May 20, 2014

For more information, contact:

J oan Cumbie
251-471-6191
FOR IMMEDIATE RELEASE:
Regions Bank Found Liable for Fraud,
Ordered to Pay Local Sewer Company Millions

Mobile, Ala. Following a week-long trial in J anuary, an arbitration panel has
found that Regions Bank bilked a local sewer company out of millions of dollars.
The panel concluded that Regions Bank defrauded Baldwin County Sewer by
selling the company a series of complex, interest rate swaps. Regions Bank was
ordered to provide Baldwin County Sewer with nearly $10 million in
compensation. The case is believed to be one of the first cases in the country
where a bank has been held liable for fraud in connection with the sale of an
interest rate swap.
The interest rate swaps were part of a financing package that Regions Bank
began marketing to small companies, churches, and non-profits in the early
2000s. As part of the financing packages, customers issued bonds that carried a
variable interest rate. These bonds were more profitable for the bank than
traditional loans. Baldwin County Sewer issued four series of these bonds. It also
purchased three interest rate swaps from Regions Bank. Regions Bank told
Baldwin County Sewer that the interest rate swaps would fix the sewer
companys interest rate. However, when the market crashed in 2008, the sewer
companys interest rate nearly doubled.
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Cunningham Bounds Regions Bank, page 2
The arbitration panel found there was a pervasive failure within Regions Bank
to communicate the true risks of interest rate swaps to its customers and that
these failures constituted a material misrepresentation.
Regions Banks marketing and advertising campaigns were critical to the
panels award. The panel emphasized that Regions Bank through its
advertising, repeatedly held itself out to the community as a trusted advisor
and assumed the relationship of an advisor, as well as being a creditor.
Billy Bonner, an attorney for Baldwin County Sewer and a partner at the Mobile,
Alabama law firm of Cunningham Bounds, LLC, described the arbitration
panels award as unprecedented. In these types of cases, banks typically
argue that the legalese in their loan documents bars a customers fraud claims,
said Bonner, but here the panel did not buy that argument. The panel held
Regions Bank accountable for the misrepresentations it made to its customer.
Regions Bank had a limited right to appeal the award, but elected to satisfy the
award in full.
Bonner and his partner, Skip Finkbohner, both of Cunningham Bounds, LLC,
served as lead co-counsel in the case.
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The law firm of Cunningham Bounds, LLC, founded in 1958, is based in Mobile, Alabama and has
been representing plaintiffs for over 50 years. Today the firm continues its tradition of
representing victims in cases involving catastrophic personal injury, industrial accidents,
defective products, truck and automobile accidents, and medical malpractice. The firm also
has expertise in business litigation, complex litigation, and national and state class action
litigation involving defective products and consumer fraud.