CNN/St. Pete Times debate includes talk about Alex Sink's banking background
One of the feistiest exchanges between Rick Scott and Alex Sink at their third and final gubernatorial debate Oct. 25, 2010 centered on fraud.
But it was Sink, not Scott, in the hot seat.
"Look, you want to talk about fraud. Let's talk about your job at NationsBank,” Scott said in the debate sponsored by CNN and the St. Petersburg Times. "Your tellers were paid kickbacks, your tellers in your bank were paid kickbacks for directing elderly consumers from ... safe deposits to risky ones.”
Sink countered that she had nothing to do with the scheme Scott was referring to, and in fact, that the lawyer who first made the allegations in court said Sink "had nothing to do with the case, had nothing to do with the situation and didn't know about the problems.”
Here we'll analyze Scott's allegation and Sink's rebuttal.
In 1994, while Sink was president of NationsBank's Florida operations, a stock broker with bank subsidiary NationsSecurities went public with what he described as a nationwide scheme to get bank customers to move investments from federally insured accounts to more risky brokerage and mutual funds.
NationsSecurities broker David Cray, who worked in Florida, said the bank intentionally blurred the lines between its traditional banking business and its securities business and misled customers into thinking those securities investments were protected by the bank or the federal government.
NationsSecurities branch managers encouraged employees to "use fear to sell” securities, according to the findings of a subsequent Securities and Exchange Commission investigation.
And NationsBank helped NationsSecurities by providing brokers with lists of customers who had Certificates of Deposit about to mature, according to the SEC's findings. Why was the bank pushing the mutual fund investments and its securities side business? According to Cray, NationsBank received lucrative fees for the transactions.
The allegations led to a class-action lawsuit against NationsBank of Florida, NationsSecurities and others, from investors who lost money by unknowingly making the risky investments. Along with the SEC, the Department of Justice also opened an investigation.
The SEC concluded that NationsBank tellers were provided incentives to refer customers to NationsSecurities stock brokers. If the NationsSecurities broker got a customer to buy into the mutual fund, the teller who made the referral would receive a 5 percent commission. The SEC fined NationsSecurities $4 million in 1998 for misleading bank customers.
NationsBank also ended up paying civil fines of $6.4 million and $6.75 million to the federal government in 2000 and 2002, and another $8.1 million to 2,230 investors nationwide.
The results of those investigations support Scott's claim. We rate it True.
But Sink's rebuttal is largely factual, too.
"Alex Sink could've done nothing about it. It was run out of (NationsBank headquarters in) Charlotte,” said Jonathan Alpert, the lawyer who handled the class-action case.
Alpert, who voted for Sink, said she no doubt knew riskier investments were being sold in the bank, but she was likely not aware of the way brokers were manipulating customers to close the sales. The companies NationsBank and NationsSecurities were managed separately.
Sink, however, would have been in a position to voice questions or concerns about the practice if she sensed anything was being handled inappropriately. So we rate her claim Mostly True.