Court approves MPLA-BoS deal on deposits
With some slight modifications, the Superior Court approved the Bank of Saipan’s agreement with the Marianas Public Lands Authority on the disposition of its deposits with the bank. It also ordered the bank and the Retirement Fund to subscribe to a court-issued depository order due to their failure to reach their own agreement.
In an Aug. 25 ruling, Associate Judge Juan T. Lizama, moved to adopt the BoS and MPLA’s proposed agreement, which, among others, calls for the immediate release of $164,622 to MPLA, representing 1 percent interest on the original principal amount, and a monthly principal reduction of $50,000.
“The court finds this agreement acceptable. It provides for return of MPLA’s deposits within a reasonable period and provides adequate security in case of bank failure,” said Lizama.
Lizama, however, pushed for two changes in the agreement: the agreement must clearly delineate which loans are guaranteed and which are not and that the document should be made public.
The judge said that “certain loans offered as security are described as ‘CDA guaranteed’ when they are not so guaranteed.” He said the document should also not be marked “confidential” because it is of public interest.
MPLA has some $8.1 million deposited with BoS while the Fund has some $5.57 million.
In the absence of a mutually adopted agreement between the bank and the Fund, the court issued a depository order for both parties to follow.
At the same time, the court said it will adopt the proposal of the bank as an order with one major change: the removal of provisions making the order confidential.
Lizama said the bank’s proposal mirrors the agreement it reached with MPLA, while the Fund’s proposal “calls for a higher interest rate on principal, increased monthly payouts, and termination of order at the end of the receivership.
“For the reasons stated below, the court has concluded that the bank’s proposed order is superior in most respects,” he said.
Based on the court-issued depository order, the bank shall pay the Fund $117,355 within 10 business days (of the date of the order), representing 1 percent interest of the principal amount from April 30, 2002—when the bank was put on receivership—through May 31, 2004.
The new account with a principal balance of $5.570 million shall earn interest at the bank’s prevailing savings account rate beginning June 1, 2004 and shall be payable monthly.
Further, the order requires the bank to immediately begin making principal reductions of $20,500 a month to the Fund.
The court said that while it understands the Fund’s concerns, overly high payouts would make it difficult for the bank to make new loans, ultimately harming all depositors, including the Fund.
Based on the Fund’s proposal, bank payments should only take seven years. With a $20,500 monthly pay, it will take 22 years to return all of the Fund’s deposit.
On April 29, 2002, the Secretary of Commerce shut down the bank, citing that it was insufficiently liquid to continue to meet the demands of its over 6,000 depositors.