SunTrust 2011 Annual Report Download - page 204
Download and view the complete annual report
Please find page 204 of the 2011 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notes to Consolidated Financial Statements (Continued)
188
at December 31, 2011, 2010, and 2009, respectively. The losses related to the FINRA agreement were accrued in 2008; however,
during the years ended December 31, 2011 and 2010, the Company recognized gains of $33 million and $18 million relating to
these ARS, respectively. Gain and loss amounts are comprised of net trading gains and net securities gains resulting primarily
from sales, calls, and redemptions of both trading securities and securities AFS that were purchased from investors, as well as,
net mark to market gains on positions that continue to be held by the Company. Due to the pass-through nature of these security
purchases, gains and losses are 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, 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 prejudice on
June 15, 2011. Plaintiffs have appealed this decision to the Fourth Circuit Court of Appeals.
Other ARS Claims
Since April 2008, several arbitrations and individual lawsuits have been filed against STRH and STIS by parties who purchased
ARS through these entities. 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 in these actions are seeking to recover the par
value of the ARS in question as well as compensatory and punitive damages in unspecified amounts. The majority of these claims
were settled during the year ended December 31, 2011. The Company reserved $7 million and $16 million as of December 31,
2011 and 2010, respectively, for estimated probable losses related to remaining other ARS claims. Losses related to the other ARS
claims have been recognized in trading income/(loss) in the Consolidated Statements of Income/(Loss).
Interchange and Related Litigation
Card Association Antitrust Litigation
The Company is a defendant, along with Visa U.S.A. and MasterCard International (the “Card Associations”), as well as several
other banks, in one of several antitrust lawsuits challenging the practices of the Card Association (the “Litigation”). For a discussion
regarding the Company’s involvement in the Litigation matter, refer to Note 18, “Reinsurance Arrangements and Guarantees.”
In re ATM Fee Antitrust Litigation
The Company is a defendant in a number of antitrust actions that have been consolidated in federal court in San Francisco, California
under the name In re ATM Fee Antitrust Litigation, Master File No. C04-2676 CR13. In these actions, Plaintiffs, on behalf of a
class, assert that Concord EFS and a number of financial institutions have unlawfully fixed the interchange fee for participants in
the Star ATM Network. Plaintiffs claim that Defendants’ conduct is illegal under Section 1 of the Sherman Act. Plaintiffs initially
asserted the Defendants’ conduct was illegal per se. In August 2007, Concord and the bank defendants filed motions for summary
judgment on Plaintiffs’ per se claim. In March 2008, the Court granted the motions on the ground that Defendants’ conduct in
setting an interchange fee must be analyzed under the rule of reason. The Court certified this question for interlocutory appeal,
and the Court of Appeals for the Ninth Circuit rejected Plaintiffs’ petition for permission to appeal on August 13, 2008. Plaintiffs
subsequently filed a Second Amended Complaint in which they asserted a rule of reason claim. This complaint was dismissed by
the Court as well, but Plaintiffs were given leave to file another amended complaint. Plaintiffs filed yet another complaint and
Defendants moved to dismiss the same. The Court granted this motion in part by dismissing one of the Plaintiffs two claims-–but
denied the motion as to one claim. On September 16, 2010, the Court granted the Defendants’ motion for summary judgment as
to the remaining claim on the grounds that Plaintiffs lack standing to assert that claim. Plaintiffs have filed an appeal of this decision
with the Ninth Circuit Court of Appeals and the parties are awaiting that court's decision.