Bernard B. Katz, the Los Angeles financier who built two fast-growing high-tech companies that subsequently flopped, has sued Bank of America and Downey Savings & Loan Assn. in Costa Mesa for $315 million, alleging breach of contract in their liquidation of a third company in which Katz owns a 45% interest.
The financial institutions are trying to recover $15 million in loans made to Helionetics of Irvine, a once-soaring laser firm that Katz bankrolled. Helionetics last year filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
Katz alleges in his Orange County Superior Court suit that Bank of America has forced Helionetics to sell substantially all the assets of HLX Laser, a company that Katz and Helionetics created to develop laser technology. Helionetics owns 55% of San Diego-based HLX, which has not filed for bankruptcy.
Approval of a reported $4.2-million sale of HLX assets to General Dynamics in St. Louis is pending in bankruptcy court in Santa Ana.
The suit claims that Bank of America violated a 1984 stock agreement between Helionetics and Katz that prohibited HLX from selling its assets, merging with any company or liquidating itself without Katz's written approval.
Katz claims in the suit that, without his knowledge, Bank of America "coerced" directors of both HLX and Helionetics to pledge the assets of HLX for "repayment of past and future" loans to Helionetics.
"I haven't seen any evidence indicating that HLX Laser benefited from any funds provided by Bank of America," Lawrence A. Cox of Los Angeles, a lawyer for Katz, said in an interview.
Though Downey Savings is named as a defendant, the suit does not specify any contract breach or fraudulent conveyance against it. Cox said the S&L is named because it will share in the proceeds from the sale of HLX assets.
A Bank of America spokesman said Tuesday that the bank denies the allegations and that the suit is without merit, but he would not discuss Katz's specific claims.