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FDIC Enforcement Decisions and Orders

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{{10-31-96 p.C-4242}}
   [11,330] In the Matter of LTCB Trust Co., New York, N.Y., Docket No. FDIC-96-96b (8-13-96)

   Trust company ordered to cease and desist from such unsafe and unsound practices as operating with inadequate internal routine and controls; operating with management whose policies and practices are detrimental to the company; and operating with a board of directors which has failed to provide adequate supervison over and direction to the operating management of the company.

   [.1] Securities—Restrictions on Trading
   [.2] Securities—Investigation Report to FDIC
   [.3] Securities—Plan to Implement Investigators' Recommendations
   [.4] Audit—Internal Audit—Plan to Implement Consultant's Recommendations
   [.5] Target Examination—Response Required
   [.6] Management—In-Depth Analysis Required
   [.7] Cease and Desist Orders—Compliance Reports Required
{{10-31-96 p.C-4243}}

In the Matter of
LTCB TRUST COMPANY
NEW YORK,NEW YORK
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-96-96b

   LTCB Trust Company, New York, New York ("Trust Company"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices alleged to have been committed by Trust Company and of its right to a hearing on the alleged 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 August 2, 1996, whereby, solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices, the Trust Company 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 Trust Company had engaged in unsafe or unsound banking practices. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Trust Company, its successors, assigns, directors, officers, employees, agents, and other "institution-affiliated parties," as defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), CEASE AND DESIST from the following unsafe or unsound banking practices:
   (a) Operating the Trust Company with inadequate internal routine and controls;
   (b) Operating the Trust Company with management whose policies and practices are detrimental to the Trust Company; and
   (c) Operating the Trust Company with a board of directors which has failed to provide adequate supervision over and direction to the operating management of the Trust Company.
   IT IS FURTHER ORDERED that the Trust Company take AFFIRMATIVE action as follows:

   [.1] 1. The Trust Company shall not reenter the securities lending business without the prior written permission of the Regional Director of the New York Regional Office of the FDIC ("Regional Director"). To obtain such permission, the Trust Company shall provide to the Regional Director any information that the Regional Director may require, including, but not limited to, detailed operational, financial control and risk management policies and procedures.

   [.2] 2. Within 10 days of the effective date of this ORDER, the Trust Company shall deliver to the Regional Director the report currently being prepared by the law firm of Simpson Thacher & Bartlett (the "STB Report"), reporting on STB's investigation of all matters relating to the securities lending activities.

   [.3] 3. Within 10 days after submitting the STB Report, the Trust Company shall provide to the Regional Director a detailed plan for implementing any recommendations contained in the STB Report and in the report prepared for the Trust Company by KPMG Peat Marwick on or about April 26, 1996, that have been determined to be appropriate by the Trust Company's Board of Directors.

   [.4] 4. Within 10 days of the effective date of this ORDER, the Trust Company shall submit to the Regional Director a detailed plan for implementing recommendations contained in the report on internal audits prepared by Mr. William Duane, independent consultant retained by the Trust Company that have been determined to be appropriate by the Trust Company's Board of Directors.

   [.5] 5. The Trust Company shall submit to the Regional Director, within 90 days of receipt of the written findings of the target examination of the Trust Company conducted jointly by the FDIC and the New York State Banking Department ("Target Examination"), a detailed response to the weaknesses and violations noted in the Target Examination.

   [.6] 6. (i) To facilitate having and retaining qualified management, the Trust Company's board of directors shall, within 15 days from the effective date of this ORDER, appoint a committee of at least three members, composed of directors who are not now, and never have been, involved in the daily operations of the Trust Company, and whose composition is acceptable to the Regional Director (the "Committee"). The Committee shall undertake an in-depth analysis of {{10-31-96 p.C-4244}}the Trust Company's managerial requirements, including the composition, policies, and practices of the Trust Company's current operating management, and consideration of whether current operating management should be changed, or the terms and conditions under which current operating management should be continued. As part of this review, the Committee shall evaluate each Trust Company officer to determine whether these individuals possess the ability, experience, and other qualifications required to perform present and anticipated duties, including adherence to the Trust Company's established policies and practices, and maintenance of the Trust Company in a safe and sound condition.
   (ii) Within 90 days of the effective date of this ORDER, the Committee shall prepare and present to the board of directors of the Trust Company a written report of its findings and recommendations. The board of directors of the Trust Company shall review the Committee's report and evaluate its current operating management in light of such report, and shall take whatever action is necessary to implement its determinations. Within 30 days of receiving the report, the board of directors shall submit to the Regional Director a copy of the Committee's report, as well as the board of directors' evaluation, determinations, and implementing actions.

   7. Each written plan required by this ORDER shall be submitted to the Regional Director. It shall remain the responsibility of the board to fully implement the plan within the specified time frames. In the event the plan, or any portion thereof, is not implemented, the board shall immediately advise the Regional Director, in writing, of the specific reasons for deviating from the plan.

   [.7] 8. By the 30th day after the end of the calendar quarter in which this ORDER is issued, and by the 15th day after the end of every calendar quarter thereafter, the Trust Company shall furnish written progress reports to the Regional Director detailing the form, content, and manner of any actions taken to secure compliance with this ORDER, and the results thereof.
   The provisions of this Order shall not bar, stop, or otherwise prevent the FDIC or any governmental entity from taking any action affecting the Trust Company, any current or former institution-affiliated parties, or their successors or assigns, including but not limited to any action or proceeding under section 8 of the Act, 12 U.S.C. § 1818.
   The effective date of this Order shall be the date it is issued by the Regional Director.
   The provisions of this ORDER shall be binding upon the Trust Company, its successors, assigns, directors, officers, employees, agents, and other institution-affiliated parties.
   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.
   Pursuant to delegated authority.
   Dated this 13th day of August, 1996.

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