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Spokane woman seeks class-action status in federal suit after bank refuses to cash bond

UPDATED: Wed., March 3, 2021

By Thomas Clouse The Spokesman-Review

A Spokane woman’s quest to cash in on a small investment her father made for her 40 years ago has turned into a federal lawsuit against a bank with a track record of failing to honor old bonds.

Heather Carlon, 56, of Spokane, said her father approached her in 2019 to remind her that he had purchased a bond as an investment on Sept. 12, 1980, from a Rainier Bank branch in Medical Lake.

The bond wasn’t worth much – $138.56 – but the interest listed on the note was 11.25% and its value should have grown considerably over the course of 39 years.

“After that, I started trying to do a little bit of research about what happened to Rainier Bank,” Carlon said. “I was hitting a dead end. I talked with people at my credit union. They were able to locate Mr. Harrison … who had helped other people with Rainier Bank bonds.”

Eric Harrison, a Seattle attorney, has sued KeyBank three times previously to force it to honor bonds sold by Rainier Bank. Harrison noted Rainier Bank was purchased in 1987 and eventually split up among KeyBank, U.S. Bank and Bank of America.

Harrison “helped me figure out it was actually KeyBank that ended up with the branch where my bond had been purchased,” Carlon said.

With that information, Carlon last summer drove to the nearest KeyBank branch, located in Wilbur in Lincoln County. She took the bond her father gave her and tried to cash it in.

The bank made a photocopy of the bond and told her they would call her back in a couple of days.

“I heard several weeks later,” Carlon said.

Instead of a phone call, Carlon received an email from KeyBank indicating it had no legal responsibility or obligation to redeem the bond.

“I wasn’t surprised, because by then I knew the history of how other people had not been able to redeem their bank bonds,” she said.

According to an escalating interest calculator, Carlon’s investment of $138.56 with 11.25% interest should be worth about $10,000 today.

KeyBank, based in Cleveland, was contacted by phone twice Wednesday for comment about the pending lawsuit. The company ended each call without responding.

Following her interaction last year, Carlon and Harrison filed a civil lawsuit Feb. 24 in Spokane federal court.

As part of the suit, Harrison is asking a judge to give it class-action status to represent all holders of Rainier bonds for which KeyBank can be held responsible.

According to court records, KeyBank has not responded to the suit.

Harrison said it’s unclear how many people, like Carlon, still hold the old Rainier Bank notes. But he wrote in the complaint that based on the serial numbers on the bonds “litigated to date, Rainier Bank issued thousands of Bonds prior to the branch acquisitions.”

Carlon said her father also bought a similar bond for her sister.

“I started out just wanting to redeem my bond,” she said. “But at this point, I would like them to redeem bonds for everybody else.”

The lawsuit has been assigned to U.S. District Court Judge Salvador Mendoza Jr.

“As people find these bonds in safe deposit boxes and file cabinets, I would like a process in place so people can easily redeem their bonds,” Carlon said. “So each person doesn’t have to file a lawsuit to redeem it.”

Once in 2018 and twice in 2019, Harrison filed similar suits against KeyBank under similar circumstances. Each time, KeyBank paid his clients to settle the suits, he said.

“They have been using this money for the past 40 years,” Harrison said of the banks. “For them to say this in 2020, you’ve just got to throw up your hands.”

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