Fleet, DEPCO reach settlement in banking deception claim

PROVIDENCE, R.I. – Fleet Financial Group has agreed to pay $15.5 million to settle a claim it deceived banking regulators.

Fleet would admit no wrongdoing under its proposed deal

to pay the Depositors Economic Protection Corp., The Providence Journal reported. DEPCO

would drop a civil suit that claims Fleet contributed to the

state’s 1991 banking crisis by deliberately deceiving banking regulators.

A Superior Court judge is scheduled to rule Tuesday on the settlement agreement.

In its suit, DEPCO claims Fleet propped up Joseph Mollicone Jr.’s Heritage Loan and Investment Co. by drafting a sham, $3.5 million loan to make Heritage look solvent. Mollicone eventually was found guilty of embezzling $12 million from Heritage depositors, precipitating the state’s banking crisis. He is now serving a 30-year jail term.

DEPCO also claimed Fleet helped Jefferson Loan & Investment Bank pad its books by $1 million to persuade banking regulators to allow Jefferson to join the Rhode Island Share & Deposit Indemnity Corp., a small insurer of banks and credit unions financed by institutions it insured. Jefferson, like Mollicone’s Heritage bank, defaulted on its obligations to depositors.

DEPCO has also sued the law firm of Edwards & Angell, alleging that the firm helped Jefferson deceive banking regulators. Edwards & Angell has denied the allegation.

If Judge Richard Israel approves the Fleet agreement, the Edwards & Angell case will become the last in a series of suits filed by DEPCO in connection with the 1991 banking crisis.

DEPCO is a state agency formed to bail out depositors whose credit union accounts were frozen 10 years ago. The agency has recovered about $180 million through lawsuits and negotiations, enabling the state to pay off all the bonds it floated to reimburse people who lost money when the credit unions closed.

“When this thing started, it was terrible,” DEPCO lawyer Leonard DeCof Sr. said. “People were living on pet food; they couldn’t get at their life’s savings.”

Fleet Financial Group merged in 1999 with BankBoston.