Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders




FDIC Enforcement Decisions and Orders

ED&O Home | Search Form | Text Search | ED&O Help



{{9-30-92 p.C-1597}}
   [10,361] In the Matter of Mainland Bank, J.H. Byrd, Fred A. Cash, Richard J. Fosdick, Tomy Hamon, Joseph A. Hoover, John W. Lyons Jr., John R. McCraw, Gary Meyer, Preston P. Temple and Gene Menn, Texas City, Texas, Docket No. FDIC-91-240b (10-22-91).

   Bank and institution-affiliated parties to cease and desist from violating FDI Act Section 32, by terminating the services of an officer; individuals to make restitution of funds paid, in violation of Section 32, as compensation to the officer after FDIC gave notice of disapproval of his employment. (This order was terminated by order of the FDIC dated 7-15-92; see ¶ 15,483.)

   [.1] Directors—Violation of FDI Act § 32—Restitution of Compensation
   [.2] Consultants—Employment of—Restrictions
   [.3] Shareholders—Disclosure—Cease and Desist Order

In the Matter of

MAINLAND BANK
TEXAS CITY, TEXAS, and
J.H. BYRD, FRED A. CASH,
RICHARD J. FOSDICK, TOMY
HAMON
, JOSEPH A. HOOVER,
JOHN W. LYONS, JR., JOHN R.
MCCRAW
, GARY MEYER,
PRESTON P. TEMPLE, and GENE
MENN
, individually, and as directors
and institution-affiliated parties of
MAINLAND BANK
TEXAS CITY, TEXAS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

   The Mainland Bank, Texas City, Texas ("Bank") and J.H. BYRD, FRED A. CASH, RICHARD J. FOSDICK, TOMY HAMON, JOSEPH A. HOOVER, JOHN W. LYONS, JR., JOHN R. MCCRAW, GARY MEYER, PRESTON P. TEMPLE, and GENE MENN (the "Individual Respondents"), individually and in their collective capacity as the Bank's board of directors, had been served with a NOTICE OF CHARGES AND OF HEARING (the "NOTICE") detailing the alleged violations of law and/or regulation that have been committed by them and were advised of their right to a hearing on those charges pursuant to section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b). Having waived those rights, the Bank and the Individual Respondents entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREE- {{9-30-92 p.C-1598}}MENT") with counsel for the Federal Deposit Insurance Corporation (the "FDIC"), dated September 17, 1991, whereby, solely for the purpose of this proceeding and without admitting or denying the charges of violation of law and/or regulation detailed in the NOTICE, the Bank and each of the Individual Respondents have consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank and all of the Individual Respondents have violated laws and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS ORDERED, that the Bank and each of the Individual Respondents, as directors and institution-affiliated parties of the Bank, cease and desist from violating section 32 of the Federal Deposit Insurance Act (the "Act"), 12 U.S.C. § 1831i (1989), and section 303.14 of the FDIC's Rules and Regulations, 12 C.F.R. § 303.14, by immediately terminating the services of Steven E. Smith as a senior executive officer and/or director of the Bank (regardless of whether so denominated by the Bank), and by ceasing any further payments of compensation and/or expense reimbursement to Steven E. Smith in the aforedescribed capacity; and
   IT IS FURTHER ORDERED, that the Individual Respondents shall be, and hereby are, held jointly and severally liable for making restitution to the Bank in the aggregate sum of $54,236.00, which sum represents the compensation and expense reimbursement that had been paid by the Bank to Steven E. Smith subsequent to the issuance of the Notice of Disapproval through September 1, 1991; and
   IT IS FURTHER ORDERED, that the following action be taken:

   [.1] 1. The Individual Respondents shall make full restitution to the Bank on or before December 31, 1991.

       a. The source of such restitution shall be the personal assets of the Individual Respondents; and, therefore, the restitution payment(s) shall not be paid nor funded, either directly or indirectly, for or by the use of the Bank's assets, including, without limitation, by means of any extension of credit from the Bank to any Individual Respondent.
       b. The prohibition against the use of Bank assets to pay or fund the restitution required by this ORDER shall not include the ordinary payment by the Bank to the Individual Respondents of authorized salaries and/or director's fees for work performed and/or participation in the conduct of the affairs of the Bank.

   [.2] 2. So long as this Order is in force and effect, the Bank shall be and hereby is prohibited from employing any individual as a consultant or advisor, unless all of the following conditions precedent are satisfied: (i) such employment is authorized by a majority vote of the Bank's board of directors in accordance with that institution's by-laws, (ii) the authorization of the board of directors is reflected in the minutes maintained by the Bank's corporate secretary, (iii) those directors' minutes expressly state the purpose(s) for which the consultant is to be employed, the term of employment and the rate of compensation to be paid to the consultant, and delineate, with specificity, the parameters of the consultant's duties and responsibilities, and (iv) written notification of the proposed employment is furnished to the Regional Director of the FDIC's Division of Supervision at least thirty (30) calendar days before the date on which the consultant is to commence service. The notification to be provided to the Regional Director shall include, at a minimum, all of the information reflected in the directors' minutes as required by this paragraph.

   [.3] 3. After the effective date of this ORDER, the Bank shall send or otherwise furnish a description of this ORDER to its shareholders in conjunction with (i) the Bank's next shareholder communication, and (ii) the notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Registration and Disclosure Unit, Washington, D.C. 20429, for review at least twenty (20) calendar days prior to dissemination to the Bank's shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice or statement.
   The effective date of this ORDER shall be ten (10) calendar days after the date of its
{{6-30-93 p.C-1599}}issuance. This ORDER shall be binding upon the Bank, the Individual Respondents and all other institution-affiliated parties of the Bank.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time, as any provision of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Pursuant to delegated authority.
   Dated at Dallas, Texas, this 22nd day of October, 1991.

ED&O Home | Search Form | Text Search | ED&O Help

Last Updated 6/6/2003 legal@fdic.gov