SunTrust 2010 Annual Report Download - page 197

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
Company believes that FINRA has completed its investigation and intends to recommend that charges be filed against
both STRH and STIS. The parties are engaged in settlement discussions, and the Company has accrued its best estimate
for this incurred loss. In addition, in November 2008, the Company moved forward with ARS purchases from essentially
the same categories of investors who would have been covered by the original agreement with FINRA as well as certain
other investors not addressed by the agreement. As of December 31, 2010, the Company has purchased approximately
$596 million of ARS and is expected to purchase approximately $46 million in additional ARS. The fair value of ARS
purchased pursuant to the pending settlement, net of redemptions and calls, was approximately $147 million and $176
million in trading securities and $128 million and $156 million in securities AFS, at December 31, 2010 and 2009,
respectively. The Company had reserved $18 million and $33 million at December 31, 2010 and 2009, respectively, for
the estimated remaining probable losses. The remaining loss amount represents the difference between the par amount
and the estimated fair value of the remaining ARS that the Company believes it will likely purchase from investors. This
amount may change due to changes in the fair market value of the underlying investment and therefore, can be impacted
by changes in the performance of the underlying obligor or collateral as well as general market conditions. The
Company recognized $177 million of losses relating to actual or anticipated ARS purchases during the year ended
December 31, 2008. However, some of this loss has been reversed through the recognition of gains, which totaled
approximately $18 million and $15 million during the years ended December 31, 2010 and 2009, respectively. These
amounts are comprised of trading gains or losses on probable future purchases, trading gains or losses on ARS classified
as trading securities that were purchased from investors, and securities gains on calls and redemptions of securities AFS
that were purchased from investors. Due to the pass-through nature of these security purchases, the economic loss has
been included in the Corporate Other and Treasury segment.
In re LandAmerica Financial Group, Inc. et al.
Two putative class action lawsuits have been filed against the Company by former customers of LandAmerica 1031
Exchange Services, Inc, (“LES”), a subsidiary of LandAmerica Financial Group, Inc. (“LFG”). The first of these actions,
Arthur et al. v. SunTrust Banks, Inc. et al., was filed on January 14, 2009 in the U.S. District Court for the Southern
District of California. The second of these cases, Terry et al. v. SunTrust Banks, Inc. et al., was filed on February 2, 2009
in the Court of Common Pleas, Tenth Judicial Circuit, County of Anderson, South Carolina, and subsequently removed
to the U.S. District Court for the District of South Carolina. On June 12, 2009, the Multi-District Litigation (“MDL”)
Panel issued a transfer order designating the U.S. District Court for the District of South Carolina, Anderson Division, as
MDL Court for IRS Section 1031 Tax Deferred Exchange Litigation (MDL 2054). Plaintiffs’ allegations in these cases
are that LES and certain of its officers caused them to suffer damages in connection with potential 1031 exchange
transactions that were pending at the time that LES filed for bankruptcy. Essentially, Plaintiffs’ core allegation is that
their damages are the result of breaches of fiduciary and other duties owed to them by LES and others, and fraud and
other improper acts committed by LES and certain of its officers, and that the Company is partially or entirely
responsible for such damages because it knew or should have known about the alleged wrongdoing and failed to take
appropriate steps to stop the same. The Company believes that the allegations and claims made against it in these actions
are both factually and legally unsupported, and has filed a motion to dismiss all claims. The Court granted this motion to
dismiss with leave to re-plead, another amended complaint has been filed, and the Company’s motion to dismiss this
complaint has been filed and fully briefed.
In addition, the Company has been made aware that the bankruptcy trustee representing the estates of LFG and LES
currently is investigating whether to bring claims against STRH and other entities related to the purchase of ARS by LES
through STRH. The total par amount of ARS bought through STRH and held by LES at the time of the collapse of the
auction rate market in February 2008 was approximately $152 million. At this time, no legal action has been filed by the
trustee. The underlying bankruptcy proceeding is pending in the U.S. Bankruptcy Court for the Eastern District of
Virginia.
Other ARS Claims
Since April 2008, several arbitrations and individual lawsuits have been filed against STRH and STIS by parties who
purchased ARS through the firms. Broadly stated, these complaints allege that STRH and STIS made misrepresentations
about the nature of these securities and engaged in conduct designed to mask some of the liquidity risk associated with
them. They also allege that STRH and STIS were aware of the risks and problems associated with these securities, and
took steps in advance of the wave of auction failures to remove these securities from their own holdings. The claimants
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