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[11,300a] In the Matter of Eugene F. Peters, Independent Bank, Manassas, Va., Docket No. 96-71k (6-21-96)

   Respondent ordered to pay a $10,000 civil money penalty.
In the Matter of
EUGENE F. PETERS,individually,
and as an institution-affiliated
party of
INDEPENDENT BANK
MANASSAS,VIRGINIA
(Insured State Nonmember Bank)
NOTICE OF ASSESSMENT OF CIVIL
MONEY PENALTY, FINDINGS OF

FACT AND CONCLUSIONS OF
LAW, ORDER TO PAY, AND NOTICE
OF HEARING

FDIC-96-71k

   The Federal Deposit Insurance Corporation ("FDIC") is of the opinion that Eugene F. Peters ("Respondent"), individually, and as an institution-affiliated party of Independent Bank, Manassas, Virginia ("Bank"), has violated the executive officer lending limitation of section 22(g) of the Federal Reserve Act, as amended 12 U.S.C. § 375a, section 215.5 of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), as amended, 12 C.F.R. § 215.5, promulgated thereunder and made applicable to insured State nonmember banks pursuant to section 18(j)(2) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1828(j)(2), and section 337.3 of the FDIC's Rules and Regulations, as amended, 12 C.F.R. § 337.3, and has violated section 215.6 of Regulation O, 12 C.F.R. § 215.6, by knowingly receiving, directly and indirectly, extensions of credit in excess of the executive officer lending limitation.
   Wherefore, the FDIC hereby issues this NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTY, FINDINGS OF FACT AND CONCLUSIONS OF LAW, ORDER TO PAY AND NOTICE OF HEARING ("NOTICE OF ASSESSMENT") pursuant to the provisions of section 8(i)(2) of the Act, 12 U.S.C. § 1818(i)(2), and Part 308 of the FDIC Rules of Practice and Procedure, 12 C.F.R. Part 308. In support thereof, the FDIC finds and concludes as follows:

FINDINGS OF FACT AND
CONCLUSIONS OF LAW

   A. GENERAL
   1. At all times pertinent to the charges herein, the Bank was a corporation existing and doing business under the laws of the State of Virginia, having its principal place of business in Manassas, Virginia. The Bank was, at all times pertinent to the charges herein, an insured State nonmember bank subject to the Act, 12 U.S.C. § 1811-1831u, the FDIC's Rules and Regulation, 12 C.F.R. Chapter III, and the laws of the State of Virginia.
   2. At all times pertinent to the charges herein, Respondent Fugene F. Peters was a "director" and an "executive officer" of the Bank within the meaning of sections 215.2(d) and 215.2(e), respectively, of Regulation O, 12 C.F.R. §§ 215.2(d) and 215.2(e), and was an "institution-affiliated party" of the Bank within the meaning of sections 3(u) and 8(i)(2) of the Act, 12 U.S.C. §§ 1813(u) and 1818(i)(2).
   3. As of January 20, 1995, the Bank was merged with and into Crestar Bank, Richmond, Virginia, and, as of that date, terminated its status as an insured State nonmember bank.
   4. Pursuant to section 3(v) of the Act, 12 U.S.C. § 1813(v), the term "violation" includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.
   5. The FDIC has jurisdiction over the Respondent, the Bank and the subject matter of this proceeding.
   B. VIOLATIONS OF THE LENDING
LIMITATIONS OF REGULATION O
   6. Pursuant to the provisions of section 22(g) of the Federal Reserve Act, 12 U.S.C. § 375a, section 215.5 of Regulation O, 12 C.F.R. § 215.5, and section 337.3(c)(2), the aggregate amount of extensions of credit to an executive officer of an insured nonmember bank for purposes not specified in sections 215.5(c)(1) and (2) of Regulation O, 12 C.F.R. §§ 215.5(c)(1) and (2), shall not, at any one time, exceed 2.5 percent of the bank's capital and unimpaired surplus or $25,000 but in no event more than $100,000, unless secured in the manner set forth in section 337.3(c)(2)(i)-(iii), 12 C.F.R. § 337.3 (c)(2)(i)-(iii).
   7. In order to implement the $100,000 lending restriction of section 22(g) of the Federal Reserve Act, 12 U.S.C. § 375a, section 215.5 of Regulation O, 12 C.F.R. § 215.5, and section 337.3(c)(2) of the FDIC's Rules and Regulations, 12 C.F.R. § 337.3(c)(2), effective May 28, 1992, the FDIC implemented sections 337.3(c)(3) and (4) of the FDIC's Rules and Regulations, 12 C.F.R. §§ 337.3(c)(3) and (4), which provided a phase-in period during which extensions of credit to executive officers of insured nonmember banks in excess of the lending limitation authorized in the statute and regulations could be brought into compliance no later than May 28, 1994.
   8. Pursuant to the Bank's written request, on or about July 2, 1993, the FDIC's Atlanta Regional Office, Division of Supervision,
{{3-31-97 p.C-4212.1}}issued a written authorization for the Bank to extend the time for compliance with the $100,000 executive officer lending limitation with respect to the extensions of credit by the Bank to Respondent Eugene F. Peters as follows: until May 28, 1994, to pay fully a $34,872 loan note; until November 30, 1993, to pay fully a $10,000 credit card line of credit; until May 28, 1994, to pay fully the balance of a $117,687 loan note; and until May 28, 1994, to reduce the cumulative balance of two lines of credit in the amount of $20,000 and $100,000, respectively, to an amount not to exceed $100,000.
   9. At a time subsequent to July 2, 1993, in apparent compliance with the reduction schedule described in paragraph 8 hereof, Respondent Eugene f. Peters fully paid the $34,872 loan note and the $10,000 credit card line of credit and purportedly fully paid the outstanding balance of the $117,687 loan note described in paragraph 8 hereof and reduced the cumulative balance of the two lines of credit described in paragraph 8 hereof to an amount not in excess of $100,000.
   10. The $177,687 extension of credit by the Bank to Respondent Eugene F. Peters described in paragraphs 8–9 hereof was purportedly fully paid in the following manner: monthly payments of principal and interest were made during the period August 13, 1993, to March 17, 1994, reducing the outstanding principal balance of the extension of credit to $112,056.44; a payment of $80,000 was made on April 8, 1994, leaving an outstanding principal balance of $32,056.44; and a final principal payment of $32,056.44 was made on April 11, 1994.
   11. The source of the $80,000 principal payment made by Respondent Eugene F. Peters on the extension of credit described in paragraph 10 hereof came from the proceeds of an unsecured $80,000 extension of credit made by the Bank to Eugene F. Peters, Jr. on March 31, 1994, the entire proceeds of which extension of credit were transferred to and used by Respondent Eugene F. Peters.
   12. The source of a portion of the final principal payment made by Respondent Eugene F. Peters on the extension of credit described in paragraph 10 hereof, in the amount of $29,861, came from the proceeds of an unsecured $86,000 extension of credit made by the Bank to Nancy M. Peters on March 31, 1994, the specified portion of the proceeds of which extension of credit was transferred to and used by Respondent Eugene F. Peters.
   13. Pursuant to section 215.3(f) of Regulation O, 12 C.F.R. § 215.3(f), the extensions of credit made by the Bank to Eugene F. Peters, Jr. and Nancy M. Peters described in paragraphs 11–12 hereof are attributable to Respondent Eugene F. Peters because all or a portion of the proceeds thereof were transferable to and used by Respondent Eugene F. Peters for his tangible economic benefit.
   14. Respondent Eugene F. Peters caused or permitted the Bank to make the extensions of credit to his children, Eugene F. Peters, Jr. and Nancy M. Peters, described in paragraphs 11–13 hereof, to give the appearance that the aggregate amount of the extensions of credit by the bank to the Respondent for purposes other than those described in section 215.5(1) and (2) of Regulation O, 12 C.F.R. §§ 215.5(1) and (2), and not secured in the manner described in section 337.3(c)(2)(i)–(iii) of the FDIC's Rules and Regulations, 12 C.F.R. § 337.3(c)(2)(i)(iii), was reduced in compliance with the schedule described in paragraphs 8–9 hereof and did not exceed the amount of $100,000.
   15. As of May 29, 1994, the cumulative amount of the extensions of credit described in paragraphs 8–14 hereof made by the Bank directly and indirectly to and for the benefit of Respondent Eugene F. Peters for purposes other than those described in sections 215.5(1) and (2) of Regulation O, 12 C.F.R. §§ 215.5(1) and (2), and not secured in the manner described in section 337.3(c)(2)(i)–(iii) of the FDIC's Rules and Regulations, 12 C.F.R. § 337.3(c)(2)(i)–(iii), exceeded the amount of $100,000.
   16. Respondent Eugene F. Peters caused or permitted the Bank to make the extensions of credit described in paragraphs 8–15 hereof directly and indirectly to or for his tangible economic benefit for purposes other than those described in sections 215.5(1) and (2) of Regulation O, 12 C.F.R. §§ 215.5(1) and (2), and not secured in the manner described in section 337.3(c)(2)(i)–(iii), the cumulative amount of which extensions of credit continuously exceeded the executive officer lending limitation of $100,000 during the period May 29, 1994, through September 2, 1994, a period of 97 days.
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   17. As a consequence of the extensions of credit described in paragraphs 8–16 hereof which Respondent Eugene F. Peters caused or permitted the Bank to make directly and indirectly to or for his tangible economic benefit, the respondent violated and caused the Bank to violate the $100,000 lending restriction of section 22(g) of the Federal Reserve Act, 12 U.S.C. § 375a, sections 215.5 and 215.6 of Regulation O, 12 C.F.R. §§ 215.5 and 215.6, and section 337.3(c)(2), of the FDIC's Rules and Regulations, 12 C.F.R. § 337.3(c)(2), during the period May 29, 1994, through September 2, 1994.

ORDER TO PAY

   By reason of the violations set forth in paragraphs 6–17 of the NOTICE OF ASSESSMENT, the FDIC has concluded that a civil money penalty should be assessed against Respondent Eugene F. Peters pursuant to section 8(i)(2) of the Act, 12 U.S.C. § 1818(i)(2). After taking into account the appropriateness of the penalty with respect to the size of financial resources and the good faith of the Respondent, the gravity of the violations, the history of previous violations, and such other matters as justice may require, it is:
   ORDERED, by reason of the violations set forth in paragraphs 6–17 hereof, that a penalty of $10,000 be, and hereby is, assessed against Respondent Eugene F. Peters, pursuant to section 8(i)(2) of the Act, 12 U.S.C. § 1818(i)(2).
   FURTHER ORDERED that the effective date of this ORDER TO PAY be, and hereby is, stayed with respect to the Respondent until twenty (20) days after the date of receipt of the NOTICE OF ASSESSMENT by the Respondent, during which time the Respondent may file an answer and request a hearing pursuant to section 8(i)(2)(H) of the Act, 12 U.S.C. § 1818(i)(2)(H), and section 308.19 of the FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.19. An original and one copy of the answer, any such request for a hearing, and all other documents in this proceeding must be filed in writing with the Office of Financial Institution Adjudication, 1700 G Street, N.W., Washington, D.C. 20552, pursuant to section 308.10 of the FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.10. Also, copies of all papers filed in this proceeding shall be served upon the Office of the Executive Secretary, Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429; upon Arthur L. Beamon, Associate General Counsel, Compliance and Enforcement Section, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429; and upon the Regional Counsel (Supervision), Federal Deposit Insurance Corporation, Atlanta Regional Office, 1201 West Peachtree Street, N.E., Suite 1600, One Atlantic Center, Atlanta, Georgia 30309-3449.
   If the Respondent fails to file a request for a hearing within twenty (20) days from the date of receipt of this NOTICE OF ASSESSMENT, the penalty assessed against the Respondent, pursuant to this ORDER TO PAY, will be final and shall be paid within sixty (60) days after the date of receipt of this NOTICE OF ASSESSMENT.

NOTICE OF HEARING

   IT IS FURTHER ORDERED that, if the Respondent requests a hearing with respect to the charges alleged in the NOTICE OF ASSESSMENT, the hearing shall commence one hundred and twenty (120) days from the date of receipt of this NOTICE OF ASSESSMENT at Baltimore, Maryland, or at such other date or place upon which the parties to this proceeding and the Administrative Law Judge mutually agree.
   The hearing will be public and will be conducted in accordance with the provisions of the Act, 12 U.S.C. §§ 1811-1831u, the Administrative Procedure Act, 5 U.S.C. § 551–559, and the FDIC Rules of Practice and Procedure, 12 C.F.R. Part 308. The hearing will be held before an Administrative Law Judge to be appointed by the Office of Financial Institution Adjudication pursuant to 5 U.S.C. § 3105. The exact time and location of the hearing will be determined by the Administrative Law Judge.
   In the event the Respondent requests a hearing, the Respondent shall file an answer to the charges in this NOTICE OF ASSESSMENT within twenty (20) days after the date of receipt of the NOTICE OF HEARING in accordance with section 308.19 of the FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.19.
   Failure of the Respondent to request a hearing shall render the civil money penalty assessed in this NOTICE OF ASSESSMENT final and unappealable pursuant to section 8(i)(2)(E)(ii) of the Act, 12 U.S.C. § 1818(i)(2)(E)(ii), and section 308.19(c)(2) of the
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   FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.19(c)(2).
   Pursuant to delegated authority.
   Dated at Washington, D.C., this 21st day of June, 1996.

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