery
obligations. In January 2014, the court entered a consent order
adjourning the motion and staying the plaintiff’s claims until
the plaintiff complies in full with its discovery
obligations. The plaintiff is required to complete its
production by early July 2014 (barring an extension of that
date), and the parties are scheduled to appear before the court
later in July 2014.
In May 2011, BNY Mellon provided notice to PNC of an
indemnification claim pursuant to the stock purchase
agreement related to this litigation. PNC’s responsibility for
this litigation is subject to the terms and limitations included
in the indemnification provisions of the stock purchase
agreement.
208 The PNC Financial Services Group, Inc. – Form 10-K