Mellon Bank is laying off 106 workers and shutting down its Internal Revenue Service processing division because it found hundreds of federal tax returns were hidden and destroyed.

The move comes as the U.S. Treasury Department investigates the disappearance of about 1,800 returns and tax payment checks sent to a Mellon lock box.

The problem affects only Northeastern filers who owed money on their 2000 tax returns and mailed them to Pittsburgh.

An undisclosed number of those being laid off were fired for cause after an internal investigation linked them to the missing returns, according to a memo employees received Friday from Chairman and Chief Executive Martin McGuinn.

The other laid off employees will be given first priority as other jobs open at the bank, Mellon officials said.

The fired workers had a "gross disregard for our shared values" and failed "to follow well-established corporate policies," McGuinn's memo said.

The bank found "no evidence of check fraud or identity theft, or that any taxpayer information has been otherwise released or used improperly," the memo said.

The memo didn't explain why the returns were allegedly hidden or destroyed, nor where they are now.