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FDIC Enforcement Decisions and Orders

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   [10,876] In the Matter of Robert G. Cruse Sr., Robert G. Cruse Jr., Goreville State Bank, Goreville, Illinois, Docket No. FDIC-93-191b (9-17-93.)

   Bank and individual respondents to cease and desist from such unsafe or unsound practices as operating in violation of applicable laws or regulations; operating with officers and employees who lack knowledge of regulatory requirements; operating without proper internal routine and controls for proper compliance with consumer laws; and failing to provide adequate supervision over the Bank's affairs.

   [.1] Violations of Law—Eliminate/Correct
   [.2] Management—Qualifications—Review
   [.3] Compensation—Names Officials—Restricted
{{11-30-93 p.C-3429}}
   [.4]Compliance Program—Quarterly Internal Audit Required
   [.5]Consumer Laws—Compliance Program—Minimum Requirements
   [.6]Board of Directors—Committee to Review Compliance with Cease and Desist Order
   [.7]Insurance—Sale of Insurance Services Prohibited
   [.8]Insurance—Audit—Reimbursement to Customers

In the Matter of

GOREVILLE STATE BANK
GOREVILLE, ILLINOIS
(Insured State Nonmember Bank)
and
ROBERT G. CRUSE, SR., AND
ROBERT G. CRUSE, JR.
(Individual Respondents)
ORDER TO CEASE AND DESIST
FDIC-93-191b

   Goreville State Bank, Goreville, Illinois ("Bank"), and Robert G. Cruse, Sr. and Robert G. Cruse, Jr. ("Individual Respondents") having been advised of their rights to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law and regulation alleged to have been committed by the Bank and the Individual Respondents and of their right to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated September 1, 1993, whereby solely for the purpose of this proceeding and without admitting or denying the charges of unsafe or unsound banking practices and violations of law and regulation, the Bank and the Individual Respondents 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 the Individual Respondents had engaged in unsafe or unsound banking practices and had violated laws and regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns, and the Individual Respondents cease and desist from the unsafe or unsound banking practices and violations of law and regulation listed below. Each of the general items listed below refers specifically to conduct or practices described in the FDIC Report of Examination dated November 23, 1992 ("Report of Examination"), or the FDIC Compliance Report dated July 24, 1992 ("Compliance Report").
   A. Violating laws and regulations as described on pages 6-a through 6-a-1 of the Report of Examination and pages 3 through 3-a-4 of the Compliance Report;
   B. Operating with directors, officers and employees who do not have knowledge of regulatory requirements sufficient to ensure compliance with laws and regulations referred to in the Compliance Report ("Consumer Laws");
   C. Operating with deficient policies and internal routines and controls to ensure compliance with the Consumer Laws; and
   D. Operating with a board of directors which has failed to provide adequate supervision over and direction to the management of the Bank and failed to ensure compliance with the Consumer Laws.
   IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, and the Individual Respondent take affirmative action as follows:

   [.1] 1. Within 90 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and regulation described on pages 6-a through 6-a-1 of the Report of Examination and pages 3-a through 3-a-4 of the Compliance Report. In addition, the Bank shall implement {{11-30-93 p.C-3430}}procedures to ensure future compliance with all applicable laws and regulations.

[.2] 2. (a) Within 60 days from the effective date of this ORDER, the Bank shall have and thereafter retain qualified management. At a minimum, such management shall include a new chief executive officer with proven ability in managing a bank of comparable size and a compliance officer who shall be given written authority by the Bank's board of directors to implement and supervise the Bank's program for compliance with the Consumer Laws. Such persons shall be provided the necessary written authority to implement the provisions of the ORDER. The compliance officer shall report directly to the Bank's board of directors. The compliance officer shall be provided training in applicable consumer laws, and said training shall be reported to, and recorded in the minutes of, the board of directors each calendar quarter. Within 30 days of the effective date of this Order, the Bank shall provide the Regional Director of the Chicago Regional Office of the FDIC ("Regional Director") and the Commissioner of Banks and Trust Companies for the State of Illinois ("Commissioner") with a list of qualified candidates for the chief executive officer position. The qualifications of the new chief executive officer, who shall be appointed within 60 days of the effective date of this Order, shall be assessed on that individual's ability to:

       (i) comply with the requirements of this ORDER;
       (ii) operate the Bank in a safe and sound manner;
       (iii) comply with applicable laws and regulations; and
       (iv) restore all aspects of the Bank to a safe and sound condition, including management effectiveness.
   (b) During the life of this ORDER, the Bank shall notify the Regional Director and Commissioner in writing of any changes in any of the Bank's management. For purposes of this ORDER, "management" is defined as members of the board of directors and "senior executive officers," as that term is defined in section 32 of the Act ("section 32"), 12 U.S.C. § 1831(I) and section 303.14 of the FDIC's Rules and Regulations (section 303.14), 12 C.F.R. § 303.14. Prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall comply with the requirements of section 32 and section 303.14.
   (c) The assessment of whether the Bank has a "qualified compliance officer" shall be based upon the officer bringing the Bank into compliance with the requirements of this ORDER and with the Consumer Laws.

    [.3] 3. (a) Following the appointment of a new chief executive officer in accordance with paragraph 2, the total compensation of the Individual Respondents shall be adjusted to a level commensurate with their new duties at the Bank.
       (b) The Bank shall not pay any extraordinary compensation nor establish any severance payments for the benefit of the Individual Respondents.
       (c) The Individual Respondents shall report directly to the new chief executive officer and shall act in accordance with the directives of that person. In addition, the Individual Respondents shall act in accordance with all written policies and procedures established in the Bank's board of directors without exception and shall comply with all Federal and State laws and regulations applicable to the Bank.

   [.4] 4. Each calendar quarter, the Bank or a consultant shall perform an internal audit of the Bank's compliance program. Any audit of the compliance program performed internally shall be performed or supervised by an officer of the Bank who has knowledge of the requirements of the Consumer Laws. The results of the audit and any recommendation by the compliance officer, the consultant and/or the board of directors shall be recorded in the minutes.

   [.5] 5. Within 60 days from the effective date of this ORDER, the Bank shall establish a written compliance program. The compliance program shall be adopted by the Board and shall set forth policies and procedures designed to meet the Bank's compliance responsibilities in a comprehensive manner on an ongoing basis. The board of directors shall assure implementation of and adherence to the compliance program. At a minimum, the compliance program shall specifically address the following areas:
   (a) Appointment of a compliance officer, including a clear delineation of the {{7-31-96 p.C-3431}}officer's duties and responsibilities as referenced in paragraph 2(a) of this ORDER;
   (b) Education and training of Bank personnel, including training in compliance with Consumer Laws for all Bank employees involved in lending, and for any other Bank employees whose responsibilities require knowledge of and compliance with Consumer Laws;
   (c) Establishment of nondiscriminatory lending criteria;
   (d) Establishment of loan application procedures;
   (e) Forms review;
   (f) Establishment of an audit program which shall include policies and procedures for monitoring the Bank's compliance with Consumer Laws, including a quarterly review of the Bank's compliance program by the compliance officer, the results of which shall be in writing, reported to the Bank's board of directors and recorded in the minutes of the board meeting at which the report is made;
   (g) Establishment of a procedure to handle consumer complaints; and
   (h) Overall review of consumer lending procedures for compliance with Bank policy.

   [.6] 6. Within 30 days from the effective date of this ORDER, the Bank shall establish a compliance committee comprised of at least three directors. No committee member may be an executive officer or principal shareholder, as those terms are defined in section 215.2(d) and (j) of Regulation O, 12 C.F.R. §§ 215.2(d) and (j). The committee shall monitor compliance with this ORDER, and on a monthly basis, shall submit to the board of directors a written report detailing the Bank's compliance with this ORDER, including compliance with its written loan and audit policies. The monthly compliance report shall be incorporated into the minutes of the corresponding board of directors' meeting.

    [.7] 7. (a) As of the effective date of this ORDER, the Bank shall discontinue the sale of all insurance services to Bank customers through Esurc, Inc.
       (b) As of the effective date of this ORDER, the Bank shall not enter into any agreement with any firm or individual to provide for the sale of insurance services to Bank customers without first obtaining the prior, written approval of the Regional Director and Commissioner.

    [.8] 8. (a) Within 30 days from this effective date of this ORDER, the Bank shall provide for an independent public accounting firm to conduct a complete audit of the sale of insurance services by Esurc, Inc. to Bank customers since January 1, 1991. The results of the audit shall be submitted to the Regional Director and Commissioner upon their receipt by the Bank.
       (b) Within 10 days of receipt of the results of the audit required in provision 7(a), the Bank shall establish an escrow fund to provide for appropriate reimbursement to Bank customers for improper payment of insurance rebates, purchase of policies or failure to provide for full settlement of insurance proceeds.
   9. On the last day of the second month following the date of issuance of this ORDER, and every third month thereafter, the Bank shall furnish written progress reports to the Regional Director and Commissioner detailing the form and manner of any actions taken to secure compliance with the ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director and Commissioner have, in writing, released the Bank from making further reports.
   The effective date of this ORDER shall be 10 days after its issuance by the FDIC.
   The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and its successors and assigns and the Individual Respondents.
   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated: September 17, 1993.
   Pursuant to delegated authority.

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