Stone v. Ritter

Facts

The derivative action is brought on AmSouth’s behalf by William and Sandra Stone, who allege that they owned AmSouth common stock. AmSouth and AmSouth’s wholly owned subsidiary, AmSouth Bank, paid $40 million in fines and $10 million in civil penalties to resolve government and regulatory investigations pertaining to the failure by bank employees to file suspicious activity reports as required by the federal Bank Secrecy Act and various anti-money-laundering regulations. The government investigations arose from an unlawful “Ponzi” scheme operated by Louis D. Hamric and Victor G. Nance. The scheme was discovered in 2002, when the investors did not receive their monthly interest payments. The authorities examined AmSouth’s compliance with its reporting and other obligations under the BSA. The authorities imposed civil penalty against AmSouth for operating an inadequate anti-money-laundering program and failing to file SARs. Among the authorities’ specific determinations were its conclusions that AmSouth’s compliance program lacked adequate board and management oversight and that reporting to management for the purposes of monitoring and oversight of compliance activities was materially deficient.