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   [5063] FDIC Docket No. FDIC-85-2k (4-7-86).

   FDIC assessed a civil money penalty against a bank's executive officer, director, and principal shareholder for causing the bank to purchase certain loan participations that involved more than the normal risk of repayment or presented other unfavorable features.

   [.1] Federal Reserve Act § 23A—Transaction with Affilliates—Approval of Directors
   Certain transactions with affiliates, including loan participations, which exceed $25,000 or 5% of capital and surplus must receive prior approval by a majority of the bank's board of directors.

   [.2] Civil Money Penalties—Amount of Penalty—Statutory Standard
   When determining the amount of a civil money penalty, the following factors must be taken into account: the appropriateness of the penalty with respect to the size of financial resources and good faith of the person charged, the gravity of the violation, the history of previous violations, and such other matters as justice may require.

   [.3] Civil Money Penalties—Purpose
   Civil penalties are assessed not only to punish the violator according to the degree of culpability and severity of the violation, but also to deter future violations.

   [.4] Civil Money Penalties—Amount of Penalty—Personal Gain
   Whenever a violation results either in personal financial or economic gain by an offender and/or in loss to the bank, that amount may be assessed as a portion of the penalty. Also, the violator should "pay a penalty over and above" the amount of loss to the bank or personal gain for violating the law.

   [.5] Shareholders—Personal Benefit
   A purchase of loan participations for cash that is intended to aid a financially ailing bank, indirectly benefits the bank's principal shareholder.

In the Matter of * * * * * * BANK


(INSURED STATE NONMEMBER BANK)
FDIC-85-2kDECISION

I. INTRODUCTION
   This action is a civil money penalty proceeding brought by the Federal Deposit Insurance Corporation ("FDIC") against * * * ("Respondent"), an executive officer, director and principal shareholder of * * * Bank * * * ("Bank`), pursuant to sections 8(i) and 18(j) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §§ 1818(i), 1828(j), for the following violations:
   1. Section 22(h) of the Federal Reserve Act, 12 U.S.C. § 375b, and Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 215, as promulgated thereunder (hereafter collectively referred to as `Regulation O"), made applicable to insured state nonmember banks by section 18(j)(2) of the Act, 12 U.S.C. § 1828(j)(2), and section 337.3(a) of the FDIC's Rules and Regulations, 12 C.F.R. § 337.3(a).
   2. Section 23A of the Federal Reserve Act, 12 U.S.C. §371c ("Section 23A"), made applicable to insured state nonmember banks by section 18(j)(1) of the Act, 12 U.S.C. § 1828(j)(1).
   3. An Order to Cease and Desist issued by the FDIC on January 25, 1984, pursuant to section 8(b) of the Act, 12 U.S.C. § 1818(b) ("Order"), and consented to by the Bank. The Order became effective on February 4, 1984.
   The FDIC proposed that a civil money penalty of $150,000 be levied against Respondent for the violations set forth above.
   The Board has reviewed the record, the parties' briefs and proposed findings of {{4-1-90 p.A-815}}facts, and the Recommended Decision and Order of the Administrative Law Judge ("ALJ") and the parties' exceptions thereto. With certain exceptions that are discussed herein, infra, concerning his discussion and conclusion with regard to whether the Respondent violated Regulation O, the Board agrees with the ALJ's assessment of a $10,000 penalty.
II. Statement of the Case
   On February 11, 1985, the Board of Directors of the FDIC issued a Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, and Order to Pay ("Notice") pursuant to sections 8(i)(2) and 18(j)(3) of the Act, 12 U.S.C. §§ 1818(i)(2), 1828(j)(3) against Respondent and * * *. During the time period pertinent to this proceeding, * * * was an executive officer and director of the Bank and Respondent was an executive officer, director, and principal shareholder of the Bank. The Notice charged that * * * and * * * caused the Bank to purchase certain loan participation from * * *. Respondent * * * was also an officer, director and the controlling shareholder of * * * , as well as the Bank. * * * was therefore an affiliate of the Bank as defined in section 23A, 12 U.S.C. § 371c(a)(1). The Notice further charged that these loan participations involved more than the normal risk of repayment or presented other unfavorable features, were purchased on terms and conditions inconsistent with safe and sound banking practices, and were not properly documented or were of inferior credit quality. The Notice alleged that by causing the Bank to purchase the loan participations, Respondent and * * * violated Regulation O, section 23A and the Order. The Notice included an assessment of civil money penalties against Respondent and * * * of $150,000 and $1,000, respectively, pursuant sections 18(j)(3)(A) and 8(i)(2)(i) of the Act, 12 U.S.C. §§ 1828(j)(3)(A) and 1818(i)(2)(i).
   Subsequently, * * * entered into a Stipulation and Consent with the FDIC whereby, without admitting or denying any of the allegations set forth in the Notice, she consented and agreed to pay the $1,000 penalty assessed against her. The Board of Review of the FDIC adopted and approved the Stipulation and Consent in settlement of the civil money penalty proceeding against her, and issued an Order Approving Stipulation and Consent. * * * therefore, is not a party to this proceeding.
   By letter dated February 26, 1985, Respondent requested a hearing on the charges set forth in the Notice, pursuant to section 18(j)(3)(c), 12 U.S.C. § 1828(j)(3)(c). In an undated letter received by the Office of the Executive Secretary on May 1, 1985, Respondent requested an extension of time within which to file an answer to the Notice and an extension was granted to May 11, 1985. On August 19, 1985 the parties executed a Stipulation by which it was agreed that the Respondent would be permitted to file his August 16, 1985 Answer to the Notice.
   In his Answer of August 16, 1985, the Respondent admitted the allegations set forth in paragraphs 1, 2, 3, 4, and 6 of the Notice, and paragraph 5 to the extend that it alleged the Bank purchased loan participations from * * * totaling $485,000 between May 4 and July 30 of 1984. Thus, Respondent admitted to the existence of all the business relationships upon which the violations of section 23A and Regulation O are predicated. The Respondent denied the remaining allegations set forth in the Notice.
   A formal hearing was held before Administrative Law Judge Adam Gefreh on August 19 and 20, 1985. The ALJ submitted his Recommended Decision to the Executive Secretary on December 16, 1985, and the FDIC filed exceptions on January 17, 1986 and Respondent on January 28, 1986. The matter was certified to the Board of Directors by the Executive Secretary on January 22, 1986.

III. THE ALJ's RECOMMENDEDDECISION AND ORDER

   The ALJ reviewed the four batches of loan participations (consisting of a total of 26 loans) that the Bank acquired from * * * between May 4, 1984 and July 30, 19841 and concluded that the Respondent


1 The Bank purchased four lots of loan participations from * * * as follows: May 4, 1984 - $300,000; June 28, 1984 $60,000; July 17, 1984 - $50,099; and July 30, 1984 - $75,000, for a total of $485,099. Respondent executed all of the participations on behalf of * * *. On August 9, 1984, * * * was put into receivership by officials of the State of * * *. (Continued)

{{4-1-90 p.A-816}}had violated Section 23A, Regulation O and the Order as follows:
   1. The loan participations purchased from * * * by the Bank violated section 22(h) of the Federal Reserve Act, 12 U.S.C. § 375b, and section 215.4(a) of the Federal Reserve System's Regulation O, 12 C.F.R. § 215.4(a), in that each loan participation involved more than the normal risk of repayment or presented other unfavorable features.
   2. The loan participations purchased from * * * by the Bank violated Section 23A of the Federal Reserve Act, 12 U.S.C. § 371c(a)(4), in that the transactions were not made on terms and conditions that were consistent with safe and sound banking practices.
   3. The loan participations purchased from * * * by the Bank violated the Order issued pursuant to section 8(b) of the Act, 12 U.S.C. §1818(b), which had become final.
   4. Respondent caused, brought about, or participated in the Bank's purchase of the loan participations from * * *.
   5. Respondent caused, brought about, or participated in the violations of section 22(h) of the Federal Reserve Act, 12 U.S.C. § 375(b), and Regulation O, 12 C.F.R. § 215.4(a).
   6. Respondent caused, brought about, or participated in violations of Section 23A of the Federal Reserve Act, 12 U.S.C. § 371c(a)(4).
   7. Respondent caused, brought about, or participated in the violations of the Order.
   8. A civil money penalty should be assessed against the Respondent for the above violations, in accordance with the provisions of sections 8(i)(2) and 18(j)(3) of the Act, 12 U.S.C. §§ 1818(i)(2), 1828(j)(3).
   The ALJ recommended that Respondent be adjudged to have violated sections 22(h) and 23A of the Federal Reserve Act, Regulation O, and the FDIC's Order to Cease and Desist (effective February 4, 1984) and that he be assessed and ordered to pay a civil money penalty of $10,000. The ALJ deemed that amount to be consistent with the prophylactic purposes of 12 U.S.C. §§ 1818(i) and 1828(j)(3). A copy of the ALJ's Recommended Decision is attached hereto as Appendix A.

IV. THE PARTIES' EXCEPTIONS
   The FDIC took exception to the ALJ's findings, conclusions, and the amount of the recommended penalty, urging as follows:
   1. The ALJ should have adopted FDIC's proposed Finding of Fact 14, that the loan participations were purchased without the prior consent of the Bank's board of directors.
   2. The ALJ should have adopted FDIC's Proposed Conclusion of Law 3, that the loan participations violated 12 U.S.C. § 375b and 12 C.F.R. § 215.4(b) in that they were purchased without prior approval of the Bank's board of directors and the aggregate amount exceeded the greater of $25,000 or 5 percent of the Bank's capital and unimpaired surplus.
   3. The ALJ should have adopted FDIC's Proposed Conclusion of Law 8, that Respondent caused, brought about, or participated in violations of 12 U.S.C. § 375b and 12 C.F.R. § 215.4(b).
   4. The ALJ should have adopted the FDIC's civil money penalty of $150,000, rather than reducing the amount to $10,000.
   The Respondent took exception to the ALJ's recommended penalty and urges that the civil money penalty be reduced to $1,000 because of his financial condition. He claims to have a net worth of less than $6,000 with an additional contingent liability of over $200,000. He contends that his financial condition, good faith, and lack of personal gain from the offending transactions warrant reduction of the penalty amount.

V. OPINION
   A. Findings and Conclusions
   The FDIC's Notice of February 11, 1985 contains three separate legal bases for liability for civil money penalties: (1) violation of the Order, pursuant to 12 U.S.C. § 1818(i)(2)(i); (2) violation of limits on loans to affiliates of bank insiders, pursuant to 12 U.S.C. § 375b and 12 U.S.C. § 1828(j)(3); and (3) violation of restrictions on transactions with affiliates, pursuant to 12 U.S.C. § 371c(a)(4) and 12 U.S.C. § 1828(j)(3).
1 Continued: As of September 25, 1984, $269,217 of these loans were classified. The Bank was closed on December 7, 1984, and FDIC was appointed Liquidating Agent of the Bank.
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   The Board has reviewed the evidence of record in this proceeding and the ALJ's Findings of Fact Nos. 1 through 36, contained in his Recommended Decision at pages 5 through 13. These Findings of Fact are supported by substantial evidence on the record as a whole. Therefore, the Board adopts and incorporates herein by reference the ALJ's Findings of Fact.
   In addition to the findings of fact adopted from the ALJ's Recommended Decision, the record supports and the Board adopts the following amendment to Finding No. 36 and additional findings of fact:
   "25A. The loan participations described herein were purchased without the prior approval of a majority of the board of directors of the Bank.
   36. [Replace the period at the end of the Findings with a comma and add the following phrase:] including $64,428 classified loss and $102,000 classified doubtful.
   37. The purchase of the loan participations from * * * by the Bank which resulted in a write-off of $115,428 in a seriously impaired bank with loans of less than $3 million is an unsafe and unsound banking practice; the purchase involved the same kind of transactions that contributed to the Bank's already impaired financial condition and prompted the FDIC's Order.
   38. After the effective date of the Order and on the date the first group of loan participations involving $300,000 was purchased by the Bank from * * * an FDIC bank examiner notified Respondent that a review of those loans revealed serious deficiencies.
   39. * * *, a Bank officer, also notified Respondent that the May 4 loan participations were seriously deficient.
   40. Despite these warnings, Respondent caused the purchase by the Bank of three more groups of deficient loan participations from * * * prior to the bankruptcy of * * * in August 1984.
   41. Respondent also admitted that he was notified by an FDIC bank examiner in July 1984, that the loan participations from * * * contained serious deficiencies.
   42. Respondent, after notification of the deficiencies in the loan participations, failed to take any action to cure those deficiencies or to sell the loan participations back to * * * , although Respondent asserted that the loan participations were purchased with recourse."
   Based upon his Findings of Fact and the record as a whole, the Board finds that the ALJ's Conclusions of Law are correct. Therefore, the Board adopts and incorporates herein by reference the ALJ's Conclusions of Law on pages 12 and 13 of his Recommended Decision.

   [.1] However, the Board also finds that the ALJ erred in failing to conclude that purchase of the loan participations violated section 215.4(b) of Regulation O, 12 C.F.R. § 215.4(b). Section 215.4(b) requires that certain transactions with affiliates which exceed $25,000 or 5 percent of capital and surplus must receive prior approval by a majority of the Bank's board of directors. Although the ALJ does not explain his reasoning, it appears that he believed that the loan participations had received prior approval by the Bank's board of directors. The ALJ thus failed to adopt FDIC Proposed Findings of Fact 14, that the loan participations were purchased without the prior approval of the board of directors of the Bank. Evidence presented at the hearing, including admissions made by Respondent, clearly show that purchase of the loan participations violated section 215.4(b)(1) for the following reasons:

       1. Contrary to * * * law, there were only two directors of the Bank, Respondent and Ms. * * *.
       2. The board never approved the participations; rather, Respondent unilaterally made the decisions. He claims that prior approval "was assumed."
       3. Ms. * * * did not approve the participations, and certainly not prior to their purchase.
       4. Respondent was an interested party and did not abstain from the decision to purchase the loans.
       5. Since only Ms. * * * would have been eligible to vote on the decision, there could be no majority.
Thus, there could have been no prior approval by the Bank's board of directors and the exception could not have applied. Accordingly, the Board adopts FDIC Proposed Finding of Fact 14 as Finding of Fact No. 25A, as set forth above, and finds that Respondent caused, brought about, or par- {{4-1-90 p.A-818}}ticipated in violations of section 215.4(b) of Regulation O, 12 C.F.R. § 215.4(b).
   B. Amount of the Penalty
   In his Recommended Decision, the ALJ concludes that a $10,000 civil money penalty would be just and consistent with the purposes of the statute. In reaching his conclusion the ALJ stated that the Respondent acted in good faith; the violations were not the direct cause of the Bank's failure; the Respondent is in severe financial difficulties and without significant resources; and the determination of a penalty based on projected loss is very speculative. However, the ALJ did not clearly explain how these or other factors led him to reduce the FDIC's requested $150,000 civil money penalty by such a substantial amount. The Board agrees with the conclusion of the ALJ that a civil money penalty should be assessed in this instance. In light of the large discrepancy between the penalty urged by the FDIC in the Notice and that recommended by the ALJ, the Board has undertaken an independent review.
   1. Statutory and Regulatory Standards
   The determination of the amount of a civil money penalty is not a matter that may be determined with scientific precision. The statutes, legislative histories, regulations, and the joint statement of policy issued by the federal financial regulators2 set forth the factors to be considered in assessing penalties, but they provide no guidance as to how those factors should be weighed and translated into a dollar amount for a particular case.

   [.2] The Federal Deposit Insurance Act provides only that the maximum penalty is $1,000 per day for each violation and requires that the FDIC:

       ...take into account the appropriateness of the penalty with respect to the size of financial resources and good faith of the person charged, the gravity of the violation, the history of previous violations and such other matters as justice may require.
12 U.S.C. §§ 1818(i)(2)(ii) and 1828(j)(3)(B). Thus, it is clear that the setting of the amount of a civil money penalty is a function left by the Congress to the discretion, expertise and judgment of the bank regulatory agencies such as the FDIC, consistent with the statutory scheme.3

   [.3.4] As stated in the FDIC's Manual of Examination Policy ("Manual") "[c]ivil money penalties are assessed not only to punish the violator according to the degree of culpability and severity of the violation, but also to deter future violations...the primary purpose...is not to effect remedial action.4 Furthermore, it is the FDIC's policy that, whenever a violation results either in personal financial or economic gain by an offender and/or in loss to the bank, that amount may be assessed as a portion of the penalty. Additionally, the Manual states that the violator should "pay a penalty over and above" the amount of loss to the bank or personal gain for violating the law.5 Willingness and promptness in making restitution is also a factor that may affect the amount of the penalty.6 As the Board has stated on other occasions, the thirteen factors set forth in the Policy Statement provide a useful guide for evaluating the responsibility or culpability of a violator for the violations that form the basis for a civil money penalty. In addition, the Board believes that the amount of direct or indirect benefit to a violator, whether in the form of financial or economic gain or otherwise, and the amount of harm suffered by the bank, should also be major considerations in the determination of the amount of the penalty.
   2. Application of the Standards to this Case
   The ALJ's conclusions as to Respondent's good faith is troubling in view of the
   


2 Interagency Policy Regarding the Assessment of Civil Money Penalties by Federal Financial Institutions Regulatory Agencies, issued September 30, 1980 ("Policy Statement").
   
3 Congress indicated that it granted discretionary civil money penalty authority to the banking agencies in order to strengthen the agencies section 8(b) cease and desist power. The House Report stated:
   The banking agencies have made sound arguments in support of authorization for imposing civil money penalties for violations of laws, rules, and orders. A monetary penalty tied to a violation can give an agency the flexibility it needs to secure compliance by individuals or institutions. Presently an agency is often faced with the option of having to ignore a violation or imposing a penalty it often considers to be overkill. A cease-and-desist action against an institution or referral of a possible criminal action may be too severe for the criticized action. Daily money penalties should serve as deterrents to violations of laws, rules, regulations, and orders of the agencies.
   H.R. Rep. No. 1383, 95th Cong., 2d Sess. 17 (1978). (Emphasis added.)
   
4 DBS Manual of Examination Policy, Section U at page 1 (FDIC, October 1982).
   
5 Id. at 2.
   
6 Id.
{{4-1-90 p.A-819}}facts of record. Respondent knew or should have known of the outstanding cease and desist order prohibiting the Bank from purchasing from affiliates loan participations that were not properly documented and were of inferior credit quality. Respondent was put on notice as to the documentation and credit deficiencies after purchase of the first group of loan participations on May 4, 1984, by an FDIC examiner and a Bank officer. Yet, Respondent proceeded to purchase three more groups of inferior loan participations from * * * in violation of the Order. The Board can only conclude that these violations of the Order, which were in and of themselves unsafe or unsound banking practices, were committed with total disregard as to the consequences to the Bank (Factors 1, 3, 12 and 13). Furthermore, Respondent was aware that prior similar conduct by the Bank led to the imposition of the Order (Factors 2 and 10). No effort or offer was made by Respondent to provide restitution to the Bank for losses incurred and, indeed, no effort was made by Respondent to rescind the purchases from * * * although he alleged that the purchases were made with recourse (Factor 8).
   The ALJ also concludes that "[i]t would be difficult to project any specific loss to the Bank on these loans, had the * * * not gone into receivership." However, the fact is that the Bank has or will likely suffer substantial loss because * * * was placed in receivership, leaving the Bank in the position of a general creditor. From the record of this proceeding, it is unclear as to how much of the loan participations may ultimately be collected by the Bank from the * * * receivership. As of the hearing, only $100,000 in principal and $51,000 in interest had been collected. The only projection of additional recovery in the record was that the State of * * *, receiver for * * *, estimated that collection on * * * assets could reach 40 percent.
   It would be surprising, therefore, if the full $485,599 plus the interest due on the loan participations were to be repaid without any loss. Indeed, from the record it would appear that actual losses were already incurred in an amount exceeding $80,000. Furthermore, applying the 40 percent recovery projection to the remaining uncollected principal of $385,000 yields a loss in excess of $200,000 without even considering the loss of interest due on the principal.

   [.5] Finally, there is the issue as to benefit to Respondent from the transactions giving rise to the violations of Section 23A, Regulation O and the Order. The ALJ concluded that Respondent did not profit from any of these transactions, nor was he motivated by self-interest. It is true that there is no evidence of ultimate benefit to Respondent in this instance since * * * went bankrupt. Nevertheless, in view of what can only be described as Respondent's willful disregard of the outstanding Order and normal safety and soundness considerations, it is reasonable to conclude that the purchase of loan participations from * * * for cash was intended to aid the financially ailing * * * and thereby indirectly benefit Respondent, * * * principal shareholder. Therefore, the Board concludes that Respondent did receive some benefit from the transactions, albeit, indirect and short-lived in view of * * * closure (Factor 7).
   From the above discussion, the Board finds that Respondent is directly responsible for violations of Section 23A, Regulation O and the Order, which resulted in substantial financial loss to the Bank and which yielded, or were intended to yield, a benefit to Respondent. Consequently, the Board concludes that assessment of a substantial civil money penalty would be warranted in this instance. The record shows that the maximum penalty allowed by the Act would substantially exceed that proposed by the FDIC in the Notice.7 The FDIC's proposed penalty of $150,000 is within the statutory limits and bears a reasonable relationship to the loss to the Bank as of the date of the Notice.
   On the other hand, as the ALJ pointed out, the undisputed modest net worth of the Respondent and the loss of his investment in the Bank resulting from its failure weigh against a large penalty. Consequently, the Board reluctantly finds that a civil money penalty of $10,000 should be assessed against Respondent. The Board concludes that this is the minimum penalty that will


7 There were 26 violations of at least one law or the Order times $1,000 per violation times the number of days the violation existed from the date of purchase of each participation to the date of failure of the Bank on December 7, 1984. This calculation yields a maximum penalty of almost $5 million dollars.
{{4-1-90 p.A-820}}meet the statutory and regulatory goals of punishment for the offenses and deterrence of future violations and is justified by Respondent's lack of financial resources.8 However, the Board is also of the view that the extremely serious nature of the violations and the willful disregard for safe and sound banking practices and the outstanding FDIC Order would, under most other circumstances, require a much more substantial penalty.

VI. CONCLUSION
   For the reason set forth above, the Board adopts and issues the accompanying Order to Pay Civil Money Penalties.
   By direction of the Board of Directors
   Dated at Washington, D.C., this 7th day of April, 1986.
   /s/ Hoyle L. Robinson
   Executive Secretary

ORDER TO PAY CIVIL MONEY
PENALTIES

FDIC-85-2k

   After taking into account the appropriateness of the penalty with respect to the size of the financial resources and good faith of * * *, the gravity of the violations, the history of previous violations, and such other matters as justice may require, it is:
   ORDERED, that by reason of the violations found herein, a penalty of $10,000 be, and hereby is, assessed against * * * pursuant to sections 8(i)(2) and 18(j)(3) of the Federal Deposit Insurance Act, 12 U.S.C. §§ 1818(i)(2), 1828 (j)(3).
   FURTHER ORDERED, that the penalty assessed hereby shall be payable and collected not later than 20 days from the date this Order becomes final and unappealable.
   By direction of the Board of Directors.
   Dated at Washington, D.C., this 7th day of April, 1986.
   /s/ Hoyle L. Robinson
   Executive Secretary

Recommended Decision

FDIC-85-2k

   This matter came before the undersigned Administrative Law Judge on a request for hearing made by the Respondent in a letter dated February 26, 1985. A hearing was held in * * * on August 19 and 20, 1985.
   Although advised of his right to be represented, Mr. * * * elected to proceed without counsel.

STATEMENT OF THE CASE
   The * * * Bank of * * * (hereinafter the "Bank") was at all times pertinent an insured state nonmember bank subject to the Federal Insurance Deposit Act (the "Act") and to the Rules and Regulations of the FDIC.
   The * * * was an * * * Corporation under the * * * Industrial Loan Law, and was not insured by the FDIC.
   Respondent * * * was an officer, director, and principal shareholder of the * * * Bank. At the same time, he was also a controlling shareholder, officer and/or director of * * *. Thus, the Bank was an "affiliate" of * * * and * * * was a related interest of Respondent.
   The Bank had been a "supervisory concern" to the FDIC since at least 1982 (Tr. 148). Examination of May 1983 revealed a disproportionate percentage of adversely classified loan participations purchased from affiliate banks. The Report of Examination noticed several violations of the Act and Regulations. The Respondent was given a copy of this report and the violations were discussed with him at a meeting in June 1983.
   On October 5, 1983, the FDIC issued a Notice of Charges and of Hearing against the Bank. The Bank stipulated and consented to the issuance of an Order to Cease and Desist which became effective February 26, 1984. The Order prohibited the Bank, its directors, officers and employees from purchasing loan participations which were not properly documented and which were of inferior credit quality from affiliated banks and other financial institutions. In his capacity as an officer and director, the Respondent was subject to the Order.
   On May 3, 1984, in an effort to save the Bank, Respondent was instrumental in raising and injecting additional capital in the amount of $594,000 into the Bank.
   Beginning on May 4, 1984, in four separate lots, the Bank purchased loan participations from * * * in the aggregate amount
   


8 The Board recognizes that this penalty exceeds Respondent's apparent net worth. While financial resources is a factor to be weighed, it must be balanced against the other statutory factors to yield an appropriate penalty. The Board believes that it is clear that an individual's net worth is not necessarily the upper limit for a civil money penalty.
{{4-1-90 p.A-821}}of $485,099. A significant portion of the loans purchased were classified by the FDIC as inferior credit quality, with $102,000 being classified "Doubtful" and $64,428 classified as "loss." The classifications for each individual loan constituting the whole package of participations are more fully set forth in the record.
   The * * * failed on August 9, 1984 and was placed in the hands of a receiver (an official of the State of * * *).
   The * * * Bank * * * was closed due to insolvency on December 7, 1984 and the FDIC was appointed liquidator of the Bank.
   The FDIC contends that the Respondent as Director caused the Bank to purchase loan participations which involved a high degree of risk and were inconsistent with safe and sound banking practices; all of which constituted violations of Section 22(h), and 23A of the Federal Reserve Act, and Regulation O promulgated thereunder, and also the Cease and Desist Order. Further, the staff of the FDIC recommended an order imposing a civil penalty of $150,000 against the Respondent. Pursuant to this recommendation, FDIC issued an Order assessing a penalty in the amount of $150,000.
   The Respondent contends basically that none of the loans participated in from * * * were ever classified as substandard by either * * * (the originator of the loans) or the * * * auditor's office which was responsible for the oversight and regulation of industrial banks.
   Respondent also argued that the type and nature of documentation required by industrial banks is not the same as required by an insured bank; and that in any event proper documentation did exist in possession of * * *. The Respondent's argument in this regard is legally incorrect, and not factually supported by the evidence. Examiners for the FDIC and the State of * * * went to review the records of * * * and discovered that the loan participations purchased were insufficiently documented, at least on the basis of the records that were made available to them.
   Section 22(h) of the Act, and Part 215 of Regulation O provides in part that no bank shall make any extension of credit in any manner to any of its executive officers or directors or any person who owns or controls the power to vote more than 10 percent of any class of voting securities of the bank, or any company controlled by such a person, unless the extension of credit is made on substantially the same terms as those prevailing at the time for comparable transactions with other persons, and the extension of credit does not involve more than the normal risk of repayment or present other unfavorable features. Part 215 of Regulation O provides that no bank may extend credit to any of its executive officers, directors, principal shareholders, or their related interests in an amount that, when aggregated with the amount of all other extensions of credit to that person and his related interests, exceeds the higher of $25,000 or 5 percent of the bank's capital and unimpaired surplus, unless (i) the extension of credit has been approved in advance by a majority of the entire board of directors of that bank, and (ii) the interested party has abstained from participating directly or indirectly in the voting.
   Section 23A(a)(4) provides that any covered transaction between a bank and an affiliate shall be on terms and conditions that are consistent with safe and sound banking practices.
   The January 25, 1984 Order to Cease and Desist prohibited the purchase from affiliated banks and other financial institutions of loan participations which were not properly documented and which were of inferior credit quality.
   The basic facts in the case are not in dispute. Respondent admits that he was a shareholder, officer and director of both institutions; that he was an executive officer and control person; that the loan participations giving rise to those proceedings are accurately reflected in the record, and that he was instrumental in effecting those transactions. However, he argues that proper documentation existed, and that the transactions were not inconsistent with safe and sound banking transactions. In addition, he testified that the loan participations were with recourse, and therefore exempt from Section 23A of the Act.
   The loan participation forms themselves do not indicate they were with recourse. Mr. * * * testified that the "with recourse" provisions were set forth in the cover letter that accompanied each package of loans. {{4-1-90 p.A-822}}However, no such letters or other documentary evidence of that contention were found at either the Bank, or the * * *.
   Mr. * * * also argues, not without some logic, that most of the loans are in fact current, and being paid to * * * however, because * * * is in receivership, the moneys are not being forwarded to the Bank.
   He also argues that the amount of the penalty sought is related to the classification of "doubtful" and "loss" loans, which classification is stale, the loans for the most part continuing to be paid.
   Respondent also points out that he became involved with the Bank at a time it already was a supervisory concern (Tr. 206) and it was impossible to find people to get involved as officers or directors. He and * * * were the only directors. Therefore, the charge that the participations were purchased without the prior approval of the Bank's board of directors is meaningless, since he in fact was the Board of Directors.

   ASSESSMENT OF CIVIL MONEY
PENALTY

   Section 18(j)(3)(A) of the Act provides in part that any officer or director of a nonmember insured bank, who violates any provision of Sections 23A or 22(h) of the Act or any lawful Regulations shall pay a civil money penalty of not more than $1,000 per day for each day during which such violation continues. There is a similar provision applicable to the violation of Cease and Desist Orders.
   By Notice and Order to Pay dated February 11, 1963 the FDIC assessed a penalty of $150,000 against the Respondent.
   Section 18(j)(3)(B) of the Act provides guidelines for the assessment of the penalties:

       In determining the amount of the penalty the (FDIC) shall take into account the appropriateness of the penalty with respect to the size of the financial resources and good faith of the insured bank or person charged, the gravity of the violation, the history of previous violations, and such other matters as justice may require.
   The evidence establishes that the Respondent is in severe financial difficulties and without significant resources. A civil penalty in the amount imposed by the FDIC in all likelihood would never be collected.
   After carefully listening to the testimony at the hearing, and reviewing the documents in the record, I am satisfied that the Respondent acted in good faith. He became associated with the bank at a time it already was in severe straits, through no fault of his own. He devoted significant time and energy - without any compensation or usual perquisites - in an attempt to turn the situation around and save the Bank. He was instrumental in raising an additional $594,000 capital for the Bank. (Although the loan participations constitute violations of the Act and Cease and Desist Order, as alleged, there is not even a hint in the record that Respondent profited from any of these transactions, or that he was at all motivated by self-interest. It was his intent and hope to increase the cash flow into the Bank. He was spending significant time albeit unsuccessfully - in the attempt to find people who would even be willing to serve as directors.
   In assessing * * * good faith, I found both instructive and persuasive the comments of the FDIC examiners at the completion of the August 2, 1984 examination that "The other violations and the violated provisions of the Order to Cease and Desist do not appear willful or intentional and Civil Money Penalties are not recommended." Although I am in general agreement with the examiners' assessment, I do believe that the prophylactic goals of the Act will better be served if some money penalty is imposed. Nonetheless, the assessment of the on-site examiner of * * * good faith is in accord with Section 18(j)(3)(B) of the Act, and is entitled to considerable weight.
   In addition, the record contains no evidence or indication that the Respondent has any history of other violations. Also, none of the violations complained or were the direct cause of the Bank's failure.
   Also, the recommendation for the $150,000 penalty was based, to a large extent, on some relationship to the projected loss. However, out of the entire participations totaling $485,599, two loans were classified as doubtful ($102,000) and the evidence is that these loans are still current. It would be difficult to project any specific loss to the Bank on these loans, had the * * * not gone into receivership.
   I am also reluctant to impose a penalty based on "projected" loss, since that approach is very speculative. The substandard {{4-1-90 p.A-823}}classifications were assigned primarily due to the incomplete documentation. It is arguable as to what constitutes sufficient documentation. However, according to the expert witnesses, the documentations were insufficient and not in accordance with good banking practices. I will accept that.
   In view of the premises, I conclude that a civil money penalty of $10,000 is consistent with the prophylactic purposes of the Act, and is just. Any money penalty greater than that, based on these facts, would seem to be merely vindictive and overly punitive.

FINDINGS OF FACT
   1. The Bank was a corporation existing and doing business under the laws of the State of * * * having had had its principal place of business in * * *. The Bank was, at all times pertinent in this proceeding, an insured state nonmember bank subject to the Act and the Rules and Regulations of the FDIC.
   2. At all times pertinent to this proceeding, * * *, was a corporation existing and doing business pursuant to the * * * Code Ann. Section 536A.
   3. * * * was not an "insured bank" as that term is defined in 12 U.S.C. Section 1813(h) in that the deposits of * * * were not insured by the FDIC.
   4. At all times pertinent to this proceedings, Respondent was an "executive officer" of the Bank as that term is defined in Section 215.2(d) of Regulation O.
   5. At all times pertinent to this proceeding, Respondent was a "member of the board of directors" of the Bank as that term is defined in Section 215.2(c) of Regulation O.
   6. At all times pertinent to this proceeding, Respondent was a "principal shareholder" of the Bank as that term is defined in Section 214.2(j) of Regulation O.
   7. At all times pertinent of this proceeding, * * * was a "related interest" of Respondent as that term is defined in Section 215.2(k) of Regulation O.
   8. The loan participations described herein were extensions of credit as that term is defined in Section 215.3 of Regulation O in that the Bank made loans, granted lines of credit, or purchased notes or other evidence of indebtedness upon which persons may be liable as maker, drawer, endorser, guarantor, or surety.
   9. The loan participations described herein involved more than the normal risk of repayment or presented other unfavorable features.
   10. The Bank's "capital and unimpaired surplus" within the meaning of Section 215.4(b) of Regulation O as of March 30, 1984, was the sum of its capital accounts ($430,000) less capital notes (O), plus earnings (O) and its reserve for loan losses ($16,000) or $446,000.
   11. The Bank's "capital and unimpaired surplus" within the meaning of Section 215.4(b) of Regulation O as of June 30, 1984 was the sum of its capital accounts ($346,000) less capital notes (O), plus current earnings (O) and its reserve for loan losses ($58,000) or $404,000.
   12. The aggregate amount of loan participations purchased by the Bank from * * * from May 4, 1984 to July 30, 1984 was $485,000.
   13. The aggregate amount of loan participations purchased by the Bank from * * * exceeded the higher of $25,000 or 5 percent of the Bank's capital and unimpaired surplus.
   14. Respondent caused, brought about, or participated in the Bank's purchase of the loan participations described herein.
   15. At all times pertinent to this proceeding, * * * was an "affiliate" of the Bank as that term is defined in Section 23A(b) of the Federal Reserve Act by virtue of its direct stock ownership of the Bank and its exercise of a controlling influence over the management and policies of the Bank.
   16. The loan participations described herein were "covered transactions" as that term is defined in Section 23A of the Federal Reserve Act in that the purchase of each loan participation was a purchase of an asset from * * *.
   17. The loan participations described herein were made on terms and conditions inconsistent with safe and sound banking practices.
   18. Respondent caused, brought about, or participated in the Bank's purchase of the loan participations described herein.
   19. On October 5, 1983 the FDIC issued a Notice of Charges and of Hearing, In the {{4-1-90 p.A-824}}Matter of * * * Bank of * * * FDIC-83-225b, pursuant to Section 8(b) of the Act.
   20. The Bank consented to the issuance of the Order of Cease and Desist and the board of directors of the Bank entered into a stipulation and Consent to the Issuance of an Order to Cease and Desist dated January 17, 1984.
   21. On January 25, 1984 the FDIC issued an Order to Cease and Desist ("Order") pursuant to Section 8(b) of the Act.
   22. The Order was made effective February 6, 1984, and was in effect at all times pertinent to this proceeding. The Order was an order "which has become final" as that term is defined in Section 8(k) of the Act.
   23. At all times pertinent to this proceeding Respondent, in his capacity as an officer and director, was subject to the Order.
   24. The Order prohibited the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the affairs of the Bank, from purchasing loan participations which were not properly documented and which were of inferior credit quality from affiliated banks and other financial institutions.
   25. Respondent caused, brought about, or participated in the Bank's purchase of the loan participation described herein.
   26. The FDIC examiners and examiners of the State of * * * in the ordinary course of their duties while examining the Bank as of September 25, 1984, gathered information for the purpose of analyzing the Bank's loans and other assets. This analysis was based on a review of all of the Bank's available documentation and consultations with Bank management.
   27. The visitation of the Bank as of September 25, 1984 was conducted in accordance with outstanding examination instructions, guidelines, standards, and criteria.
   28. The examiners in the ordinary course of their duties while examining the Bank, analyzed the Bank's assets, and these assets were either passed or were specifically mentioned or were assigned adverse classification of "Substandard", "Doubtful" or "Loss" depending on the degree of risk to the Bank of each loan or other asset so analyzed. A "passed" asset is an asset, usually a loan, which has been reviewed and not classified.
   29. The FDIC's assignment of an adverse classification is an expression of the degree of risk to the Bank that a certain loan or other asset will not be fully paid by a borrower in accordance with its stated terms.
   30. The definitions used by the FDIC to determine classification of loans are:

       (a) "Substandard" describes a loan or portion thereof which has well defined weakness or weaknesses that jeopardize the liquidation of the debt. These assets are inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged.
       (b) "Doubtful" describes a loan or portion thereof which has all the same weaknesses that are found in Substandard loans, and in addition there is a strong possibility of loss.
       (c) "Loss" describes a loan or portion thereof on which the ultimate collectibility seems to be so remote that it is not considered prudent to have it on the bank's book as an asset. A loan which cannot be collected but which is kept on the books of a bank distorts the financial condition of the bank by overstating the bank's assets and capital accounts.
   31. A "loan participation" or "participation" is a loan or a portion of a loan that is originated in one financial institution and then sold to another financial institution. The portion which is sold is a loan participation.
   32. Bank credit files normally contain the following information: the loan application, the purpose of the loan, and the source of repayment; financial information regarding the borrower including a financial statement, statements of income, and loan history; collateral documentation including collateral assignments, appraisals, title opinions, and security agreements; and corporate resolutions wherever a company executes relevant documents. A bank cannot evaluate the credit quality of a loan participation without such information.
   33. The Bank purchased four lots of loan participations from * * * as follows: May 4, 1984 - $300,000; June 28, 1984 -$60,000; July 17, 1984 - $50,099; and July 30, 1984 - $75,000; for a total of $485,099. The Respondent executed all of the participations on behalf of * * *.
   34. The problem loans participated in were as follows:
{{4-1-90 p.A-825}}
   (a) * * * On May 4, 1984 the Bank purchased a participation in the amount of $20,000 represented by Participation Certificate No. 11415. There was insufficient financial data on the borrowers. Documents at * * *, revealed the loan did not have a sufficient collateral margin. There was no appraisal information in the Bank's files.
   (b) * * * On May 4, 1984 the Bank purchased a participation in the amount of $9,000 represented by Participation Certificate No. 11408. The loan participation certificate was in the name of * * * yet all of the other documentation in the credit file was in the name of * * *. Thus, the Bank was not sure who the actual debtor was. There was no current financial information in the file about any of the debtors. The Bank purchased the loan participation as a simple interest loan whereas it was actually a discounted loan. Thus, the borrower owed much less than the amount shown on the Bank's book. The Bank paid approximately $3,000 more for the loan participation than the loan was actually worth.
   (c) * * * On July 17, 1984 the Bank purchased a participation in the amount of $14,599 represented by Participation Certificate No. 11459. There was no current financial information available. There was an insufficient collateral margin. There had been periods of delinquency in the past.
   (d) * * * On May 4, 1984 the Bank purchased a participation in the amount of $29,000 represented by Participation Certificate No. 11402. The * * * loan did not have sufficient documentation.
   (e) * * * On July 30, 1984 the Bank purchased a participation in the amount of $52,500 represented by Participation Certificate No. 11478. This loan was not properly documented as shown by the following. There was no financial information whatsoever in the files of the Bank regarding this loan. No payments had been made on the loan since the date of its purchase. There were several deficiencies in the collateralization of the loan. Part of the collateral was an assignment of a lease which was not recorded. Part of the collateral was a security interest which had not been perfected. There was no security agreement in the file.
   (f) * * * On May 4, 1984 the Bank purchased a participation in the amount of $10,000 represented by Participation Certificate No. 11406. The * * * loan participation was not properly documented as shown by the following. There was no current financial information. The purpose of the loan was not stated. The source of repayment was not stated.
   (g) * * * On July 17, 1984 the Bank purchased a participation in the amount of $11,000 represented by Participation Certificate No. 11460. The * * * loan participation was not properly documented.
   (h) * * * On May 4, 1984 the Bank purchased a participation in the amount of $9,000 represented by Participation Certificate No. 11413. There was no appraisal as to the underlying real estate securing the loan. The borrower was required to pay only interest on the loan. Thus, there was no principal reduction made during the life of the loan. Payment history indicated the borrower habitually lagged in performance until forced to catch up.
   (i) * * * On June 28, 1984 the Bank purchased a participation in the amount of $50,000 represented by Participation Certificate No. 11450. The * * * loan participation was not properly documented, as shown by the following. The loan was a commercial loan but there was no financial information on the company to support the loan. There was no way to value the collateral which consisted of furniture and fixtures. There was nothing in the files authorizing the individual who signed the note to sign on behalf of the corporation. The debtor informed the receiver of * * * that he would no longer be able to make any payments on the loan. The Bank's security interest in the collateral was not perfected.
   (j) * * * On July 17, 1984 the Bank purchased a participation in the amount of $10,000 represented by Participation Certificate No. 11467. The documentation at the Bank did not reveal any purpose for the loan. There was no appraisal and no financial information on the borrower. An examination of the payment history kept in the files of * * * revealed negative comments made by collectors as to the loan. The borrower was unable to get insurance on the home. There was no appraisal in the files of the Bank. An appraisal in the files of * * * was a drive-by appraisal and was not necessarily made by a qualified appraiser.
   (k) * * * On May 4, 1984 the Bank purchased a participation in the amount of $24,000 represented by Participation Cer- {{4-1-90 p.A-826}}tificate No. 11413. This loan was partially secured by real estate but there was no appraisal in the files. There was no financial information on the borrower. An application in the files stated that the borrower's income was primarily $1,000 a month from the sale of a bar. Whereas monthly loan payments were $437. Documents in the files of * * * indicated the borrower was paying $200 per month of the $1,000 he was receiving to his wife or ex-wife. An appraisal in the files of * * * did not reveal the nature of the property. There was a slim collateral margin.
   (l) * * * On June 28, 1984 the Bank purchased a participation in the amount of $10,000 represented by Participation Certificate No. 11451. The purpose of the loan was not stated. The source of repayment was not shown in the files. There was no financial data on the maker or guarantor.
   (m) * * * On May 4, 1984 the Bank purchased a participation in the amount of $23,000 represented by Participation Certificate No. 11410. The loan was a farm operating line on a ten-year pay out which was an extremely long pay out. There was no financial data on either the maker or guarantors, if any. The receiver for * * * informed the examiners that the farming operation was out of business and trying to borrower elsewhere, and the individual was unemployed. Payments had been sporadic.
   (n) * * * On May 4, 1984 the Bank purchased a participation in the amount of $19,000 represented by Participation Certificate No. 11416. It was a commercial loan yet there was no financial information available on the business or on the president who apparently signed the note.
   (o) * * * On May 4, 1984 the Bank purchased a participation in the amount of $17,000 represented by Participation Certificate No. 11404. The appraisal of the underlying collateral was inadequate. Title to the underlying collateral was not shown in the files.
   (p) * * * On May 4, 1984 the Bank purchased a participation in the amount of $8,000 represented by Participation Certificate No. 11413. There was no current financial information on the borrower. The borrower had stopped paying July 7, 1984. Based upon an income statement the debtor's cash flow was limited.
   (q) * * * On July 17, 1984 the Bank purchased a participation in the amount of $6,500 represented by Participation Certificate No. 11457. The loan was not properly documented, due to the lack of complete and current financial information.
   (r) * * * On May 4, 1984 the Bank purchased a participation in the amount of $12,000 represented by Participation Certificate No. 11414. The participation certificate was in the name of * * * yet all other documentation was in the name of * * *. The Bank had no way of knowing who was supposed to be paying the loan.
   (s) * * * On May 4, 1984 the Bank purchased a participation in the amount of $20,000 represented by Participation Certificate No. 11411. By pledge agreement dated February 28, 1984 * * * assigned the note executed by * * * to * * * Bank * * *. The same note was subsequently sold by * * *, to the Bank. Both the pledge agreement to * * * Bank and the participation agreement to the Bank were signed by the Respondent. The * * * note could not be sold to the Bank because it was already serving as collateral on the pledge to * * * Bank * * *. The * * * Bank * * * pledge agreement went into default on April 28, 1984. The loan documentation in the Bank nor the documentation at * * * revealed the prior pledge.
   (t) * * * On May 4, 1984 the Bank purchased a participation in the amount of $14,000 represented by Participation Certificate No. 11472. The purpose of the loan and the source of repayment were not clear. There was no financial information or income information on the borrower.
   (u) * * * On July 30, 1984 the Bank purchased a participation in the amount of $8,500 was represented by Participation Certificate No. 11471. The insurance on the property had apparently expired. The purpose of the loan was unknown. The source of repayment was unknown. The payment record showed payments were made up to a month or month and a half late.
   (v) * * * On July 17, 1984 the Bank purchased a participation in the amount of $8,000 represented by Participation Certificate No. 11458. This loan was not properly documented, due to the lack of complete and current financial information.
   (w) * * * On May 4, 1984 the Bank purchased a participation in the amount of $18,000 represented by Participation Certificate No. 11412. The loan was not properly documented as shown by the following. {{4-1-90 p.A-827}}The appraisal was a letter from a broker, not an appraiser, and was an estimate of value. There was no financial information on the maker.
   (x) * * * On May 4, 1984 the Bank purchased a participation in the amount of $7,000 represented by Participation Certificate No. 11407. The * * * loan participation was not properly documented due to the lack of current financial information.
   (y) * * * On May 4, 1984 the Bank purchased a participation in the amount of $14,000 represented by Participation Certificate No. 11409. The * * * loan participation was not properly documented as shown by the following. The Bank's documentation did not reveal that the note had been paid. Although * * * had received payment in full on the * * * loan, it failed to remit the payment to the Bank. Since the failure to remit was that of * * * the receiver refused to remit payment to the Bank.
   (z) * * * On May 4, 1984 the Bank purchased a participation in the amount of $20,000 represented by Participation Certificate No. 11405. By pledge agreement dated February 28, 1984 * * * assigned the note executed by * * * to * * * Bank, * * *. The same note was subsequently sold by * * * to the Bank. Both the pledge agreement and the participation agreement to the Bank were signed by Respondent. The * * * note could not be sold to the Bank because it was already serving as collateral on the pledge to * * * Bank, * * *. The * * * Bank, * * * pledge agreement went into default on April 28, 1984. The loan documentation in the Bank nor the loan documentation at * * *, revealed the prior pledge.
   35. As of September 25, 1984, the loan participation purchased from * * * which were adversely classified totaled $269,217.
   36. All of the above loans with defects as noted involved more than normal risk or repayment, or presented other unfavorable features and were made on terms and conditions inconsistent with safe and sound banking practices.

CONCLUSIONS OF LAW
   1. The FDIC has jurisdiction over the Bank, the Respondent, and the subject matter of this proceeding.
   2. The loan participation purchased from * * * by the Bank were purchased in violation of Section 22(h) of the Federal Reserve Act (12 U.S.C. Section 375b), and in violation of Section 215.4(a) of Regulation O (12 C.F.R. Section 215.4(a)) in that each loan participation involved more than the normal risk of repayment or presented other unfavorable features.
   3. The loan participation referred to in finding 34 above were purchased in violation of Section 23A of the Federal Reserve Act (12 U.S.C. Section 371c(4)) in that the transactions were not made on terms and conditions that were consistent with safe and sound banking practices.
   4. The loan participations purchased from * * * by the Bank were purchased in violation of the Order which had become final and which was issued pursuant to Section 8(b) of the Act (12 U.S.C. Section 1818(b)).
   5. Respondent caused, brought about, or participated in the Bank's purchase of the loan participations from * * *.
   6. Respondent caused, brought about, or participated in violations of Section 22(h) of the Federal Reserve Act (12 U.S.C. Section 375(b)), and in violation of Section 215.4(a) of Regulation O (12 C.F.R. Section 215.4(a)).
   7. Respondent caused, brought about, or participated in violations of Section 23A of the Federal Reserve Act (12 U.S.C. Section 371c(a)(4)).
   8. Respondent caused, brought about, or participated in violations of the Order.
   9. A civil money penalty should be assessed against the Respondent for the above violations, in accordance with the provisions of Section 8(1)(2) and 18(j)(3) of the Act.
   THEREFORE, it is the recommended decision of the Administrative Law Judge that the Respondent, * * *, be adjudged having violated Sections 22(h), 23A and Regulation O of the Act and the Order to Cease and Desist effective February 6, 1984, and that he be assessed and ordered to pay a civil penalty in the amount of $10,000.00.
   /s/ ADAM GEFREH
   Administrative Law Judge
   December 16, 1985

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