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FDIC Enforcement Decisions and Orders |
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FDIC entered an order continuing the suspension and prohibition from participating in the conduct of the affairs of a bank of a director who had been charged with systematic concealment of personal income, fraud, and falsification of income tax returns, even though he had not been charged with anything that has caused any monetary loss to the bank, or with any offense relating to the bank's business.
[.1] Prohibition, Removal, or SuspensionCriminal Indictment
[.2] Prohibition, Removal, or SuspensionPotential Threat to Depositors
BEFORE THE FEDERAL DEPOSIT INSURANCE CORPORATION
Hearing under Section 308.59 of the FDIC's rules and regulations pursuant to the request of * * *, vice president and director of * * *, that the Notice of Suspension and Prohibition issued May 7, 1984, under Section 8(g)(1) of the Act of rescinded.
RECOMMENDED DECISION
On June 20, 1984, a hearing was held in * * *, under Section 308.59 of the FDIC's Rules and Regulations on the written request filed by * * *, vice president and director of the * * * Bank, * * *, that the Notice of Suspension and Prohibition issued against him under Section 8(g)(1) of the Act of rescinded.
The Indictment
Mr. * * * was indicted on March 29, 1984, by a Grand Jury in the U.S. District Court for the Eastern District of * * * ( * * * Division), and was charged with
{{4-1-90 p.A-292}}five counts of willfully and knowingly attempting to evade Federal income taxes by filing false and fraudulent income tax returns during each year of a five year period from 1978 through 1982.
Mr. * * * evidence is support of his contention that the Notice of Suspension and Prohibition should be rescinded.
In summary, Mr. * * * contended that, notwithstanding his indictment, his continued service and participation in the affairs of the * * * Bank, * * *, would not pose a threat to the bank's depositors and would not threaten to impair public confidence in the bank.
{{4-1-90 p.A-293}}
Evidence offered by FDIC staff.
The FDIC staff introduced six exhibits; the indictment, the letter to the Board of the * * * Bank notifying of the suspension of Mr. * * * and Mr. * * *, the letter to Mr. * * * notifying him of his suspension, a certified copy of the resolution of the Board of the FDIC adopting a Notice of Suspension and Prohibition suspending Mr. * * * from his office as director and vice president of the * * * Bank and prohibiting him from further participation in its affairs, the Notice itself and the fidelity bond insuring the * * * Bank against loss due to dishonesty of employees.
Opinion
Mr. * * * is now under indictment for a serious Federal offense involving dishonesty. Whatever one may think about certain aspects of the income tax laws, there is no uncertainty about the obligation of every taxpayer to report income honestly and without willful and fraudulent concealment. Mr. * * *, of course, at this juncture has not been found guilty of anything, he has only been charged. But the charges do not involve minor infractions or small dollar amounts. As stated earlier, Mr. * * * has been charged with willfully and knowingly failing to report between $10,000 and $15,000 of income in each year for five consecutive years until the investigation of
{{4-1-90 p.A-295}}
[.1] The undersigned accepts the view that Mr. * * * has not been charged with anything that has caused any monetary loss to the bank, and has not been charged with any offense relating to the bank's business. But what the witnesses who testified in his behalf, or wrote letters supporting Mr. * * *, have not addressed is that he has been indicted for an offense involving dishonesty and willful and knowing submission of false statements. Where an officer has been indicted for the submission of false statements involving substantial sums of money, even though not connected with bank business, there must be concern over the possibility of the submission of false statements in the bank's affairs. The potential for harm to the public in banking is greater than in many other areas of the business world. For example, the submission of false information in connection with bank business can conceal unsafe or unsound banking practices with the capacity to damage depositors and erode public confidence. Likewise false statements in conducting bank business can frustrate national policy in controlling currency transactions.
[.2] The use of the word "may" in Section 8(g)(1) establishes that a threat to the bank's depositors or impairment of public confidence need not actually have occurred for the Corporation to suspend an officer or director and prohibit further participation in the affairs of the bank. The statute is satisfied if there is a potential threat to the interest of depositors or a potential impairment of public confidence. Were it otherwise, the Corporation would have to wait until loss or damage to a bank or its depositors had occurred, or confidence had been impaired, and would not be able to act to prevent such loss or damage, or impairment of confidence. Such would be ineffective regulation and was not the intention of Congress. Manges v. Camp, 474 F.2d 97 (5th Cir. 1973); Feinberg v. Federal Deposit Insurance Corp., 420 F. Supp. 109 (D.C. D.C. 1976).
Conclusion and recommendation
Based upon the record as a whole and all the circumstances, the undersigned concludes that in view of the charges of willfully and knowingly attempting to evade income taxes due by the filing of false and fraudulent income tax returns the continued participation by Mr. * * * in the affairs of the * * * Bank, * * *, may pose a threat to the interest of the bank's depositors and may threaten to impair public confidence in the bank. |
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Last Updated 6/6/2003 | legal@fdic.gov |