Federal Deposit
Insurance Corporation

{{4-1-90 p.A-61}}
   [¶5006] FDIC Docket No. FDIC-80-69(e) (3-16-81)

   Bank director removed from office and prohibited from further participation in the affairs of the bank. The bank acquired a Telex machine which the director allegedly used to receive and send messages concerning multi-million dollar financial transactions, none of which appear to have benefitted the bank.

   [.1] Prohibition, Removal, or Suspension—Transactions Not Benefitting Bank
   A bank director may be removed from office and prohibited from further participation in the affairs of the bank for arranging financial transactions that do not benefit the bank.

In the Matter of* * * (INSURED
STATE NONMEMBER BANK)


FINDINGS OF FACT, CONCLUSIONS
OF LAW
and
ORDER OF REMOVAL AND OF
PROHIBITION FROM
PARTICIPATION
FDIC-80-69(e)

   The Board of Directors (the "Board") of the Federal Deposit Insurance Corporation (the "FDIC") issued to * * * a NOTICE OF INTENTION TO REMOVE FROM OFFICE AND ORDER OF SUSPENSION FROM OFFICE AND OF PROHIBITION FROM PARTICIPATION (the "NOTICE"). The NOTICE charged * * * with having engaged and participated in unsafe or unsound banking practices. In addition, the NOTICE charged * * * with having committed or having engaged in acts, omissions or practices which constituted breaches of his fiduciary duty to * * * Bank.
   * * * , his counsel and counsel for the FDIC thereafter executed a STIPULATION AND CONSENT (the "CONSENT AGREEMENT"), dated February ____ , 1981, whereby, solely for the purpose of this proceeding and without admitting or denying the allegations in the NOTICE or the FINDING OF FACT AND CONCLUSIONS OF LAW ("FINDINGS") herein, * * * consented to the imposition of an ORDER OF REMOVAL AND OF PROHIBITION FROM PARTICIPATION ("ORDER") by the FDIC.
   The Board considered the matter and determined that it had reason to believe that * * * engaged and participated in unsafe or unsound practices and that he engaged in acts, omissions or practices which constituted breaches of his fiduciary duty to * * * Bank. Thereupon, the Board accepted the executed CONSENT AGREEMENT and made the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

   1. The Board finds as facts the allegations of Paragraphs 1 through 6 of the NOTICE, a copy of which is attached hereto and made a part hereof by reference thereto.
   2. The Board concludes, on the basis of the foregoing findings, that the statutory grounds specified in Section 8(e)(1) of the Federal Deposit Insurance Act (the "Act")[12 U.S.C. § 1818(e)(1)] for the removal of * * * as a director of * * * Bank and for his prohibition from participation in the conduct of the affairs of the Bank, have been met, and that such an order {{4-1-90 p.A-62}}should issue, pursuant to the provisions of Section 8(e)(4) of the Act.
   Therefore, to remedy the foregoing acts, practices, omissions and breaches of fiduciary duty, the Board, pursuant to Section 8(e)(4) of the Act [12 U.S.C. § 1818(e)(4)] issues the following:

ORDER OF REMOVAL AND OF PROHIBITION FROM PARTICIPATION

   1. * * * is hereby removed as an officer and/or director of * * * Bank, * * *.
   2. * * * is hereby prohibited from participation in any manner in the affairs of * * * Bank, * * *.
   3. * * * is hereby prohibited from voting for a director of * * * Bank, * * *, without the prior written approval of the FDIC.
   4. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of this ORDER shall have been modified, terminated, suspended or set aside by the Board.
   By direction of the Board of Directors March 16, 1981.
/s/ Hoyle L. Robinson
Executive Secretary

NOTICE OF INTENTION TO
REMOVE FROM OFFICE
and
ORDER OF SUSPENSION FROM
OFFICE AND OF PROHIBITION
FROM PARTICIPATIONFDIC-80-69e
   The FEDERAL DEPOSIT INSURANCE CORPORATION (the "FDIC") being of the opinion that * * *, in his capacity as a director of * * * Bank, * * * (the "Bank"), has engaged or participated in unsafe and unsound practices in connection with the Bank, or has committed or engaged in acts, omissions or practices which constitute breaches of his fiduciary duty; and
   Having determined that the Bank has suffered or will probably suffer substantial financial loss or other damage or that the interests of its depositors could be seriously prejudiced by reason of such violation or practice or breaches of fiduciary duty or that * * * has received financial gain by reason of such violation, practice or breaches of fiduciary duty; and
   Having determined that such violation or practice or breaches of fiduciary duty involve personal dishonesty on the part of said * * * or demonstrate a willful or continuing disregard for the safety or soundness of the Bank;
   The FEDERAL DEPOSIT INSURANCE CORPORATION, therefore, institutes this proceeding for the purpose of determining whether an appropriate order should issue against said * * * under the provisions of Section 8(e) of the Federal Deposit Insurance Act (the "Act") (12 U.S.C. § 1818(e)) and the FDIC hereby issues this NOTICE OF INTENTION TO REMOVE FROM OFFICE and ORDER OF SUSPENSION FROM OFFICE AND OF PROHIBITION FROM PARTICIPATION pursuant to the provisions of said Act and the FDIC's Rules of Practice and Procedures (12 C.F.R. Part 308) and alleges as follows:
   1. The Bank, a corporation, existing and doing business under the laws of the State of * * *, and having its principal place of business at * * *, has been and, at all times mentioned herein, is an insured State nonmember bank. The Bank, therefore, has been and, at all times mentioned herein, is subject to the Act (12 U.S.C. § 1811 et seq.) and the Rules and Regulations of the FDIC (12 C.F.R. Part 303 et seq.). The FDIC has jurisdiction of the Bank and the subject matter of this proceeding.
   2. At all times pertinent to the charges herein, * * * has been a member of the Bank's board of directors; that * * * is currently serving as a director of the Bank, and is Chairman of the Bank's board of directors.
   3. As of June 30, 1980, the Bank's total assets were $6,712,000, and the Bank's capital, reserves and subordinated debt were $442,000.

   [.1] 4. Director * * * has engaged or participated in unsafe and unsound practices in connection with the Bank, or has committed or engaged in acts, omissions or practices which constitute breaches of his fiduciary duty, as follows:

   (a) On or about March 1, 1980, ostensibly for the purpose of facilitating Mr. * * * activities in the arranging of multimillion dollar financial transactions, the Bank acquired a Telex machine. That numerous Telex communications have been received and sent, none of which appear to have benefited the Bank; that the Bank has paid the expenses for the use of said machine, in the amount of approximately $6,000 to date. {{4-1-90 p.A-63}}    (b) On or about March 5, 1980, and on several dates subsequent thereto, in Telex messages directed to * * * Bank, and in Telex messages apparently initiated by "* * *, Chairman of the Board, * * * Bank," the Bank became involved in, and may be exposed to legal liability for, a proposal to lend $273 million, in Swiss francs, to various entities in * * *, to wit: $100 million to the Minister of Finance; $100 million to the Minister of Labor; $35 million to the Municipality of * * *; and $38 million to * * * President of the Cooperative * * *.
   (c) On or about March 5, 1980, and on several dates subsequent thereto, in Telex messages apparently initiated by " * * *, Chairman of the Board, * * * Bank," the Bank became involved in, and may be exposed to legal liability for, a transaction involving * * *, President, * * * and * * *, in connection with a certain purported escrow arrangement for the guaranteed disbursement of an amount which "will not exceed $6.75 million U.S. dollars."
   (d) On or about April 4, 1980, in a letter written on * * * Bank letterhead paper, and apparently signed by "* * *, Chairman of the Board," the Bank became involved in, and may be exposed to legal liability for, a proposal for a loan of $100 million to * * * Business and Trust Company of * * *, on behalf of Bank * * *, to finance the construction of hotels in * * *.
   (e) On or about May 20, 1980, in Telex messages directed to * * * Bank and in Telex messages apparently initiated by "* * *, Chairman of the Board, * * * Bank," the Bank became involved in, and may be exposed to legal liability for, the acceptance of an offer from * * *, for a loan of $100 million (U.S. dollars), bearing interest at 10 1/2 percent, payable annually.
   (f) On or about July 22, 1980, and on several dates subsequent thereto, in Telex messages apparently initiated by " * * *, Chairman of the Board, * * * Bank," the Bank became involved in, and may be exposed to legal liability for, a proposed transaction whereby the Bank would act as escrow agent and as agent for the closing of the sale and purchase of 2,000 metric tons (64,000 ounces) of 999.5 pure gold, in 12 1/2 kilogram bars, for London delivery. An escrow account, designated in these Telex messages as * * *, was purportedly opened by the proposed sellers of the gold.
       (g) On or about August 4, 1980, in an unsigned Telex message, a copy of which was discovered in * * * Bank, the Bank became involved in, and may be exposed to legal liability for, a transaction referenced as "* * * ", whereby the Bank, acting on behalf of its "escrow client" offers to sell 2000 metric tons (64,000 ounces) of gold at a discount of $5.25 below London price, with a further offer of a "second amount if available" at $6.00 below London price, upon completion of the first contract.
   (h) On or about October 7, 1980, and on subsequent dates, in Telex messages directed to "* * * Bank Attn: Mr. * * *, Chairman of the Board," and in other communications referred to therein, the Bank became involved in, and may be exposed to legal liability for, a transaction for the sale and purchase of 300 million Russian rubles, at a price of $16 million for "the first tranche of 50 million rubles."

ORDER OF SUSPENSION FROM OFFICE AND OF PROHIBITION FROM PARTICIPATION

   In consideration of the acts, omissions and practices which * * * is alleged to have committed, engaged in, or participated in as specified in the foregoing NOTICE OF INTENTION TO REMOVE FROM OFFICE, and taking into consideration the fact that these practices, omissions and acts evidence a pattern of personal dishonesty or willful or continuing disregard for the safety and soundness of the Bank, and taking into consideration the financial position of the Bank, the FEDERAL DEPOSIT INSURANCE CORPORATION deems it necessary for the protection of * * * Bank and the interests of its depositors that * * * be suspended from office as a director of the Bank and prohibited from further participation in any manner in the affairs of the Bank, and the Corporation hereby issues this ORDER OF SUSPENSION FROM OFFICE AND PROHIBITION FROM PARTICIPATION, and notice is hereby given, pursuant to Section 8(e)(3) of the Federal Deposit Insurance Act (12 U.S.C. § 1818(e)(3)), that * * *, Respondent, be, and hereby is, suspended as a director of * * * Bank and prohibited from further participation in any manner in the conduct of the affairs of * * * Bank, pending the completion of the administrative proceedings instituted pursuant to the foregoing NOTICE OF INTENTION TO REMOVE FROM OFFICE. This ORDER OF SUSPENSION AND PROHIBITION FROM PARTICIPATION becomes effective immediately upon service thereof.
   Dated at Washington, D.C., this 27th day of October, 1980.
   By direction of the Board of Directors.
/s/ Alan J. Kaplan (for)
Hoyle L. Robinson
Executive Secretary

ORDER OF APPROVAL AND RECOMMENDATION
FDIC-80-69(e)
   The above-captioned matter came before me at * * * on February 10, 1981, the time and date set for the hearing in said matter. The Federal Deposit Insurance Corporation appeared by and through * * *, Regional Counsel, * * *; * * * appeared by and through * * * of the firm of * * *.
   It was represented by counsel for the parties that the Office of the General Counsel of the Federal Deposit Insurance Corporation and * * *, had entered into a "STIPULATION AND CONSENT" (hereafter "CONSENT AGREEMENT") for the resolution of this matter, which CONSENT AGREEMENT would be submitted to the Board of Directors of the Federal Deposit Insurance Corporation for approval. The said CONSENT AGREEMENT, dated February 5, 1981 and bearing the signatures of * * *, * * * and * * * was presented for approval. It appeared that the CONSENT AGREEMENT contemplated the entry and issuance by the Board of Directors of the Federal Deposit Insurance Corporation of certain FINDINGS OF FACT, CONCLUSIONS OF LAW and ORDER OF REMOVAL AND OF PROHIBITION FROM PARTICIPATION (hereafter "FINDINGS" and "ORDER"). Said FINDINGS and ORDER, including a copy of the NOTICE OF INTENTION TO REMOVE FROM OFFICE and ORDER OF SUSPENSION FROM OFFICE AND OF PROHIBITION FROM PARTICIPATION (the "NOTICE"), made a part of the "FINDINGS" and "ORDER" by reference thereto, were also presented for approval.
   Having ascertained the validity of the documents thus presented and having determined that * * * executed the "CONSENT AGREEMENT" of his own free will and choice, that he was not subject to duress, undue influence or improper inducements of any kind, and that he was fully advised as to the facts of this matter and the consequences of his action, I hereby make and enter the following:

{{4-1-90 p.A-65}}
ORDER OF APPROVAL AND RECOMMENDATION

   1. The "STIPULATION AND CONSENT" referred to herein is hereby approved.
   2. The "FINDINGS OF FACT, CONCLUSIONS OF LAW and ORDER OF REMOVAL AND OF PROHIBITION FROM PARTICIPATION referred to herein are hereby approved.
   3. The adoption and issuance by the Board of Directors of the Federal Deposit Insurance Corporation of the "FINDINGS OF FACT, CONCLUSIONS OF LAW and ORDER OF REMOVAL AND OF PROHIBITION FROM PARTICIPATION" referred to herein is recommended.
   Dated this ____ , day of February 1981.
/s/ Joseph M. May
Administrative Law Judge
1900 L Street N.W., Suite 500
Washington D.C. 20036

STIPULATION AND CONSENT FDIC-80-69(e)
Subject to the acceptance of this STIPULATION AND CONSENT (the "CONSENT AGREEMENT") by the Board of Directors of the Federal Deposit Insurance Corporation (the "FDIC"), it is hereby stipulated and agreed by and between the office of the General Counsel of the Federal Deposit Insurance Corporation and * * *, * * *, as follows:
   1. * * *, solely for the purpose of this proceeding and without admitting or denying the allegations set forth in the NOTICE OF INTENTION TO REMOVE FROM OFFICE (the "NOTICE") hereby consents and agrees to the entry by the FDIC of FINDINGS OF FACT AND CONCLUSIONS OF LAW (the "FINDINGS") and agrees to the imposition of an ORDER OF REMOVAL FROM OFFICE AND OF PROHIBITION FROM PARTICIPATION (the "ORDER") by the FDIC. * * * further stipulates and agrees that such ORDER shall be deemed to be an "order which has become final," as defined in Section 8(k) of the Federal Deposit Insurance Act (the "Act") [12 U.S.C. § 1818(k)], and that said ORDER shall become effective upon its issuance, and fully enforceable by the FDIC pursuant to the provisions of Section 8(i) of the Act [12 U.S.C. § 1818(i)], subject only to the conditions set forth in Paragraph 2 of this CONSENT AGREEMENT.
   2. In the event the FDIC accepts this CONSENT AGREEMENT and issues the ORDER, it is agreed that no action to enforce said ORDER in the United States District Court will be taken by the FDIC unless * * * has violated or is about to violate any provision of the ORDER; and it is also agreed that no further action will be taken solely on the basis of the facts upon which the findings and conclusions of unsafe or unsound practices described in the FINDINGS were based.
   3. The parties to this CONSENT AGREEMENT waive;

   (a) A hearing for the purpose of taking evidence on the allegations set forth in the NOTICE;
   (b) The filing of PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW;
   (c) A recommended decision of an Administrative Law Judge; and
   (d) Exceptions and briefs with respect to such recommended decision.