American Savings will pay more than $1 million to settle a lawsuit by its former security director, who alleged he was unfairly passed over for a promotion after reporting fraud within the bank.

The bank's former security director, Bert Corniel, charged in his suit that bank officials told him not to report to federal regulators a case in which a bank employee allegedly defrauded a 92-year-old customer of more than $600,000.

The bank has denied the charges. Yesterday, bank spokeswoman Dawn Dunbar said, "We are pleased to put this matter behind us."

The bank continues to face a federal investigation into the matter.

Corniel's lawsuit, filed on Aug. 2, also charged that American Savings Chief Executive Officer Constance Lau asked him to "recharacterize" the bank's fraud losses as "potential losses."

Lau, in a written statement on Aug. 16, said the bank "did not in any way, shape or form cover up anything" and that allegations by Corniel were "unfounded." She characterized Corniel as a "disgruntled former employee."

American Savings agreed last September to pay more than $1 million to settle a related lawsuit by the 92-year-old customer, Ada Lim, who alleged that a bank employee defrauded her.

American Savings yesterday declined to comment on the terms of the settlement with Corniel, but a person familiar with the deal said the bank agreed to pay Corniel more than $1 million. The person agreed to discuss the settlement on condition of anonymity due to the confidential nature of the agreement.

John Perkin, an attorney for Corniel, declined comment.

"We believe that this resolution of the matter is in the best interests of American Savings Bank," said Dunbar.

Last September, a federal grand jury issued subpoenas to the bank, but a hearing date was held off until the audit committee of the board of American Savings' parent, Hawaiian Electric Industries Inc., could complete an independent investigation.

Dunbar had no comment on the federal investigation. She said the independent investigation, which is being handled by HEI's outside law firm Orrick, Herrington & Sutcliffe LLP, was recently completed and that the bank is in the process of reviewing the firm's findings and will take appropriate action.

She said she did not have the details of Orrick's findings.

Established in 1925, American Savings is the state's third-largest financial institution, with $6.9 billion in assets.

Corniel is a retired Honolulu police officer and a former investigator with the city prosecutor's office who was hired as American Savings' security director in 2000.

He and Lim both sued the bank on Aug. 2, alleging that an operations supervisor in American Savings' Hawai'i Kai branch defrauded Lim of more than $600,000 and that the bank tried to cover up the alleged theft.

Tom Tarter, a former president of the Bank of Los Angeles who now advises financial institutions on corporate governance issues, said the dual settlements fall short of exoneration.

Tarter added that he's surprised that the bank hasn't taken more action by reassigning executives involved in the Lim and Corniel cases.

"This is an indication to me that there was validity to the claims and the bank opted to settle," Tarter said. "They just don't write checks unless they feel there was a justifiable basis."

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.