Bank of New York Mellon Corp. has agreed to end eight years of litigation in which it sought unsuccessfully to recoup $312 million it lent a Chicago-area money manager that collapsed in 2007, and whose former chief is now in prison for fraud, Reuters reported yesterday. According to a Wednesday court filing, Bank of New York Mellon will be treated as an unsecured creditor with a $312 million claim in the bankruptcy of Sentinel Management Group Inc., formerly of Northbrook, Ill. The settlement with Sentinel bankruptcy trustee Frederick Grede requires court approval. It followed the Jan. 8 rejection by the federal appeals court in Chicago of the bank's effort to be treated as a secured creditor with a higher priority claim. U.S. Circuit Judge Richard Posner said that an unsecured claim was appropriate because the bank had been aware of suspicious facts that should have led it to probe whether Sentinel and its chief Eric Bloom were involved in wrongdoing. It is unclear how much the bank will eventually recover on its claim, but it previously took a $170 million pre-tax write-off, or $106 million after taxes, as a result of Judge Posner's decision. Read more.
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