{{10-31-00 p.C-4247}}
[¶11,332A] In the Matter of John M. Dudley, Phenix-Girard Bank, Phenix City,
Alabama, Docket No. 96-102k (8-19-96).
Respondent agrees to pay civil money penalty assessed by the FDIC in
the amount of $10,000. This was an uncontested notice and became a
final order by operation of law.
In the Matter of
JOHN M. DUDLEY,
individually, and as an institution-affiliated party of
PHENIX-GIRARD BANK
PHENIX CITY, ALABAMA
(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-96-102k
NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTY
The Federal Deposit Insurance Corporation ("FDIC") is of the
opinion that John M. Dudley ("Respondent"), individually and as
an institution-affiliated party of Phenix-Girard Bank, Phenix City,
Alabama ("Bank"), has violated the prior approval and terms and
creditworthiness provisions of sections 22(h)(2) and (3) of the Federal
Reserve Act, as amended, 12 U.S.C. §§ 375b(2) and (3), and sections
215.4(a) and (b), and section 215.6 of Regulation O of the Board of
Governors of the Federal Reserve System ("Regulation O"), as
amended, 12 C.F.R. §§ 215.4(a) and (b), and § 215.6, 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(b) of the
Rules and Regulations of the FDIC, 12 C.F.R. § 337.3(b).
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. The Bank is and was, at all times pertinent to the charges
herein, a corporation existing and doing business under the laws of the
State of Alabama, having its principal place of business in Phenix
City, Alabama. The Bank is and 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 Regulations, 12 C.F.R.
Chapter III, and the laws of the State of Alabama.
2. At all times pertinent to the charges herein, Respondent John M.
Dudley 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. At all times pertinent to the charges herein, Respondent owned or
controlled Phenix Lumber Company, Phenix City, Alabama ("Phenix
Lumber Company"), a "related interest" of Respondent John M.
Dud-
{{10-31-00 p.C-4248}}ley within the meaning of section 215.2(n) of Regulation O, 12
C.F.R. § 215.2(n).
4. At all times pertinent to the charges herein, Respondent John M.
Dudley and his related interest Phenix Lumber Company were each an
"insider" of the Bank as that term is defined in section 215.2(h)
of Regulation O, 12 C.F.R. § 215.2(h).
5. 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.
6. The FDIC has jurisdiction over the Respondent, the Bank and the
subject matter of this proceeding.
B. VIOLATIONS OF THE PRIOR APPROVAL AND TERMS AND CREDITWORTHINESS
PROVISIONS OF REGULATION O
7. During the period 1993 - 1994, the Bank extended credit to
Leslie Dudley Greene, the daughter of Respondent John M. Dudley, on
three occasions in the cumulative amount of $755,075.
8. The first of the extensions of credit described in paragraph 7
hereof which the Bank made to Leslie Dudley Greene was evidenced by a
loan note (no. 2084) and originated on January 29, 1993, in the
principal amount of $230,025, for a term of 90 days, with an original
maturity date of April 29, 1993. The entire proceeds of this extension
of credit were deposited to the account of Phenix Lumber Company at the
Bank. This extension of credit was renewed without principal reduction
on five occasions during the period 1993 - 1994. All interest payments
on the loan were made by Phenix Lumber Company. The extension of credit
finally matured on September 1, 1994, and was fully paid by Phenix
Lumber Company on September 8, 1994.
9. The extension of credit made by the Bank to Leslie Dudley Greene in
the amount of $230,025 described in paragraph 8 hereof was past due and
was carried by the Bank in a delinquent status for a period of 16 days
during the period April 30 - May 17, 1993, and was past due and carried
by the Bank in a delinquent status for another period of 16 days during
the period February 15 - March 3, 1994.
10. The next extension of credit described in paragraph 7 hereof which
the Bank made to Leslie Dudley Greene was evidenced by loan note (no.
21420) and originated on August 12, 1993, in the principal amount of
$345,025, for a term of 90 days with an original maturity date of
November 10, 1993. The entire proceeds of this extension of credit were
deposited to the account of Phenix Lumber Company at the Bank. This
extension of credit was renewed on three occasions without principal
reduction during the period 1993 - 1994. All interest payments on the
loan were made by Phenix Lumber Company. The extension of credit
finally matured on September 1, 1994, and was fully paid by Phenix
Lumber Company on September 8, 1994.
11. The extension of credit made by the Bank to Leslie Dudley Greene in
the amount of $345,025 described in paragraph 10 hereof was past due
and was carried by the Bank in a delinquent status for a period of 22
days during the period February 8 - March 3, 1994.
12. The last extension of credit described in paragraph 7 hereof which
the Bank made to Leslie Dudley Greene was evidenced by loan note (no.
21786) and originated on January 19, 1994, in the principal amount of
$180,025, for a term of 60 days with an original maturity date of March
21, 1994. The entire proceeds of this extension of credit were
deposited to the account of Phenix Lumber Company at the Bank. The
extension of credit was renewed on three occasions without principal
reduction during 1994. all interest payments on the loan were made by
Phenix Lumber Company. The extension of credit finally matured on
September 1, 1994, and was fully paid by Phenix Lumber Company on
September 8, 1994.
13. The extension of credit made by the Bank to Leslie Dudley Greene in
the amount of $180,025 described in paragraph 12 hereof was past due
and was carried by the Bank in a delinquent status for a period of 40
days during the period July 21 - August 30, 1994.
14. The entire proceeds of the extensions of credit described in
paragraphs 7-13 hereof, in the cumulative amount of $755,075, were not
transferred by the Bank to Leslie Dudley Greene but, rather, were
transferred by the Bank directly to and used by Respondent John M.
Dudley and his related business interest, Phenix Lumber Company.
15. 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 Leslie
Dudley Greene described in paragraphs 7-14 hereof are attributable to
Respondent John
{{10-31-00 p.C-4248.1}} M. Dudley because all of the proceeds thereof were
transferred to and used by Respondent John M. Dudley and his related
interest, Phenix Lumber Company, for his tangible economic
benefit.
16. Respondent John M.Dudley caused or permitted the Bank to make the
extensions of credit to his daughter, Leslie Dudley Greene, described
in paragraphs 7-15 hereof, and to transfer the entire proceeds of the
extensions of credit to him and to his related interest, Phenix Lumber
Company, for his tangible economic benefit.
17. Each of the extensions of credit made by the Bank to Leslie Dudley
Greene described in paragraphs 7-16 hereof was not repaid by Leslie
Dudley Greene but, rather, each extension of credit was fully repaid by
John M. Dudley and his related business interest, Phenix Lumber
Company.
18. Section 215.4(a) of Regulation O, 12 C.F.R. § 215.4(a), provides
that:
[N]o [bank] may extend credit to any insider of the bank
. . . unless the extension of credit is made on substantially the
same terms (including interest rates and collateral) as, and follows
credit underwriting procedures that are not less stringent than, those
prevailing at the time for comparable transactions by the bank with
other persons that are not covered by [Regulation O] and who are not
employed by the Bank; and . . . [d]oes not involve more than the
normal risk of repayment or present other unfavorable features.
19. Each of the extensions of credit made by the Bank to Leslie
Dudley Greene described in paragraphs 7-17 hereof, which is
attributable to Respondent John M. Dudley, was not made on
substantially the same terms and followed less stringent underwriting
procedures than extensions of credit made by the Bank to persons that
are not covered by Regulation O and not employed by the Bank and
involved more than the normal risk of repayment and presented other
unfavorable features as a result to the following factors:
(1) The extensions of credit were unsecured;
(2) The nominee borrower, Leslie Dudley Greene, did not have the
financial capability to pay the interest charges and to repay the
principal amount of the extensions of credit;
(3) The extensions of credit were not supported by documentation
sufficient to permit the Bank adequately to analyze the credit quality
of the transactions; and
(4) The extensions of credit were made on a "nominee" or
"accommodation" basis for the benefit of the recipient, Phenix
Lumber Company, the name of which business entity did not appear in the
Bank's records and to which the Bank may have been unwilling or unable
to grant direct credit.
20. Section 215.4(b)(1) of Regulation O, 12 C.F.R.
§ 215.4(b)(1), provides in pertinent part that:
[N]o [bank] may extend credit . . . to any insider of the
bank . . . in an amount that, when aggregated with the amount of all
other extensions of credit to that person and to all related interests
of that person, exceeds the higher of $25,000 or 5 percent of the
[bank's] unimpaired capital and unimpaired surplus, unless . . .
[t]he extension of credit has been approved in advance by a majority
of the entire board of directors of the bank; . . . [a]nd the
interested party has abstained from participating directly or
indirectly in the voting.
The Bank's lending limit pursuant to section 215.4(b)(1) of
Regulation O, 12 C.F.R. § 215.4(b)(1), was $401,850.
21. Section 215.4(b)(2) of Regulation O, 12 C.F.R.
§ 215.4(b)(2), further provides that:
[I]n no event may a [bank] extend credit to any insider of
the bank . . . in an amount that, when aggregated with all other
extensions of credit to that person, and all related interests of that
person, exceeds $500,000, except by complying with the requirements of
this paragraph [215.4(b)].
Section 337.3(b) of the FDIC's Rules and Regulations, 12 C.F.R.
§ 337.3(b), contains this same prohibition.
22. The following extensions of credit made by the Bank to Leslie
Dudley Greene described in paragraphs 7-17 hereof, the proceeds of
which were transferred to and used by Respondent John M. Dudley and his
related interest, Phenix Lumber Company, were not approved in advance
by a majority of the Bank's board of directors, with the interested
party abstaining from the voting, at a time when the aggregate amount
of the Bank's extensions of credit attributable to Respondent John M.
Dudley equaled or exceeded the sum of $500,000:
{{10-31-00 p.C-4248.2}}
(1) The four renewals of the $230,025 extension of credit which
occurred on August 16 and November 15, 1993, and March 3 and June 2,
1994, respectively;
(2) The origination of the $345,025 extension of credit which occurred
on August 12, 1993, and the three renewals of the extension of credit
which occurred on November 10, 1993, and March 3 and June 2, 1994,
respectively; and
(3) The origination of the $180,025 extension of credit which occurred
on January 19, 1994, and the three renewals of the extension of credit
which occurred on March 21, May 21, and August 30, 1994, respectively.
23. Respondent John M. Dudley participated as a director in the
approval by the Bank's board of directors of the $180,025 extension of
credit on January 19, 1994, described in paragraph 12 hereof, at a time
when he knew that he and his related interest would receive the use and
benefit of the proceeds of the extensions of credit.
24. As a consequence of the extensions of credit described in
paragraphs 7-23 hereof, which Respondent John M. Dudley caused or
permitted the Bank to make directly and indirectly to or for his
tangible economic benefit, Respondent John M. Dudley violated and
caused the Bank to violate the prior approval and terms and
creditworthiness provisions of sections 22(h)(2) and (3) of the Federal
Reserve Act, 12 U.S.C. §§ 375b(2) and (3), and sections 215.4(a) and
(b) of Regulation O, 12 C.F.R. §§ 215.4(a) and (b). Furthermore, as
a consequence of the extensions of credit described in paragraphs 7-23
hereof, Respondent John M. Dudley knowingly received the proceeds of
extensions of credit by the Bank to his daughter, Leslie Dudley Greene,
in a manner and under circumstances not authorized by Regulation O in
violation of section 215.6 of Regulation O, 12 C.F.R. § 215.6.
ORDER TO PAY
By reason of the violations set forth in paragraphs 7-23 of the
NOTICE OF ASSESSMENT, the FDIC has concluded that a civil money penalty
should be assessed against Respondent John M. Dudley 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 7-24
hereof, that a penalty of $10,000.00 be, and hereby is, assessed
against Respondent John M. Dudley, 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 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
{{10-31-00 p.C-4248.3}} ASSESSMENT at Opelika, Alabama, 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 FDIC Rules of
Practice and Procedure, 12 C.F.R. § 308.19(c)(2).
Pursuant to delegated authority.
Dated at Washington, D.C., this 19th day of August, 1996.