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FDIC Enforcement Decisions and Orders

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   [11,989] In the Matter of Randolph W. Lenz, Donald Weand, Jr., Marcial Cuevas, Jack W. Dunlap, Steven B. Levine, Timothy S. Reed, Brian A. Marks, and Marshall C. Asche, Connecticut Bank of Commerce, Stamford, Connecticut, Docket Nos. 02-160c&b, 02-161c&b (11-22-02).

   Based upon findings by the FDIC that it was necessary to prevent dissipation of assets rightfully belonging to the FDIC as receiver and statutory successor to the CBC, a temporary cease and desist order was issued as to Respondents Lenz and Weand, former chairman and CEO respectively, requiring each to provide security in the amount of $34,000,000 and to provide complete financial statements.

In the Matter of
RANDOLPH W. LENZ,
J. DONALD WEAND, JR.,
MARCIAL CUEVAS,
JACK W. DUNLAP,
STEVEN B. LEVINE,
TIMOTHY S. REED,
BRIAN A. MARKS, and MARSHALL C.ASCHE,
individually and as former institution-affiliated parties of
CONNECTICUT BANK OF COMMERCE
STAMFORD, CONNECTICUT
(Insured State Nonmember Bank)
(In Receivership)

FDIC-02-160c&b
FDIC-02-161c&b
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TEMPORARY ORDER TO CEASE AND DESIST
AS TO RESPONDENT
RANDOLPH W. LENZ AND RESPONDENT J. DONALD WEAND, JR.

   WHEREAS, the Federal Deposit Insurance Corporation ("FDIC") has determined that Randolph W. Lenz ("Respondent Lenz"), former Chairman of the Board of Directors of Connecticut Bank of Commerce, Stamford, Connecticut ("CBC") and J. Donald Weand, Jr. ("Respondent Weand"), former President and Chief Executive Officer of CBC, have exhibited a reckless disregard for the law through their causing CBC to engage in, and through their participation in, the violations or unsafe or unsound banking practices specified in the NOTICE OF CHARGES FOR ORDER OF RESTITUTION AND OTHER APPROPRIATE RELIEF, AND NOTICE OF HEARING ("NOTICE"), and that Respondent Lenz was unjustly enriched in connection with such violations or practices, and thereby seeks to order:

       1) Respondent Lenz to pay restitution, reimbursement, and guarantee against loss for unjust enrichment and the aggregate unpaid balance on the fraudulent loans made by CBC, as specified in the NOTICE; and

       2) Respondent Weand to pay restitution, reimbursement, and guarantee against loss for the aggregate unpaid balance on the fraudulent loans made by CBC, as specified in the NOTICE; and

   WHEREAS, the FDIC has determined that in order to prevent dissipation of assets that rightfully belong to the FDIC as receiver for and statutory successor to CBC, Respondents' assets should be preserved pending completion of the proceeding provided for in 12 U.S.C. §1818(b);

   NOW, THEREFORE, the FDIC issues this TEMPORARY ORDER TO CEASE AND DESIST AS TO RESPONDENT LENZ AND RESPONDENT WEAND ("TEMPORARY ORDER") and hereby gives notice pursuant to section 8(c)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(c)(1), that each Respondent be, and hereby is, ORDERED as follows:

ARTICLE I

   (1) (a) Respondent shall provide security, by no later than 12:00 noon Eastern Time on the tenth (10th) day after service of this TEMPORARY ORDER, as follows:

       i) as to Respondent Lenz in the amount of at least $34,000,000. This amount represents restitution, reimbursement, and guarantee against loss for the aggregate unpaid balance on the 3/22 Loans, the 6/21 Loans, the Additional Related Loans, and the 6/23 Extensions (as those terms are defined in the NOTICE), that exposed CBC and/or the FDIC to losses of at least $34,000,000. The FDIC charges that the foregoing has been caused by Respondent Lenz's reckless violations of laws, regulations, or prior FDIC order, unsafe or unsound practices, and other reckless disregard for the law. This amount includes $20,000,000 in unjust enrichment that Respondent Lenz received as a direct result of the foregoing misconduct;

       ii) as to Respondent Weand in the amount of at least $34,000,000. This amount is for restitution, reimbursement, or guarantee against loss for the aggregate unpaid balance on the 3/22 Loans, the 6/21 Loans, the Additional Related Loans, and the 6/23 Extensions (as those terms are defined in the NOTICE), that exposed CBC and/or the FDIC to losses of at least $34,000,000. The FDIC charges that the foregoing has been caused by Respondent Weand's reckless violations of laws, regulations, or prior FDIC order, unsafe or unsound practices, and other reckless disregard for the law.

   The restitution, reimbursement, and guarantee against loss amounts set forth herein are exclusive of interest, which is to be computed on the basis of the prime interest rate as published from time to time by the Wall Street Journal, plus two percentage points, calculated from the time that the respective losses were incurred or when unjust enrichment was received, to the time payment is made pursuant to a final Order.

   (b) Each Respondent shall post security by one or a combination of any of the following means:

       (i) by paying cash (or its equivalent) to the FDIC in care of its Boston Area Director in Braintree, Massachusetts, in the amounts specified in subparagraph (1)(a)(i) and (1)(a)(ii), respectively;

       (ii) by establishing and maintaining an escrow account in the amounts specified in subparagraph (1)(a)(i) and (1)(a)(ii), respectively, at a financial institution and
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       with an escrow agent approved by the Director, FDIC, Division of Supervision and Consumer Protection ("Division Director");

       (iii) by providing an irrevocable letter of credit or fidelity bond from a federally insured depository institution or an insurer approved by the Division Director in the amounts specified in subparagraph (1)(a)(i) and (1)(a)(ii), respectively; or,

       (iv) by providing other security deemed adequate by the Division Director.

   (c) Each Respondent shall submit to the Area Director, by no later than 12:00 noon (Eastern Time) on the tenth (10th) day following service of this TEMPORARY ORDER, a written notice supported by his sworn affidavit demonstrating compliance with the requirements relating to the posting of security.

   (2) (a) Each Respondent shall cease and desist from, directly or indirectly, causing the sale, transfer or encumbrance of funds or other asset of any nature whatsoever in which the Respondent, or any member of his immediate family, has a legal or beneficial interest, whether directly or through any other person or entity, including but not limited to the transfer of assets currently outside of the United States.

   (b) The foregoing limitation on asset transfers shall not apply to assets used to pay ordinary and reasonable living expenses and attorney fees having an aggregate value of less than ten thousand dollars ($10,000.00) per month.

   (c) The Area Director is authorized to grant appropriate relief from restrictions on expenditures or asset transfers in this TEMPORARY ORDER upon finding that the applicant has demonstrated full compliance with the aforesaid security requirements. A copy of any such application for relief shall be filed and served in the manner provided below.

   (3) If a Respondent contends that compliance with the provisions on limitations on expenditures or asset transfers of this TEMPORARY ORDER would cause undue hardship to him or his dependents, or cause him to be unable to hire legal counsel for the enforcement proceeding, he may make appropriate application to the Area Director requesting relief from this TEMPORARY ORDER. Any such application shall be filed and served in the manner provided in this TEMPORARY ORDER and will not be deemed complete and appropriate for action by the FDIC until the application is supported by the following:

   (a) current, complete and accurate financial statements as of December 31, 1999, December 31, 2000, December 31, 2001, and September 30, 2002 for Respondent and his immediate family, either prepared and certified to by a certified public accountant, or signed by the applicant with a certification under penalty of perjury that the information contained therein is true and accurate and complete to the best of his knowledge and belief following diligent inquiry; and,

   (b) true, accurate, complete and signed federal and state tax returns for 1999, 2000, 2001, and 2002 (if available), and all schedules and attachments, or if unavailable, written authorization permitting the FDIC to obtain the tax returns from the appropriate federal and state agencies; and,

   (c) written statements accurately and completely describing arrangements, funds or trusts established for his benefit or for the payment of legal or other fees or other expenses, whether directly or indirectly, along with a written statement of fees or other expenses advanced but not exhausted; and,

   (d) affidavits setting forth such other facts as thought to be pertinent.

ARTICLE II

   (1) (a) Within ten (10) days following service of this TEMPORARY ORDER, each Respondent shall submit to the Area Director such financial statements as are necessary to show, as of a date no earlier than October 30, 2002, a complete and itemized listing of his assets and liabilities, and those of his immediate family, and which shall show the value of Respondent's legal and beneficial interest in each of his related interests. If assets or liabilities shown on the financial statements are held through a corporation, partnership, trust or other entity, then the financial statement shall disclose the name and nature of the entity, as well as the percentage of the person's ownership interest in the entity. Such financial statements shall be prepared in accordance with generally accepted accounting principles by a certified public accountant acceptable to the Area
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   Director, and shall be certified under penalties of perjury and false statements by Respondent as being accurate and complete.

   (b) Updated financial statements shall be prepared by each Respondent as of December 31, 2002, and thereafter at quarterly intervals for as long as this TEMPORARY ORDER remains in effect. such updated statements shall be prepared in accordance with the requirements above, except that they shall also include an itemized statement of all changes in assets, including the source or disposition of each asset affected, since the date of the statement for the previous period. Such updated statements shall be submitted to the Area Director within thirty (30) days after the end of the relevant reporting period.

   (c) Within twenty (20) days following service of this TEMPORARY ORDER, each Respondent shall submit to the Area Director such financial statements as are necessary to show, for the period May 20, 1999 up to the date of this TEMPORARY ORDER, a complete and itemized listing of his assets and liabilities, and those of his immediate family, and which shall show the value of Respondent's legal and beneficial interest in each of his related interests. If assets or liabilities shown on the financial statements are held through a corporation, partnership, trust or other entity, then the financial statement shall disclose the name and nature of the entity, as well as the percentage of the person's ownership interest in the entity. Such financial statements shall be prepared in accordance with generally accepted accounting principles by a certified public accountant acceptable to the Area Director, and shall be certified under penalties of perjury and false statements by Respondent as being accurate and complete.

   (d) Upon written request from a Respondent, the financial statements submitted to the Area Director pursuant to this paragraph will not be made public to persons or entities other than employees and agents of governmental authorities, unless otherwise required by law or court order.

   (2) Within ten (10) days following service of this TEMPORARY ORDER, each Respondent shall submit to the Area Director lists, signed under penalty of perjury and false statements: (a) of all assets, including community assets, having a value of ten thousand dollars ($10,000) or more that Respondent, any member of Respondent's immediate family or any related interest has sold, transferred, or encumbered from May 20, 1999, to the date of the issuance of this TEMPORARY ORDER, including the date of the transfer, name and address of the transferee, the purpose of the transfer, and the amount of any consideration received, if any, from the recipient, transferee, or purchaser; and (b) of all transfers of cash totaling more than ten thousand dollars ($10,000) during any seven (7) day period made by Respondent, any member of Respondent's immediate family or any related interest from May 20, 1999, to the date of the issuance of this TEMPORARY ORDER, including the date of the transfer, name and address of transferee, purpose of the transfer, and the consideration received, if any, from the recipient, transferee, or purchaser.

   (3) Within twenty (20) days following service of this TEMPORARY ORDER, each Respondent shall provide copies of his, his immediate family's and his related interests' federal and state tax returns for the calendar years ending December 31, 1999, December 31, 2000, December 31, 2001, and for each succeeding calendar year that this Order remains in effect.

   (4) Within ten (10) days following service of this TEMPORARY ORDER, each Respondent shall provide a listing, signed under penalty of perjury and false statements, of any and all trusts: (a) established by him, or any member of his immediate family, within three (3) years prior to the date of issuance of this TEMPORARY ORDER; (b) in which Respondent, or any member of his immediate family acted as trustee within three (3) years prior to the date of issuance of this TEMPORARY ORDER; (c) in which Respondent, or any member of Respondent's immediate family, had a direct or indirect beneficial interest within three (3) years prior to the date of issuance of this TEMPORARY ORDER; and/or (d) in which Respondent, or any of member of his immediate family had directly or indirectly made a contribution in the aggregate amount of five thousand dollars ($5,000) or more within three (3) years prior to the date of issuance of this TEMPORARY ORDER.

   (5) Within ten (10) days following service of this TEMPORARY ORDER, Respondent shall provide a listing, signed under penalty of perjury and false statements, of any power of attorney in existence as of the date of the issuance of this TEMPORARY ORDER, or entered into by Respondent, or in effect at
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   any time within three (3) years prior to the date of issuance of this TEMPORARY ORDER, in which Respondent has authorized others to act directly or indirectly on his behalf with respect to assets in which Respondent, any immediate family member, or any related interest had a legal or beneficial interest.

   (6) Within thirty (30) days following service of this TEMPORARY ORDER, Respondent shall certify by affidavit, signed under penalty of perjury, that he is in full and complete compliance with the provisions of this Article.

ARTICLE III

   (1) The terms of this TEMPORARY ORDER shall be construed broadly and in the most inclusive sense with a view to their remedial and preventive purposes of protecting the interests of the FDIC as receiver for and statutory successor to CBC, and of the Bank Insurance Fund.

   (2) As used in this TEMPORARY ORDER, the term "immediate family" shall have the meaning provided by 12 C.F.R. §215.2(g), and the term "related interest" shall have the meaning provided by 12 C.F.R. §215.2(n), and shall include, without limitation, Equity Merchant Banking Corporation, L.C.

ARTICLE IV

   (1) Any notice or application required to be made to the Division Director by this TEMPORARY ORDER shall be provided to:

       Michael J. Zamorski, Director
    Division of Supervision and Consumer Protection
    Federal Deposit Insurance Corporation
    550 17th Street, NW
    Washington, DC 20429-0002

   (2) Any notice or application required to be made to the Area Director by this TEMPORARY ORDER shall be provided to:


    Daniel E. Frye
    Boston Area Director
    Federal Deposit Insurance Corporation
    15 Braintree Hill Office Park
    Braintree, Massachusetts 02184

   A copy of all documents sent to the above-referenced individuals shall be provided to:


    David A. Schecker
    Regional Counsel
    Federal Deposit Insurance Corporation
    15 Braintree Hill Office Park
    Braintree, Massachusetts 02184

ARTICLE V

   (1) This TEMPORARY ORDER shall become effective upon service. It shall remain effective and enforceable unless set aside, limited, or suspended by court order in proceedings authorized under 12 U.S.C. §1818(c)(2), or to the extent it is stayed, modified, or terminated by the FDIC. If a permanent order to cease and desist shall subsequently be issued, this TEMPORARY ORDER shall remain in force until the effective date of that permanent order to cease and desist.

   (2) If at any time the FDIC deems it appropriate in fulfilling the responsibilities placed upon it by the laws of the United States of America to undertake any action affecting Respondent, or any other institution-affiliated party of CBC, nothing in this TEMPORARY ORDER shall in any way inhibit, estop, bar, or otherwise prevent the FDIC from doing so.

   Pursuant to delegated authority.

   Dated at Washington, D.C., this 22nd day of November, 2002.

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