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FDIC Enforcement Decisions and Orders

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   [5087] FDIC Docket No. FDIC-85-357k (3-31-87)

   A civil money penalty was assessed against a bank director for making improper loans and extending credit to a bank's affiliate and its majority shareholder when the director failed to file an answer to a Notice of Hearing.

   [.1] Civil Money Penalties—Notice of Assessment—Time to Answer
   Every party to a proceeding shall file an answer within 20 days after service of the notice of hearing.

   [.2] Civil Money Penalties—Notice of Assessment—Time to Answer
   A party who requests a hearing shall file an answer to the charges within 20 days of receipt of the Notice of Hearing.

   [.3] Civil Money Penalties—Notice of Assessment—Failure to Answer
   Failure to file an answer within the time required is deemed to be a waiver to the right to appear and contest the allegations of the notice of hearing.


* Failure of any party to file exceptions to this Recommended Decision and Order, pursuant to Section 308.14 of FDIC Rules and Regulations, within 20 days after service, shall be a waiver of objection thereto.
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In the Matter of * * *, individually and
as director of * * * Bank (INSURED
STATE NONMEMBER BANK)


Decision and Order To Pay Civil Money
Penalty
FDIC-85-357k

I. Procedural History

   This proceeding, brought by the Federal Deposit Insurance Corporation ("FDIC"), seeks a civil money penalty against * * * ("Respondent"), individually and as a director of * * * Bank, * * *, for violation of sections 23A and 22(h) of the Federal Reserve Act (12 U.S.C. §§371c(a) and 375(b)) and Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 215) (improper loans and extensions of credit to a bank's affiliate and to its majority shareholder). These provisions apply to state nonmember banks pursuant to section 18(j)(2) of the Federal Deposit Insurance Act (the "Act") (12 U.S.C. § 1828(j)(2)).
   On December 11, 1985, the FDIC issued a Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice"), pursuant to the provisions of section 18(j)(3) of the Act (12 U.S.C. § 1828(j)(3)) and the FDIC Rules of Practice and Procedures ("FDIC Rules") (12 C.F.R. Part 308). The Notice states that pursuant to section 308.69 of the FDIC Rules, a written request for hearing may be filed within ten days of receipt of the Notice of Hearing. (12 C.F.R. § 308.69). The Notice also sets forth that anyone requesting a hearing shall file an Answer to the charges in the Notice within 20 days of receipt of the Notice in accordance with section 308.06 of the FDIC Rules (12 C.F.R. § 308.06). Respondent made a timely request for a hearing by letter dated January 3, 1985, [sic] and received January 7, 1986, but he failed to file an Answer to the charges in the Notice. Respondent also received notice of the time and place of two pre-hearing conferences but failed to appear, send a representative or request postponement of these proceedings.
   On September 16, 1986, enforcement counsel for the FDIC filed a Notice of Motion and Motion for Recommended Decision based upon the failure to file an Answer, as provided in section 308.06(a) of the FDIC Rules (12 C.F.R. § 308.06(a)). Respondent did not respond to the FDIC's motion. On January 26, 1987, the Administrative Law Judge ("ALJ") issued a Recommended Decision recommending entry of an order to pay against Respondent. At no time has Respondent sought leave to file a late Answer or made any effort to excuse his failure to answer.

   II. Discussion

   [.1] Section 308.06 of the FDIC Rules provides:

       Every party to a proceeding shall file an answer with the Executive Secretary within 20 days after service of the notice of hearing...(emphasis added).
   The directive of this rule could not be more clear. An Answer to the charges in the Notice must be filed by Respondent.

   [.2] Furthermore, consistent with this provision, the Notice of Hearing specifically put Respondent on notice of the obligation to file an Answer. The Notice of Hearing states:

       Any Respondent who requests a hearing shall file an answer to the charges in the Notice of Assessment within 20 days of receipt of the Notice of Hearing in accordance with section 308.06 of the FDIC Rules...(emphasis added).
   In light of Respondent's failure to file an Answer, the Board of Directors ("Board") of the Federal Deposit Insurance Corporation, adopts and incorporates by reference herein the Administrative Law Judge's Recommended Decision, finding the facts to be as alleged in the Notice.

ORDER TO PAY CIVIL MONEY
PENALTIES

   The Board has reviewed the record in this proceeding, including the Administrative Law Judge's Recommended Decision and finds * * * to have violated section 23A and 22(h) of the Federal Reserve Act (12 U.S.C. §§ 371c and 375b) and Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 215).
   IT IS HEREBY ORDERED, that * * * shall pay a civil money penalty of $25,000.
   IT IS FURTHER ORDERED, that the penalty hereby ordered shall not be paid directly or indirectly by * * * Bank, * * *, but shall be paid by the Respondent {{4-1-90 p.A-1068}}and this penalty shall be paid within 60 days of the date of this Order.
   By direction of the Board of Directors.
   Dated at Washington, D.C. this 31st day of March, 1987.
/s/ Hoyle L. Robinson
Executive Secretary

RECOMMENDED DECISION
FDIC 85-375k

Recommended Decision

   [.3] On this 26th day of January, 1987, the Motion for Recommended Decision filed by the Federal Deposit Insurance Corporation (FDIC) came on to be heard. After considering the arguments and exhibits herein pertaining to the failure and/or refusal of the Respondent * * * to file an answer as specified in Section 308.06 of the FDIC Rules of Practice and Procedures (12 C.F.R. section 308.06) and page eight of the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice") it is found that Respondent * * * has failed to file and answer within the time required by Section 308.06(a) of the FDIC Rules of Practice and Procedures (12 C.F.R. section 308.06(a)). Furthermore, having been notified of the time and place of two pre-hearing conferences the respondent also has failed to appear, send a representative, or request postponement of these proceedings. Pursuant to Section 308.06(d) of the FDIC Rules of Practice and Procedures (12 C.F.R. section 308.06(d)) I find that the Respondent is deemed to have waived his right to appear and contest the allegations of the notice of hearing. I find the facts to be as alleged in the Notice.
   It is ordered that this Recommended Decision be filed with the Executive Secretary of the FDIC, as provided by Section 308.06(d) of the FDIC Rules of Practice and Procedures (12 C.F.R. Section 308.06(d)).
   Signed and entered this 26 day of January, 1987.
/s/ Walter J. Fisher
Administrative Law Judge
Office of Hearings and Appeals
624 So. Grand Ave., Suite 2300
Los Angeles, California 90017
Date: January 26, 1987

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