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FDIC Enforcement Decisions and Orders |
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A civil money penalty of $35,000 was assessed against a bank director for extending credit to bank insiders and their related interests in excess of the legal lending limit and involving more than the normal risk of repayment. The $35,000 penalty was found not excessive since the director had a net worth of $1,359,200.
[.1] Practice and ProcedureEvidenceExpert Opinion
[.2] Regulation OLoans to InsidersApproval of Board of Directors Required
[.3] Regulation OLoans to InsidersLending Limit
[.4] Civil Money PenaltiesAmountStatutory Standard
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DECISION
The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") has reviewed the record and finds that the Administrative Law Judge's ("ALJ's") Recommended Decision and Order to Pay a Civil Money Penalty ("Recommended Decision") (appended hereto) is in all material respects fully supported by the law and the evidence. The ALJ's Recommended Decision is therefore adopted and incorporated herein by reference.
ORDER
For the reasons set forth in the above Decision,
/s/ Hoyle L. Robinson
FDIC-85-176k
ALLYN A. BROOKS
I. SUMMARY OF THE PROCEEDINGS
On June 12, 1985, the Federal Deposit Insurance Corporation ("FDIC") issued a Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, and Order to Pay against various executive officers and/or directors of the * * * Bank, * * * ("Bank"). The FDIC alleged that the Bank extended to Bank insiders * * * ("Respondent * * *") and * * * , and their related interests, credit which involved more than the normal risk of repayment and presented other unfavorable features, in violation of Section 215.2(k) of Regulation O of the Board of Governors of the Federal Reserve Board ("Regulation O") (12 C.F.R. Section 215.2(k)). In addition, the FDIC alleged that the Bank extended credit to * * * , a related interest of * * * , and to * * *, for the benefit of Respondent * * * , without receiving the prior approval of a majority of the Bank's board of directors as required by Section 215.4(b) of Regulation O (12 C.F.R. Section 215.4(b)). It was further alleged that the Bank extended credit to * * * Farms, a related interest of * * * , and * * * , in an amount which exceeded the Bank's aggregate lending limit imposed by Section 215.4(c) of Regulation O (12 C.F.R. Section 215.4(c)).
II. BACKGROUND
The preceding section provides a skeletal summary of the proceedings. It is now necessary to expand that summary so that the course of events leading to this recommended decision without an oral hearing can be adequately understood.
III. FINDINGS OF FACT AND
FINDINGS OF FACT
1. At all times pertinent to this proceeding, the Bank was a corporation existing and doing business under the laws of the State of * * * , having its principal place of business in * * *. (Admitted in Answer)
CONCLUSION OF LAW:
A. The FDIC has jurisdiction over the Bank, each Respondent and the subject matter of this proceeding.
FINDINGS OF FACT:
5. Field Office Supervisor * * * is a highly trained commissioned bank examiner with approximately 20 years experience in the analysis of the financial condition of banks, including compliance with applicable laws and regulations. (Trost pp.12)
CONCLUSION OF LAW:
[.1]B. The conclusions and opinions of * * * and * * * in bank regulatory matters are entitled to be considered as the opinions and conclusions of expert witnesses. (See also, Sunshine State Bank v. Federal Deposit Insurance Corporation. 783 F. 2d 1580 (11th Cir. 1986)
FINDINGS OF FACT:
8. * * * was a corporation in which Respondent * * * had a one-third interest. (* * * p.7)
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C. * * * was a "related interest" of Respondent * * * as that term is defined in Section 215.2(k) of Regulation O (12 C.F.R. Section 215.2(k)).
FINDINGS OF FACT:
10. The Bank extended credit to * * * on June 19, 1984 in the amount of $136,257.51. (Ex. 18)
CONCLUSION OF LAW:
D. The extension of credit to * * * involved more than the normal risk of repayment and presented other unfavorable features, in violation of Section 215.4(a) of Regulation O (12 C.F.R. Section 215.4(a)).
FINDING OF FACT:
16. As of August 8, 1984, twenty-five (25) percent of the shares of stock outstanding in * * * were owned by the Bank vice-president, * * *. (* * * p.4, Exs. 9 and 10)
CONCLUSION OF LAW:
E. * * * was a "related interest" of * * * as that term is defined in Sections 215.2(k) and 215.2(b)(1)(i) of Regulation O (12 C.F.R. Section 215.2(i) and 215.2(b)(1)(i)).
FINDINGS OF FACT:
17. The Bank extended credit to * * * on the following dates in the corresponding amounts:
(Exs. 38)
CONCLUSION OF LAW:
F. The extensions of credit to * * * on February 10, 1984, March 2, 1984, March 31, 1984, July 19, 1984 and July 28, 1984 involved more than the normal risk of repayment and presented other unfavorable features and were in violation of Section 215.4(a) of Regulation O (12 C.F.R. Section 215.4(a)).
FINDING OF FACT:
21. * * * Farms is a designation of the farm business of * * * and is a sole proprietorship. (* * * p.5)
CONCLUSION OF LAW:
G. * * * Farms is a "related interest" of * * * as that term is defined in Section 215.2(k) and 215.2(b)(1)(i) of Regulation O (12 C.F.R. Sections 215.2(k) and 215.2(b)(1)(i)).
FINDINGS OF FACT:
22. The Bank extended credit to * * * Farms on the following dates in the corresponding amounts:
(Exs. 1114)
CONCLUSION OF LAW:
H. Bank extensions of credit to * * * or * * * Farms on February 10, 1984, March 2, 1984, March 31, 1984, June 15, 1984, July 19, 1984 and July 28, 1984, as indicated in Proposed Findings of Fact 23 through 28, exceeded the Bank's aggregate lending limit and, therefore, were made in violation of Section 215.4(c) of Regulation O (12 C.F.R. Section 215.4(c)).
FINDINGS OF FACT:
30. Between March 2, 1984 and August 8, 1984, five percent of the Bank's capital and unimpaired surplus never exceeded $62,200. (Ex. 17, * * * pp.57)
CONCLUSIONS OF LAW
I. Bank extensions of credit to * * * on March 2, 1984, March 31, 1984, July 19, 1984 and July 28, 1984, as indicated in Proposed Findings of Fact number 30 through 33, were made in violation of Section 215.4(b) of Regulation O (12 C.F.R. Section 215.4(b)).
FINDINGS OF FACT:
36. On January 3, 1984, the Bank extended credit in the amount of $34,000 to * * * , wife of * * *. (* * * p.9, Ex. 22)
CONCLUSIONS OF LAW:
J. The Bank extension of credit to * * * was made indirectly for the benefit of * * * and, consequently, was considered made to him within the meaning of Section 215.3(f) of Regulation O (12 C.F.R. Section 215.3(f)).
FINDINGS OF FACT:
42. Respondent * * * was president and chairman of the board at the * * * Bank * * * at the time the actions identified in the Notice of Assessment took place. (* * * p.2 Ex. 1 p.34)
CONCLUSION OF LAW:
L. The assessment of a civil money penalty against Respondent * * * in the amount of $35,000 is appropriate in consideration of the statutory factors required to be considered by Section 18(j)(3)(B) of the Act (12 U.S.C. Section 1828(j)(3)(B)).
IV. DISCUSSION
A. Statutory Background
[.2]The Financial Institutions Regulatory and Interest Rate Control Act of 1978 ("FIRIRCA") (Pub. L. No. 95630, 92 Stat. 3641) was enacted into law on November 10, 1978 and became effective on March 10, 1979. Section 104 of Title I of FIRIRCA imposes a statutory prohibition against loans or extensions of credit to executive officers, directors, principal shareholders, and their related interests, where the loan or extension of credit to that person and all related interests of that person, exceed in the aggregate an amount determined by the appropriate federal banking agency (that is, the higher of $25,000 or 5 percent of the Bank's capital and unimpaired surplus up to a maximum of $500,000),1 unless such loan or extension of credit is approved in advance by a majority of the entire board of directors.
[.4] When the FDIC makes the determination that it is appropriate to assess a civil money penalty, the agency is required to consider certain statutory factors set forth in Section 18(j)(3)(B) and the ACT (12 U.S.C. 1828(j)(3)(B)). That section provides:
V. ORDER TO PAY
After taking into account the appropriateness of the penalty with respect to 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:
Hoyle L. Robinson |
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Last Updated 6/6/2003 | legal@fdic.gov |