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   [5174] In the Matter of Robert S. Stoller, Coolidge Corner Co-operative Bank, Brookline, Massachusetts, Docket No. FDIC-90-115e (2-18-92).

   Board adopts ALJ's recommended decision, finding misconduct, breach of fiduciary duty, culpability and financial benefit to Respondent, and prohibits Respondent from participating in the conduct of affairs of, or exercising voting rights in, any insured institution without the prior consent of the FDIC.

   [.1] Practice and Procedure—Oral Argument
   Party seeking oral argument has the burden of showing good cause for such argument and establishing that arguments may not be adequately presented in writing.

   [.2] Prohibition—Liability—Factors Determining
   Elements necessary for a prohibition action are misconduct, detrimental effect on bank or benefit to Respondent, and culpability.

   [.3] Regulation O—Loans to Insiders—Aggregation of Loans
   The entire amount of an extension of credit is attributable to an insider within the scope of Regulation O, even though he has only a partial interest in the entity receiving the loan.

   [.4] Unsafe or Unsound Practices—Excessive Concentrations of Credit
   Numerous loans to Respondent's related interests amount to excessive concentrations of credit that are inherently risky, and constituted a serious breach of fiduciary duty.

   [.5] Prohibition—Liability—Losses to Bank—Personal Gain
   Respondent benefited from loans to realty trusts in which he held beneficial interests; three such loans resulted in losses to the Bank.

   [.6] Prohibition—Liability—Disregard for Safety and Soundness
   Too high a concentration of Bank's assets in the interests of one individual is an unsafe or unsound practice, but since Respondent was a Bank insider the seriousness of his actions is compounded.

{{11-30-92.A-1866}}
   [.7] Prohibition—FDI Act Section 8(e)—Retroactive Application of
   Pre-FIRREA conduct is subject to FIRREA remedy because a court applies the remedy in effect at the time it renders its decision unless that would result in a manifest injustice.

   [.8] Evidence—Hearsay Rule
   Deposition taken in a prior civil case, authenticated by the attorney who took the deposition and corroborated by other evidence, has sufficient indicia of trustworthiness to warrant admission into evidence.
   [.9] Evidence—Bank Records—Custody
   FDIC bank examiner, though not custodian of the records, can authenticate Bank's records, including loan files, board of directors' minutes and other documents he reviewed as part of the examination process.

In the Matter of
ROBERT S. STOLLER, individually,
and as president, director,
and/or a person participating
in the conduct of the affairs of
COOLIDGE CORNER
CO-OPERATIVE BANK

BROOKLINE, MASSACHUSETTS
(In Receivership)
DECISION AND ORDER
TO PROHIBIT FROM
FURTHER PARTICIPATION

FDIC-90-115e

DECISION
I. PROCEDURAL BACKGROUND

   A Notice of Intention to Prohibit From Further Participation ("Notice") was served by the Federal Deposit Insurance Corporation ("FDIC") on Robert S. Stoller ("Respondent") on July 17, 1990. Based on allegations that Respondent had engaged in unsafe or unsound banking practices, violations of law and regulation, and/or breaches of fiduciary duty, the Notice sought to prohibit Respondent from further participation in the conduct of the affairs of Coolidge Corner Co-operative Bank, Brookline, Massachusetts ("Bank"), and any other insured depository institution, as provided by section 8(e)(7) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e)(7) (1989). The Notice was issued pursuant to section 8(e) of the FDI Act, 12 U.S.C. § 1818(e), and Part 308 of the FDIC's Rules of Practice and Procedures, 12 C.F.R. Part 308.1 The Notice alleges that Respondent engaged in unsafe or unsound banking practices in connection with his role as president of the Bank, and that he breached his fiduciary duty as a director of the Bank as a result of his lending practices. The Notice further alleges that, as a result of the unsafe or unsound practices and breaches of fiduciary duty, the Bank suffered substantial financial losses or other damage, and/or that the interests of the Bank's depositors were seriously prejudiced. Notice at 11-13. The Notice also charges that Respondent has received financial gain or other tangible economic benefit by reason of such violations, practices, and/or breaches of fiduciary duty; that Respondent's conduct demonstrates personal dishonest and a willful or continuing disregard for the safety and soundness of the Bank and, as such, is evidence of the Respondent's unfitness to participate in the affairs of the Bank or to participate in the conduct of the affairs of any other federally insured depository institution. The Notice seeks to prohibit Respondent from further participation in the Bank, and seeks to bar him from further participation in the affairs of any federally insured depository institution.2
   A hearing was held in Boston, Massachusetts on June 3 through 5, 1991, before Administrative Law Judge James L. Rose ("ALJ"). The ALJ filed his Recommended Decision, dated October 15, 1991, with the Office of the Executive Secretary in which he found upon the record as a whole that


1 Because the Respondent's activities which are the basis of this proceeding took place prior to the passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), the Respondent's conduct is measured against the substantive requirements of the pre-FIRREA version of section 8(e)(2) of the FDI Act, 12 U.S.C. § 1818(e)(2).

2 The Bank was closed March 15, 1991, and is currently in receivership. Therefore, this action only involves the bar from participation in the affairs of any federally insured institution.
{{4-30-92 p.A-1867}}Respondent should be prohibited from further participation in the affairs of federally insured financial institutions. R.D. at 1.3 Both parties filed Exceptions to the ALJ's Recommended Decision. Respondent also requests oral argument.
   For the reasons set forth in detail below, after careful review and analysis of the complete record in this proceeding, the Board of Directors ("Board") of the FDIC adopts and incorporates herein the Recommended Decision of the ALJ and finds that the record as a whole supports prohibition of the Respondent from further participation in any federally insured financial institution.
   II. REQUEST FOR ORAL ARGUMENT

   [.1] Under the FDIC's Rules and Regulations, the decision to hear oral argument is within the discretion of the Board. However, a party seeking oral argument has the burden of showing good cause for such argument and establishing that arguments may not be adequately presented in writing. 12 C.F.R. § 308.40(b). After considering Respondent's request for oral argument and the allegations and arguments presented in the briefs, the Board finds that: (1) the factual and legal arguments are fully set forth in the parties' written submissions; (2) the Board will not be aided in deciding this matter by oral argument; and (3) Respondent will not be prejudiced by the lack of oral argument. Therefore, the Board declines to exercise its discretion under section 308.40(b) of the FDIC's Rules and Regulations (to be condified at 12 C.F.R. § 308.40(b)) and denies the request for oral argument. See In the Matter of Harold Hoffman, FDIC-88-156c& b, 2 P-H ¶5140 (1989); FDIC-85-42b, 1 P-H ¶5062 (1986).

III. FACTUAL SUMMARY

   Respondent was a director, president, and chief executive officer of the Bank from 1975 until he was asked to resign by the Bank's board of directors on March 15, 1990. He was also the principal lending officer and made all the extensions of credit at issue in this proceeding. The Bank, a small community bank with about $85 million in assets, initially provided loans for purchasers of one to four family residences. However, in 1986, the Bank underwent a major change in its lending philosophy, and began to shift from primarily residential to commercial lending. FDIC Ex. 70 at 1-A; R.D. at 2. A number of these commercial loans, primarily to real estate trusts, form the basis for the allegations concerning Respondent.
   Respondent had a beneficial interest in four such realty trusts: Rustro Realty Trust ("Rustro"), Star Trust, Danert Realty Trust ("Danert"), and Raynham Realty Trust ("Raynham"). Respondent also organized a fifth entity, Quality Communications, Inc. ("Quality"), to purchase a radio station. Respondent personally authorized a number of extensions of credit to these entities, many of which grossly exceeded the Bank's lending limitations under Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. Part 215, made applicable to insured State nonmember banks such as the Bank by section 18(j)(2) of the FDI Act, 12 U.S.C. § 1828 (j)(2), and were made without prior approval by the Bank's board of directors. A summary of these extensions of credit follows.
   On April 28, 1986, Rustro was created for the purpose of taking title to a property Respondent had contracted to purchase. FDIC Ex. 15; R.D. at 2. The same day, the Bank made an extension of credit to Rustro for $1,850,000, which the Respondent personally guaranteed "to induce the acceptance of the Promissory Note of" Rustro's trustee. FDIC Ex. 6.4
   Star Trust was created on April 11, 1986. Respondent's son, Gregory L. Stoller, at the time a minor, was a one-third beneficiary. Respondent was the Bank's loan officer on eight of Star Trust's loans to purchase con-


3 Citations in this Decision shall be as follows:
Recommended Decision—"R.D. at ____."
Transcript—"Tr. at ____."
Exhibits—"FDIC Ex. ____", or "Resp. Ex. ____."
Exceptions—"FDIC Except. at ____"; or
"Resp. Except. at ____."

4 The following table sets forth the Bank's unimpaired capital and surplus as reported in its call reports during the pertinent periods. Regulation O prohibits any extension of credit to an executive officer, director, or principal shareholder in excess of five percent of the Bank's unimpaired capital and surplus, 12 C.F.R. § 215.4(b); the aggregate of extensions of credit to bank insiders and their related interests also may not exceed 15 percent of the Bank's unimpaired capital and surplus, 12 C.F.R. § 215.4(c).
(Continued)

{{4-30-92 p.A-1868}}dominiums. FDIC Exs. 14, 16, 20, 23, 25, and 30. The first Star Trust loan was made by the Bank on June 16, 1986, in the amount of $939,000. A second loan was made by the Bank to Star Trust on October 22, 1986, for $660,000, which was guaranteed by the Respondent "to induce the acceptance of the Promissory Note of" the trustee. FDIC Ex. 17. On June 12, 1987, the Bank made a third and fourth extension of credit to Star Trust, for $550,000 and $850,000, respectively. FDIC Ex. 19 and 22. On July 13, 1987, the Bank made a fifth and sixth extension of credit to Star Trust for $680,000 and $600,000, both of which were guaranteed by the Respondent in order "to induce" the Bank's acceptance of the trustees' notes. FDIC Ex. 27 and 32; R.D. at 3. Finally, on September 27, 1988, the Bank made a seventh loan to Star Trust for $90,000, which was secured by a second mortgage on property; the Bank already held the first mortgage. FDIC Ex. 35. On November 21, 1988, this loan was rewritten (eighth loan) in the amount of $93,500. 5 This loan was unsecured, and was not, apparently, for the purpose of purchasing real estate. FDIC Ex. 34; R.D. at 4.
   Danert was formed on December 23, 1988. On the same day, the Bank extended it a credit of $263,500 for the purpose of purchasing condominium units. The Respondent was the Bank's loan officer as well as the guarantor "to induce" the Bank to make the loan. FDIC Exs. 44 and 46. Further, the Respondent was one of Danert's two beneficiaries. FDIC Ex. 41. This loan had not been given prior approval by the Bank's board of directors. FDIC Ex. 47.
   Raynham was created on December 15, 1986, with the Respondent holding a one-eighth beneficial interest. FDIC Exs. 62 and 63. He also represented a group which controlled a three-eighths interest. FDIC Ex. 53. On June 12, 1987, the Bank, with the Respondent as the loan officer, extended a credit of $1,915,200 to Raynham for the purchase of condominiums. FDIC Ex. 67 and 68.
   Quality was incorporated on November 25, 1985, for the purpose of acquiring a radio station, with Respondent as the sole incorporator, principal officer, and account card signer. Further, until October 29, 1986, its principal place of business was the Respondent's home. FDIC Exs. 48, 49 and 50. The Bank made two extensions of credit to Quality: $320,000 on October 29, 1986, and, $630,000 on September 29, 1987. FDIC Exs. 55, 56 and 60.
   Respondent does not deny the material facts of these transactions. He asserts the following defenses: that he was unaware of the lending limitations of Regulation O; that he is not subject to removal and prohibition because he resigned from the Bank prior to issuance of the Notice; that he is the target of a grand jury investigation and therefore could not adequately defend himself; that he did not gain from these transactions; and that the Bank did not suffer any more losses than other financial institutions in the area which lent money on real estate. R.D. at 6.

IV. THE ALJ'S DECISION

   [.2] The Recommended Decision analyzes Respondent's defenses and the factual support for each of the elements of this prohibition action: (1) Misconduct - violations of Regulation O, unsafe or unsound banking practices, breach of fiduciary duty; (2) Effect; and (3) Culpability. The ALJ concludes, and the Board agrees, that there is sufficient factual support in this record for each element of this prohibition action.
   The ALJ rejects Respondent's argument that he was ignorant of the lending limitations of Regulation O. The ALJ found, and


4 Continued:
Unimpaired Capital Aggrregate Single
Date and Surplus Loans 15% Loans 5%
April 28, 1986 $4,356,000 $653,400 $217,800
June 16, 1986 4,356,000 653,400 217,800
October 22,1986 5,065,000 759,750 253,224
October 29, 1986 5,065,000 759,750 253,224
December 23, 1986 5,065,000 759,750 253,224
June 12, 1987 5,533,000 829,950 276,622
July 13, 1987 5,934,000 890,100 296,670
September 27, 1987 6,642,000 996,300 322,067
November 21, 1988 7,279,000 1,091,850 363,950

5 Respondent excepts to the characterization of the $90,000 loan on September 27, 1988, and its rewriting for $93,500 on November 21, 1988, as two separate loans. Resp. Except. at 2. Since the record indicates that one loan was secured and one was not, and there were separate loan transaction, albeit one a rewriting of the other, the Board finds that separate identification of the loan transactions is appropriate.
{{4-30-92 p.A-1869}}the Board agrees, that Respondent as a director and officer of a bank is presumed to have knowledge of credit limits; ignorance of banking law is no defense.6 The ALJ also properly rejects Respondent's assertion that, under Stoddard v. Board of Governors of the Federal Reserve System, 868 F.2d 1308 (D.C. Cir. 1989), the FDIC does not have jurisdiction to enter a prohibition order since he resigned from the Bank prior to issuance of the Notice. The ALJ states that one who commits a removable offense cannot escape liability by terminating his employment, citing section 904 of FIRREA which Congress passed specifically to overrule Stoddard.7    The ALJ also rejects Respondent's argument that the industry-wide prohibition contained in FIRREA cannot be applied retroactively. R.D. at 8. The ALJ further rejects the Respondent's contention that he was not able to testify because he is the target of a federal grand jury investigation and therefore this matter ought to be dismissed. R.D. at 8. Finally, the ALJ was not persuaded by Respondent's arguments that he did not benefit from these transactions and that the Bank did not suffer losses. The ALJ states that substantial financial loss to the Bank on certain loans to Star Trust, Danert, and Raynham played a part in the Bank's insolvency and ultimate closure on March 15, 1991. R.D. at 20. As to each of the elements of the removal action, the ALJ made the following findings.
   1. Misconduct

    a. Violation of Regulation O
   The ALJ found, and the Board agrees, that the record amply supports the allegations of misconduct. Regarding the Rustro loan of $1,850,000, guaranteed by Respondent, the Bank's lending limit to executive officers at that time was $653,400. The ALJ concluded that this loan was an extension of credit to Respondent since there was "evidence of indebtedness upon which a person may be liable as...guarantor." 12 C.F.R. § 215.3(a)(4). R.D. at 10.

   [.3] The ALJ properly rejects Respondent's argument that only a portion of this loan, reflecting his interest in the trust, is attributable to him. The ALJ notes that the purpose of Regulation O was to restrain insiders (such as this Respondent) from treating a bank's funds as their own. R.D. at 11. The ALJ states, and the Board agrees, that the purpose of Regulation O is to limit the access of insiders to depositors' money, not to create exceptions so they could have more access. The ALJ concluded, and the Board agrees, that the entire amount of an extension of credit is attributable to an insider within the scope of Regulation O.8
   Concerning Star Trust, in which Respondent's then minor son, Gregory Stoller, was one of the three equal beneficiaries, the ALJ notes that the Respondent signed documents as "custodian for Gregory L. Stoller."9 The ALJ also found that Respondent made financial contributions to the trust.10 FDIC Exs. 11 and 37. The ALJ concludes that Star Trust was a related interest of the Respondent within the meaning of Regulation O, and thus, the Bank's extensions of credit to Star Trust should be aggregated for Regulation O purposes, with other extensions of credit to Respondent.
   The ALJ properly aggregated Respondent's outstanding credits as of November 21, 1988, finding an outstanding balance of $6,785,709.70. Respondent's outstanding balance had been as much as $8,350,444.60 as of July 13, 1987. FDIC Ex. 75; R.D. at 13. The ALJ correctly concluded that aggregate credits attributable to the Respondent clearly violated


6 The ALJ cites Briggs v. Spaulding, 141 U.S. 132 (1891), and del Junco v. Conover, 682 F.2d 1338, 1342 (9th Cir. 1982). R.D. at 23. The Board also notes that Respondent is an attorney.

7 The ALJ also notes that Congress meant for this provision to be applicable retroactively and cites Jameson v. FDIC, 931 F.2d 290 (5th Cir. 1991). R.D. at 7–8.

8 Respondent reargues this point in his Exceptions, which the Board also rejects. Resp. Except. at 53–57.

9 The ALJ found that Gregory Stoller was a nominee for Respondent and was unaware of his interest in Star Trust until about November 23, 1989, the day before his deposition was taken in a civil matter. R.D. at 3.

10 Respondent argued before the ALJ and in his Exceptions that he did not make financial contributions to Star Trust. The Board finds substantial evidence to the contrary. The FDIC introduced evidence (FDIC Ex. 37) of a letter addressed to Robert Stoller regarding the assessments made against Star Trust for expenses. Additionally, Leonard Aronson, a partner and Trustee of the Star Trust, testified that he had never met Gregory Stoller (Tr. II. at 187); that even after Gregory Stoller was designated beneficiary, Respondent did not cease to be involved in Star Trust's activities (Tr. II, at 187); that he requested, and was given, Respondent's personal guaranty on the Star Trust loans (Tr. II, at 188); and that Gregory Stoller never provided Aronson authority to act as Trustee on behalf of Star Trust.
{{4-30-92 p.A-1870}}section 215.4(c) (15 percent of the Bank's unimpaired capital and surplus as of July 13, 1987, was $1,091,850).11
   Regarding Danert, the ALJ notes that it was clearly a related interest of the Respondent since he was one of its two beneficiaries.12 R.D. at 14. The ALJ concludes that at the time of this $263,500 extension of credit, the outstanding balance of credits attributable to the Respondent was $3,887,370.70, while 15 percent of the Bank's unimpaired capital and unimpaired surplus was $759,750, and five percent was $253,224. R.D. at 14; FDIC Ex. 75. Thus, the ALJ properly concludes that by this transaction the Respondent clearly violated sections 215.4(b) and (c) of Regulation O.
   Regarding Raynham, in which the Respondent had a one-eighth interest and represented a group which had a three-eights interests, the ALJ found, and the Board agrees, that these facts meet the definition of "control" contained in section 215.2(b) (1)(i) and that Raynham was a related interest of Respondent. The Board agrees with the ALJ that the $1,915,200 extension of credit is properly attributable to Respondent. R.D. at 15. This amount added to the Respondent's other outstanding credits as of June 12, 1987, gives an aggregate of $6,816,845.90, well in excess of the Bank's 15 percent lending limit on that day of $829,950. R.D. at 15; FDIC Ex. 75.
   Concerning Quality, the ALJ found no evidence of ownership by the Respondent, or other proof that he, in fact, exercised control over Quality.13 R.D. at 14.
   The ALJ concluded that the transactions discussed above, made between April 28, 1986, and November 21, 1988, by Respondent, constituted numerous extensions of credit to related interest, in the aggregate exceeding $8 million. Many of these were made without prior approval of the Bank's board of directors, evidencing a clear, repeated pattern of lending limited violations of Regulation O. R.D. at 16.

   [.4] b. Unsafe or Unsound Banking Practices and Breach of Fiduciary Duty.
   Further, the ALJ found that these extensions of credit made to Respondent's related interests amounted to excessive concentrations of credit that are inherently risky and fall within the standard definition of unsafe or unsound banking practices. R.D. at 18. The ALJ reasoned, and the Board agrees, that when directors and officers place their personal interests above those of the corporation, or utilize corporate resources for personal gain, they have committed a serious breach of their fiduciary duty.14 R.. at 17.
   The ALJ concludes and the Board agrees, that Respondent used the Bank's money to fund his real estate ventures, in violation of the regulatory lending limits and contrary to prudent banking practices. The ALJ opined, and the Board agrees, that for Respondent to use the Bank's money for his own personal gain was a breach of his fiduciary duty within the meaning of section 1818(e)(1). R.D. at 17–18.

   [.5] 2. Effect
   The ALJ notes that, under the second tier of section 1818(e)(1), as applicable to this case, misconduct is deemed to have had an actionable effect if: a) the Bank suffered, or would have probably suffered, substantial financial or other loss;15 or b) the interests of the depositors were or could have been prejudiced; or c) the Respondent received financial gain. R.D. at 18.
   The ALJ found that Respondent financially benefited from the credit to Rustro, which was formed for the purpose of taking title to real estate under contract to him. Through Rustro's receipt of a $1,850,000 credit and completion of the purchase to which the Respondent was committed, he was relieved of this obligation and, the ALJ


11 The ALJ properly rejected Respondent's argument, reasserted in its Exceptions, that each of these credits was secured by a real estate mortgage and therefore an additional 10 percent of unimpaired capital and surplus was permitted to be extended. R.D. at 13 fn. 2; Resp. Except. at 4. The ALJ noted that real estate does not constitute "readily marketable collateral having a market value, as determined by reliable and continuously available price quotations" within the meaning of 12 U.S.C. § 84(a)(2). FDIC-85-165k, 1 P-H FDIC Enf. Dec. –5065 (1986), at A-845, A-859.
12 Respondent also guaranteed the loan, which was not approved in advance by the Bank's board of directors.

13 Enforcement Counsel take exception to this finding, stating that the Quality loans were subject to Regulation O because the loans were made for the tangible economic benefit of Respondent. FDIC Except. at 4. The Board finds it unnecessary to reach this issue since, without considering this transaction, the record amply supports the Board's conclusion that prohibition is appropriate.

14 The ALJ cites Pepper v. Litton, 308 U.S. 295, 311 (1939).

15 The "Substantial" loss element was dropped as a requirement by FIRREA.
{{4-30-92 p.A-1871}}concludes, financially benefited from the transaction. R.D. at 18.
   The ALJ also found that another effect of Respondent's misconduct was serious loss to the Bank, particularly in connection with the Star Trust, Danert, and Raynham loans. R.D. at 18–20.16
   Noting that these losses played a role in the Bank's insolvency and ultimate receivership, the ALJ rejects as speculative Respondent's argument that there will be no loss on these credits because they are in litigation. R.D. at 20. The ALJ found, and the Board agrees, that the direct losses the Bank suffered are more than sufficient to establish the effects element of section 1818(e)(1). R.D. at 20.

   [.6] 3. Culpability
   The ALJ noted that the third tier of section 1818(e)(1) provides three alternative standards of culpability: continuing disregard for the Bank's safety or soundness; willful disregard for the Bank's safety or soundness; or personal dishonest. R.D. at 21. The ALJ concludes that Enforcement Counsel proved the existence of all three.
   In the ALJ's view, the evidence overwhelmingly proves that the respondent used the Bank's funds to finance his investments in real estate and repeatedly caused the Bank to extend credit to his related interests far in excess of the lending limits imposed by Regulation O. The ALJ found this to be a consummate pattern of insider dealing. R.D. at 22.
   The ALJ found that as a result, too high a concentration of the Bank's assets were placed in the interests of one individual, which is one of the unsafe or unsound practices sought to be eliminated by the lending limit proscriptions of Regulation O. R.D. at 22. The ALJ concludes, and the Board agrees, that this concentration of credit would have been unsafe or unsound had the Respondent not been an insider, but since he was, the seriousness of his actions is compounded. R.D. at 22.
   Accordingly, the ALJ concludes that Enforcement Counsel established each element necessary to warrant an order of prohibition against Respondent.


16 The Bank's losses from these loans are summarized in this table which shows the substandard and loss classifications from three examinations reports.
Name, Date And 11/4/88 12/15/89 11/13/90
Amount of Loan Examination Examination Examination
Star Trust Substandard ORE
6/16/86 $383,000 $223,000
$383,000 Loss $3,000
Star Trust $535,00 $466,000 $407,000
10/22/86 Substandard Substandard Substandard
$535,000 $72,000 Loss $4,000 Loss
Star Trust $547,000 $462,000
6/12/87 Substandard Substandard
$550,000 $86,000 Loss
Star Trust $677,000 $396,000 $245,000
6/12/87 Substandard Substandard Substandard
$850,000 $182,000 Loss $5,000 Loss
Star Trust $676,000 $401,000 $351,000
7/13/87 Substandard Substandard Substandard
$680,000 $280,000 Loss $5,000 Loss
Star Trust $595,000 $421,000 $348,000
7/13/87 Substandard Substandard Substandard
$600,000 $178,000 Loss $94,000 Loss
Star Trust Substandard $93,500 Loss
9/27/88
$90,000
Danert Substandard Substandard
11/4/88
$202,000
Star Trust $549,000 $1,764,000
11/13/90 was charged off Substandard
$464,000 + $1,500,000* $200,000 Loss


   * $464,000 of a former Star Trust loan was added to a $1,500,000 former Raynham credit. (R.D. at 18–20.
{{4-30-92 p.A-1872}}

V. DISCUSSION

   The ALJ's Recommended Decision contains an analysis of the factual evidence and the applicable law. Based upon a complete review of the record in this proceeding, the Board finds that the ALJ's Recommended Decision is well-supported by the evidence and his conclusions are correct.
   The Respondent filed approximately 20 pages of exceptions to the ALJ's Recommended Decision, which are discussed below.

   [.7] 1. Retroactive Application of FIRREA Remedies
   Respondent takes exception to the ALJ's conclusion that the industry-wide prohibition may be applied to him retroactively. Resp. Except. at 8. Respondent argues further that the retroactive application of section 1818(e)(7) to him violates ex post facto clause of the United States Constitution because he will be subject to increased criminal sanctions (if he violates the terms of the prohibition order) for acts allegedly committed before FIRREA's enactment. Resp. Except. at 57. The Board disagrees. The Board notes that this issue was raised below in the briefs and was discussed by the ALJ in his Recommended Decision. However, since the ALJ's discussion of the issue was not a complete explanation of the law relative to retroactivity, the Board shall briefly discuss the law on the issue.
   First, this is not a case of first impression. The Board has previously applied FIRREA remedies in enforcement actions based on pre-FIRREA conduct.17 Second, as the Supreme Court stated in Bradley v. School Board of Richmond, 416 U.S. 696, 711 (1974), "a court is to apply the law in effect at the time it renders its decision, unless doing so would result in manifest injustice or there is statutory or legislative history to the contrary." Since Section 904 of FIRREA is silent as to express legislative intent, Bradley indicates that retroactive application of FIRREA is the rule unless "manifest injustice" would occur. In the Board's view, no manifest injustice would result.
   A number of Courts have permitted retroactive application of statutory changes that are procedural or remedial in nature, as opposed to substantive. See, e.g., Lussier v. Dugger, 904 F.2d 661, 665 (11th Cir. 1990) ("statutory changes that are procedural or remedial in nature apply retroactively"); Sarfati v. Wood Holly Assoc., 874 F.2d 153, 1525-26 (11th Cir. 1989) (statute of limitations must be contained in the same statute or act in order to be deemed an integral, substantive limit on a right, otherwise it is procedural and may be applied retroactively); Turboff v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 867 F.2d 1518, 1521 (5th Cir. 1989) (statutory changes which are procedural or remedial in nature are to be applied retroactively); United States v. Vanella, 619 F.2d 384, 386 (5th Cir. 1980) (same). The statutory amendment to FIRREA at issue here is without a doubt remedial and therefore applies retroactively. Further, the Board notes that other financial regulators have applied FIRREA remedies in a consistent manner.18
   Third, Respondent's ex post facto clause claim is equally faulty since the clause only applies to criminal prosecutions. Galvan v. Press, 347 U.S. 522, 531 n.4 (1954). Respondent, in essence, argues that as an attorney, a prohibition order under amended section 8(e)(7) will deprive him of his right to earn his livelihood because he will be banned from representing insured financial institutions. Resp. Except. at 28. However, revocations of occupational licenses for misconduct have long been considered remedial and not penal for ex post facto purposes. Hawker v. New York, 170 U.S. 189, 196, 199–200 (1898).19 Here, there is no limitation on Respondent's license to practice law, i.e., his ability to provide legal advise or to


17 In the Matter of Frank E. Jameson, First State Bank, Liberty Texas, FDIC-89-83e, 2 P-H FDIC Enf. Dec. ¶5154A (1990), affirmed, Jameson v. FDIC, 931 F.2d 290 (5th Cir. 1991); In the Matter of Marvin Clark, Farmers & Merchants Bank, Dublin, Georgia, FDIC-89-199e, 2 P-H FDIC Enf. Dec. ¶ 5162 (1991).

18 In the Matter of F. Louis Freitag, Bancfirst Austin, N.A., Austin, Texas, Docket No. AA-EC-89-139 (May 1, 1991) at 4 n.3, The Board of Governors of the Federal Reserve System applied the industry-wide bar of FIRREA to pre-FIRREA conduct in a removal case initiated after passage of FIRREA; In the Matter of Gerald R. O'Keeffe, First Atlantic Savings and Loan Association, South Plainfield, New Jersey, FHLBR No. 89–773 (Order dated April 26, 1990), the Director of the Office of Thrift Supervision applied the industry-wide bar of FIRREA to pre-FIRREA conduct in a removal and prohibition action.

19 Hawker concerned retroactive application of a statute prohibiting convicted felons from practicing medicine when the criminal act occurred 15 years before the removal statute was enacted; See also Lewis v. United States, 445 U.S. 55, 66 (1980) (barring felons from arms trafficking); Fleming v. Nestor, 363 U.S. 603, 616 (1960) (medical licence revocation); DeVeau v. Brainstead, 363 U.S. 144, 159 (1960) (removal of felons from union (Continued)

{{4-30-92 p.A-1873}}represent federally insured institutions as legal counsel.20 However, Respondent is prohibited from being an officer, director, or employee or otherwise engaging in the business activities of a federally insured financial institution.
   Therefore, the Board finds that section 8(e)(7) as amended by FIRREA, is remedial or corrective, and thus may be properly applied in this case.

   [.8] 2. Other Matters Raised in Respondent's Exceptions
   Respondent filed exceptions to the ALJ's Recommended Decision challenging almost every factual finding, legal conclusion, and many of the ALJ's evidentiary rulings.
   Respondent specifically disagrees with the ALJ's legal interpretation of various banking statutes and their application to the facts of this case.21 In the Board's view, most of Respondent's Exceptions merely reargue matters raised below, which were adequately addressed by the ALJ and do not warrant further discussion.22
   Regarding the ALJ's evidentiary rulings, Respondent excepts to the ALJ's admission of the deposition of Gregory Stoller taken in a prior civil case.23 In the deposition testimony, Gregory Stoller admitted that he was not aware of his interest in Star Trust until the day before he was deposed. The attorney who had taken the deposition was called as a witness for the FDIC. The attorney authenticated the deposition as a true and accurate record of Gregory Stoller's prior testimony. Over the hearsay objection of Respondent, the ALJ ruled the evidence was admissible.24 The ALJ concluded, and the Board agrees, that there are sufficient indicia of trustworthiness to warrant admission of the deposition testimony. Furthermore, this testimony merely corroborates other evidence of Respondent's activities related to the Star Trust.25

   [.9] Respondent also excepts to the admission through FDIC Bank Examiner James Moore of certain Bank records, including loan files, board of directors' minutes and other documents reviewed as part of the examination process.26 Respondent asserts that since Moore was not a custodian of the Bank's records, he cannot personally identify each document, and therefore, they were not properly authenticated. The Board finds that Respondent's exceptions lack merit and the ALJ properly overruled Respondent's objection to the admission of these documents.27
   Respondent's remaining evidentiary exceptions concern the denial of his Motion in Limine to exclude the FDIC's premarked


19 Continued: office); In re Daley, 549 F.2d 469, 475-7 (7th Cir. 1977) (attorney disbarment), cert. denied, 434 U.S. 829 (1978).


20 However, to the extent that as an attorney representing a federally insured institution Respondent "knowingly or recklessly participates in—(A) any violation of law or regulation; (B) any breach of fiduciary duty; (C) any unsafe or unsound practice, which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured institution," he could be an "institution-affiliated party" whose participation is prohibited by this decision. Under the definition set forth above, it is unlikely that an attorney could innocently run afoul of the prohibition from participation in the affairs of an insured institution.

21 Respondent asserts that, since none of the trusts at issue have directors or any class of voting securities, he cannot have control within the meaning of 12 C.F.R. § 215.2(b)(1)(i) and (ii). Resp. Except. at 11. The Board has considered this assertion and finds that a person can control a company in several ways, either individually or acting in concert with others. A person has control of a company if he "[h]as the power to exercise a controlling influence over the management or policies of the company." 12 C.F.R. § 215(b)(1)(iii). Based upon the nature of

22 For example, Respondent excepts to the ALJ's failure to adopt his previously submitted Findings of Fact and Conclusions of Law. Resp. Except. at 6, 10, and 14.

23 Respondent filed a Motion in Limine to exclude this evidence and asserted a hearsay objection at the hearing.

24 The Board notes that although the Federal Rules of Evidence do not apply to this administrative proceeding, they may provide some guidance. Fed. R. Evid. 803(24) provides that evidence, which would otherwise constitute hearsay, is admissible if there are "circumstantial guarantees of trustworthiness, and (A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence with the proponent can procure through reasonable efforts; and (C) the general purpose of these rules and the interest of justice will best be served by admission of the statement into evidence."

25 See p. 11 and n.10, supra.

26 The Respondent also excepts to the "condition and availability" of certain Bank's documents. The Board finds these exceptions to be without merit. After the Bank was closed, its files were transferred to the Division of Liquidation and the record indicates every effort was made to make documents available to Respondent. This matter was extensively discussed at a pre-hearing telephone conference and during the hearing itself.

27 Several of the documents at issue are records of the FDIC, a public agency, and therefore, under Fed. R. Evid. 803(8), they do not require any foundational testimony. See, e.g., United States v. Regner, 677 F.2d 754, 761 (9th Cir. 1982). In addition, the examiner, as an employee of the FDIC, is in a position to properly lay a foundation for such documents. As to the remaining documents, they were collected by the FDIC examiners and (Continued)

{{4-30-92 p.A-1874}}exhibits and his Motion to Stay the proceedings. The Board rejects these exceptions as they merely reassert the Respondent's position taken at the hearing and the Board is in full agreement with the ALJ's disposition of these issues. R.D. at 8.

VI. REMEDY

   Section 8(e)(4) of the FDI Act, 12 U.S.C. § 1818(e)(4) (1989), provides that "[i]f upon the record made at any such hearing the [FDIC] shall find that any of the grounds specific in such notice have been established, the [FDIC] may issue such orders of suspension or removal from office, or prohibition from participation in the conduct of the affairs of the depository institution, as it may deem appropriate." Upon a thorough review of the record in this proceeding, the Board finds that the serious nature of Respondent's unsafe or unsound conduct and serious breaches of fiduciary duty merit prohibition from participating in the conduct of the affairs of any other federally insured depository institution or organization listed in section 8(e)(7) of the FDI Act, 12 U.S.C. § 1818(e)(7) (1989).

ORDER OF PROHIBITION FROM FURTHER PARTICIPATION

   For the reasons set forth in the above Decision, and pursuant to section 8(e) of the FDI Act, 12 U.S.C. § 1818(e), the Board of the FDIC hereby ORDERS that:
   1. Robert S. Stoller is hereby prohibited from service or acting as an institutionaffiliated party, as that term is defined in section 3(u) of the FDI Act, 12 U.S.C. § 1813(u) (1989), and/or from participating in any manner in the conduct of the affairs of any of the institutions or agencies, listed herein, without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency pursuant to the provisions of section 8(e)(7)(A) of the FDI Act, 12 U.S.C. § 1818(e)(7)(A) (1989):

       (i) Any insured depository institution;
       (ii) Any institution treated as an insured bank under sections 8(b)(3) and 8(b)(4) of the Act, 12 U.S.C. §§ 1818(b)(3) and 8(b)(4), including(1) any bank holding company, (2) any subsidiary of a bank holding company, (3) any foreign bank that maintains a branch or agency in a State, (4) any foreign bank or foreign company controlling a foreign bank that controls a commercial lending company organized under State law, and any company of which any foreign bank or company referred to in (3) and (4) above is a subsidiary, or as a savings association under section 8(b)(8) of the Act, 12 U.S.C. § 1818(b)(8), including any savings and loan holding company, any service corporation of a savings association, and any subsidiary of a service corporation of a savings association;
       (iii) Any insured credit union under the Federal Credit Union Act, 12 U.S.C. § 1781 et seq.;
       (iv) Any institution chartered under the Farm Credit Act of 1971, 12 U.S.C. § 2001 et seq.;
       (v) Any appropriate Federal Depository institution regulatory agency;
       (vi) The Federal Housing Finance Board and any Federal home loan bank; and
       (vii) The Resolution Trust Corporation.
   2. Robert S. Stoller is hereby prohibited from soliciting, procuring, transferring, attempting to transfer, voting, or attempting to vote any proxy, consent, or authorization with respect to any voting rights in any of the institutions described in paragraph 1 hereof.
   3. Robert S. Stoller is hereby prohibited from voting for a director of any insured depository institution.
   This ORDER shall become effective ten (10) days from the date of its issuance.
   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 FDIC.
   By direction of the Board of Directors.
   Dated at Washington, D.C. this 18th day of February, 1992.
   /s/ Hoyle L. Robinson
   Executive Secretary
27 Continued:are part of the work papers of the examination of the Bank. Therefore, the Board concludes that the examiner is in a position to lay sufficient foundation for those documents for purposes of this proceeding.
{{4-30-92 p.A-1875}}

_________________________________________
RECOMMENDED DECISION

In the Matter of
Robert S. Stoller, Individually, and as President, Director and/ or A Person Participating in the Conduct of Affairs of
Coolidge Corner Co-Operative Bank Brookline, Massachusetts
(Insured State Non-Member Bank)
James L. Rose, Administrative Law Judge:

STATEMENT OF THE CASE

   This matter was tried before me on June 3, 4 and 5, 1991, at Boston, Massachusetts, upon the FDIC's Notice of Intention to Prohibit from Further Participation. The FDIC and the Respondent were represented by counsel. Following the hearing, counsel submitted detailed proposed findings of fact and conclusions of law, supporting briefs and reply briefs. Upon the record as a whole, including my observation of the witnesses and briefs and arguments of counsel, I hereby make the following findings and conclusions and recommended order that the Respondent be prohibited from further participation in the affairs of federally insured financial institutions.

I. THE FACTS

   From 1975 until asked to resign by the board of directors on March 15, 1990, the Respondent, Robert S. Stoller, was a director and president and chief executive officer of the Coolidge Corner Co-Operative Bank (herein the Bank). He was also the principal lending officer and made all the extensions of credit involved in this matter.
   The Bank originated to provide loans for one to four family residential purchasers and until 1986 was not federally insured. It is a small community bank with about $85 million in assets as of the November 13, 1990, joint examination. Between February 1986, when it became a member of the FDIC, and the joint examination of November 4, 1988, the Bank underwent a major change in its lending philosophy, from residential dominant loans to primarily commercial. (FDIC Ex. 70, 1-A) From 1986 many loans were made to real estate trusts, some of which form the basis of the allegations here.
   On April 28, 1986, Rustro Realty Trust was created for the purpose of taking title to certain realty which the Respondent had contracted to purchase on March 27, 1986, known as the "Beacon Street Property." (FDIC Ex 1) On April 28 the Bank made an extension of credit to Rustro for $1,850,000, which the Respondent personally guaranteed "to induce the acceptance of the Promissory Note of" Rustro's trustee. (FDIC Ex. 6)
   Star Trust was created on April 11, 1986. The designated trustees were Leonard J. Aronson and Rudolph Peselman, who were also one-third beneficiaries. The other one-third beneficiary was Gregory L. Stoller, the Respondent's son, who, at the time, was a minor. However, Gregory was unaware of his interest until about November 23, 1989, the day before his deposition was taken in connection with civil litigation in a Massachusetts court.1 The Respondent was a contributor to the trust along with Aronson and Peselman. (FDIC Ex. 37) On these facts, it appears that Gregory Stoller was a nominee for the Respondent and that the Respondent controlled a one-third interest in Star Trust.
   The Bank made several extensions of credit to Star Trust, beginning on June 16, 1986, with a loan of $939,000. A second loan was made by the Bank to Star Trust on October 22, 1986, for $660,000, which was guaranteed by the Respondent "to induce the acceptance of the Promissory Note of" the trustees. (FDIC Ex. 17)
   On June 12, 1986, the bank made two more extensions of credit to Star Trust, for $550,000 and $850,000. (FDIC Ex. 19 and 22)
   On July 13, 1987, the Bank made two extensions of credit to Star Trust for $680,000 and $600,000, both of which were guaranteed by the Respondent in order "to induce" the Bank's acceptance of the trustee's notes. (FDIC Ex. 27 and 32)
   The stated purpose of each of these loans was to purchase condominiums and for each,


1 The deposition of Gregory Stoller was received over the Respondent's hearsay objection. Although hearsay in this matter as to this Respondent, I concluded it was sufficiently trustworthy to be admitted, thus shifting the burden to the Respondent to refute the factual assertions contained therein. Gregory Stoller was under oath and was subject to cross examination. See Federal Rules of Evidence, Rule 803(24) and 804(5).
{{4-30-92 p.A-1876}}the Respondent was the loan officer. (FDIC Ex. 14, 16, 20, 23, 25 and 30)
   On September 27, 1988, the Bank loaned Star Trust $90,000 which was secured by a mortgage on property on which the Bank already held a first mortgage. (FDIC Ex. 35) And on November 21, 1988, this was redone to $93,500. This loan was unsecured, and was not, apparently, for the purpose of purchasing real estate. (FDIC Ex. 34)
   On December 23, 1986, Danert Realty Trust came into being and on that day the Bank extended it a credit of $263,500 for the purpose of purchasing condominium units. The Respondent was the Bank's loan officer as well as the guarantor "to induce" the Bank to make the loan. (FDIC Ex. 44 and 46) The Respondent was one of the Trust's two beneficiaries. (FDIC Ex. 41) This loan was not approved by the Bank's board of directors prior to being made. (FDIC Ex. 47)
   Quality Communications, Inc. was incorporated on November 25, 1985, as WINQ, Inc. The name was changed on March 11, 1986. The Respondent was the sole incorporator, principal officer, account card signer, and, until October 29, 1986, its principal place of business was the Respondent's home. (FDIC Ex. 48, 49 and 50) Funds originating with the Respondent were directed through his son Gregory on October 28, 1986, for the purpose of purchasing a radio station in Winchendon, Massachusetts. (FDIC Ex. 49)
   On October 29, 1986, the Bank made an extension of credit to Quality Communications, Inc. for $320,000 (FDIC Ex. 55P and to Quality Communications Realty Trust for $80,000 (FDIC Ex. 56), both of which were secured by the same mortgage (FDIC Ex. 57) and deposited in the same account at the Bank. (FDIC Ex. 58) And on September 29, 1987, Quality Communications, Inc. borrowed another $630,000 from the Bank. (FDIC Ex. 60)
   On December 15, 1986, the Raynham Realty Trust was created (FDIC Ex. 62), with the Respondent holding a one-eighth beneficial interest. (FDIC Ex. 63) He also represented a group which controlled a three-eights interest (FDIC Ex. 53), which presumably included his one-eighth.
   On June 12, 1987, the Bank, with the Respondent as the loan officer, extended a credit of $1,915,200 to Raynham Realty Trust to be used to purchase condominiums. (FDIC Ex. 67 and 68)
   From call reports submitted by the Bank, at various material times in this matter the Bank's unimpaired capital and unimpaired surplus was:
Unimpaired Capital
Date and Surplus 15% 5%
April 28, 1986 $4,356,000 $653,400 $217,800
June 16, 1986 4,356,000 653,400 217,800
October 22, 1986 5,065,000 759,750 253,224
October 29, 1986 5,065,000 759,750 253,224
December 23, 1986 5,065,000 759,750 253,224
June 12, 1987 5,533,000 829,950 276,622
July 13, 1987 5,934,000 890,100 296,670
September 29, 1987 5,934,000 890,100 296,670
September 27, 1987 6,642,000 996,300 322,067
November 21, 1988 7,279,000 1,091,850 363,950

{{4-30-92 p.A-1877}}

II. ANALYSIS
   On these facts, almost all of which were taken from Bank records created when the Respondent was its president and chief executive officer, the FDIC contends that an order should issue prohibiting him from further participation in the affairs of any federally insured financial institution.
   The Respondent did not deny these facts, by his own testimony or other evidence. He did raise several defenses, which will be treated in more detail below, but which may be summarized: since he resigned prior to initiation of this action, he cannot be prosecuted; he was not told, nor was he aware, of any lending limit proscriptions; he is the target of a grand jury investigation and therefore could not adequately defend himself; he did not gain from these transaction; the Bank did not suffer any losses more than other financial institutions in the area which lent money on real estate; and, the evidence does not demonstrate a willful or continuing disregard for the Bank's safety and soundness nor his personal dishonesty.
   A. The Statutory Scheme
   Since all the activity alleged for which the FDIC seeks prohibition occurred prior to August 9, 1989, (the effective date of the Financial Institutions Reform, Recovery and Enforcement Act of 1989) the parties agree that the substantive provisions of 12 U.S.C. § 1818(e)(1) at it was written prior to that date control this action.
   Since the Respondent resigned his position with the Bank prior to the commencement of this action, he argues that under the authority of Stoddard v. Board of Governors of the Federal Reserve System, 868 F.2d 1308 (D.C. Cir. 1989) the FDIC does not have jurisdiction to enter a removal or prohibition order.
   I reject the Respondent's argument and conclude that by Section 904 of FIRREA Congress specifically overruled Stoddard and meant to provide that the remedy of prohibition may be entered against one who has terminated his affiliation with the bank prior to the notice being filed. Further, Congress meant for this provision to be applicable retroactively. Thus in the Conference Committee Report on FIRREA at ¶4905:
    Section 905 authorizes the banking agencies to take enforcement actions against culpable institution-affiliated parties who resign or otherwise depart from an institution, within 6 years of their leaving the institution. This section does not create a new offense; it is procedural in nature, and can therefore be applied retroactively to yet undiscovered misconduct and to currently pending supervisory matters that have been stayed awaiting congressional action. For example, assuming that the legislation is enacted on August 26, 1989, a banking agency could initiate and pursue enforcement against any institution-affiliated party who departed an institution in the previous six years dating back to August 26, 1983.
   The Fifth Circuit recently held that the jurisdictional provision of FIRREA could be applied retroactively to one who had resigned his position with the bank prior to the notice being served: Jameson v. FDIC, 931 F.2d 290 (5th Cir: 1991).
   The Respondent further argues that the industry-wide prohibition cannot be applied retroactively, and therefore cannot be a remedy in this case. I disagree. Although Section 1818(e)(7) was a FIRREA addition, it does not differ in substance from the preFIRREA Section 1818(j). Congress did not enact a law which makes activity unlawful which was not at the time committed, nor did it increase the possible punishment after the fact. As to this case, FIRREA made only procedural changes. An officer who committed a removable offense cannot escape liability by terminating his employment before the action is commenced.
   I also reject the Respondent's contention that he was not able to testify because he is the target of a Federal grand jury investigation and therefore this matter ought to be dismissed. Whether his truthful testimony would tend to incriminate the Respondent is for him and his attorney to decide. And I draw no inference that the facts occurred as alleged from his failure to do so, except where an inference is warranted absent a specific denial. For instance, since the Respondent did not testify, I do not accept as evidence his counsel's assertions that the Respondent did not know about Regulation O. I infer that he knew the basic banking laws. However, the facts upon which an order of prohibition can be based must be proved by a preponderance of the credible evidence. Steadman v. SEC, 450 U.S. 91, 102 (1981).
   Under pre-FIRREA Section 1818(e)(1), a
{{4-30-92 p.A-1878}}federal banking agency may remove from office an officer who engaged in specific misconduct (a violation of law, an unsafe or unsound banking practice or a breach of fiduciary duty) which has had a particular effect (financial gain to the respondent or substantial financial harm or other damage to the institution) and where it is shown that the misconduct involved culpability of a particular degree (personal dishonesty or a willful or continuing disregard for the safety and soundness of the institution).
   As noted, the FDIC has the burden of proof on each of these elements. Further, for particular misconduct to constitute a predicate for prohibition, effect and culpability must be proven as to that conduct. That is, it is not sufficient for the FDIC to prove that certain activity involves misconduct, but the prescribed effect and/or culpability arose as a result of other, nonmisconduct, acts. To be actionable, each of the three tiers must be proven as to the same conduct.

   Misconduct

   Violation of Regulation O.

   It is alleged that each of the transactions outlined above was in some way violative of Regulation O, 12 C.F.R. Part 215. Specifically it is alleged that some of the transactions, to be detailed below, were extensions of credit to the Respondent in excess of five percent of the Bank's capital and unimpaired surplus without prior approval of the board of directors in violation of Section 215.4(b). Other transactions are alleged to have been violative of Section 215.4(c) in that they were extensions of credit to the Respondent, or his related interests, which in the aggregate exceeded 15 percent of the Bank's unimpaired capital and unimpaired surplus.
   Although 12 C.F.R. Part 215 is a Federal Reserve Regulation for member banks, the provisions in issue here are applicable to state non-member banks and their officers and directors. 12 C.F.R. § 337.3.
   The credible evidence amply supports the allegations of misconduct. Thus on April 28, 1986, the Bank made an extension of credit to Rustro Realty Trust for $1,850,000 at a time when the Bank's lending limit to executive officers was $653,400. The Respondent guaranteed this loan "to induce" the Bank to accept Rustro's promissory note. Thus without regard to whether, or to what extent, Rustro may have been a related interest of the Respondent, this loan was an extension of credit to him. Under Section 215.3(a)(4) an extension of credit includes any "evidence of indebtedness upon which a person may be liable as...guarantor."
   As to the Rustro credits (as well as those to Raynham and Danert) the Respondent argues that only the portion reflecting his interest in the trust is attributable to him. The Respondent cites Section 215.3(f):

    An extension of credit is considered made to a person covered by this part to the extent the proceeds of the extensions of credit are used for the tangible economic benefit of, or are transferred to, such person.
   I disagree that this language means that extensions of credit attributable to more than one person are subdivided on some kind of a pro rate basis for lending limit purposes. The purpose of Regulation O was to stop insiders (such as this Respondent) from treating a bank's funds as their own. Certain acts are proscribed. Others require full and advance disclosure. Regulation O was written to limit the access of insiders to other people's money, not to create exceptions so the could have more access. Thus the phrase "to the extent" means "if." The entirety of a given extension of credit is attributable to each individual who comes within the purview of Regulation O.
   Part 32 of 12 C.F.R. implements the lending limit proscriptions of 12 U.S.C. § 84, which are adopted for purposes of Regulation O by Section 215.2(f). Thus the combination rules set for in Part 32 are applicable to Regulation O. Specifically, 12 C.F.R. § 32.5 reads:
   Combining loans to separate borrowers.
    (a)(1) General rule. Loans or extensions of credit to one person will be attributed to other persons, for purposes of this part, when (i) the proceeds of the loans or extensions of credit are to be used for the direct benefit of the other person or persons or (ii) a "common enterprise" is deemed to exist between the persons.
   A trust is a "person" within the meaning of Section 32.2(b). And clearly, a loan to a trust is for the direct benefit of the beneficiaries. Thus, under the combination rules implementing 12 U.S.C. § 84, the entirety of an extension of credit to Rustro (and others) is attributable to the Respondent.
   Star Trust was created on April 11, 1986. Gregory Stoller, the Respondent's then mi
{{4-30-92 p.A-1879}}nor son, was one of the three equal beneficiaries, a fact which was unknown to Gregory until three and one-half years later. The Respondent signed documents as "custodian for Gregory L. Stoller" (FDIC Ex. 11) and contributed to the trust as needed. (FDIC Ex. 37) The Trust was revocable at will by any one of the beneficiaries. On these facts I conclude that Star Trust was a related interest of the Respondent within the meaning of Regulation O. Thus the Bank's extensions of credit to Star Trust would aggregate with other extensions of credit to the Respondent for purposes of Regulation O. Even if Star Trust was not a related interest, those loans which the Respondent guaranteed are extensions of credit to him by virtue of Section 215.3(a)(4).

   Star Trust loans:

June 16, 1986 $939,000
October 22, 1986 660,00 guaranteed
June 12, 1987 550,000
June 12, 1987 850,000
July 13, 1987 680,000 guaranteed
July 13, 1987 600,000 guaranteed
September 27, 1988 90,000
November 21, 1988 93,500

   Each of these credits, when added to the Respondent's others with the Bank at the time extended, well exceeded 15 percent of the Bank's unimpaired capital and unimpaired surplus. When the Respondent made the April 28, 1986, loan to Rustro his outstanding credits far exceeded those permissible under Regulation O, and over the next two and one-half years the overline grew substantially. Thus when he made the extension of credit of November 21, 1988, the outstanding balance of credits to him was $6,785,709.70.2 The outstanding balance had been as much as $8,350,444.60 as of July 13, 1987. (FDIC Ex. 75) The aggregate credits attributable to the Respondent clearly violated Section 215.4(c).
   Further, the loans of October 22, 1986, June 12, 1987, July 13, 1987, September 27, 1988, were made without prior approval of the Bank's board of directors. Since the aggregate of these loans, along with the outstanding balance of other credits attributable to the Respondent, exceeded five percent of the Bank's unimpaired capital and surplus, these extensions were violative of Section 215.4(b)(1).
   Danert Realty Trust was created on December 23, 1986, and on that day the Bank, with the Respondent as the loan officer, extended a credit to Danert for $263,500. He was also one the Danert's two beneficiaries. Thus it was clearly a related interest of the Respondent. In addition, he guaranteed the loan. Finally, the credit was not approved in advance by the Bank's board of directors.
   At the time of the extension, the outstanding balance of credits attributable to the Respondent was $3,887,378,70. (FDIC Ex. 75) Fifteen percent of the Bank's unimpaired capital and unimpaired surplus was $759,750 and five percent was $253,224.
   By this transaction the Respondent clearly violated Sections 215.4(b) and (c) of Regulation O.
   The FDIC alleges, and the Respondent denies, that Quality Communications, Inc., was a related interest of the Respondent. The Respondent was the sole incorporator WINQ, Inc., on November 25, 1985. That corporation's name was changed to Quality Communications, Inc., on March 11, 1986, with the Respondent signing as the clerk. And until October 29, 1986, Quality's principal place of business was at the Respondent's residence. Finally, on October 28, 1986, Gregory Stoller lent money to Quality which he had received from the Respondent. However, there is no evidence of ownership by the Respondent, or records that he in fact exercised control over Quality.
   Although it may be that the Respondent "controlled" the company within the meaning of Section 215.2, such cannot be concluded from this record. Even if Gregory Stoller is considered a nominee of the Respondent, there is no reason to believe his ownership was more than 20 percent. (FDIC Ex. 51) While the Respondent was the incorporator and performed other functions, there is no evidence he had the power to exercise controlling influence over management or in fact did so. By definition, "con-


2 The Respondent argues that each of these credits was secured by a real estate mortgage and therefore an additional 10 percent of unimpaired capital and surplus was permitted to be extended. I reject this argument. Real estate does not constitute "readily marketable collateral having a market value, as determined by reliable and continuously available price quotations." See 2 P.H. FDIC Enfd. Dec. ¶5065 (1986) at 6673. But even if the Respondent's position were accepted, the aggregate extensions of credit to him far exceeded 25 percent of the Bank's unimpaired capital and unimpaired surplus.
{{4-30-92 p.A-1880}}trol" of a company is required in order for the company to be a "related interest." Section 215.2(k)
   Accordingly, I conclude that the FDIC did not establish by a preponderance of the credible evidence that extensions of credit to Quality were violations of Regulation O as to the Respondent.
   The Respondent had a one-eight interest in Raynham Realty Trust and represented a group which had a three-eights interest (presumably including the Respondent's stake). Such meets the definition of "control" in Section 215.2(b)(1)(i). Therefore Raynham was a related interest of the Respondent and the $1,915,200 extension of credit to it is attributable to him.
   The Respondent argues that he did not sign the note, nor is there any evidence of what Raynham did with the money. Neither of these factors has any relevance to the issue of whether or not this was an extension of credit to the Respondent within the meaning of Regulation O.
   Adding this to the Respondent's other outstanding credits as of June 12, 1987, gives an aggregate of $6,816,845.90. (FDIC Ex. 75, not including Quality.) This is well in excess of the Bank's 15 percent lending limit that day of $829,950. Indeed, it exceeded the Bank total unimpaired capital and surplus.
   This extension was also made without prior approval of the Bank's board of directors, and was therefore violative of Section 215.4(b).
   In sum, between April 28, 1986, and November 21, 1988, the Respondent made numerous extensions of credit to his own related interests which in the aggregate exceeded $8 million. Many of these were made without prior approval of the board of directors. The evidence clearly proves a repeated pattern of lending limit violations proscribed by Regulation O.

b. Unsafe and unsound banking practices.

   These extensions of credit the Respondent made to his own related interests, as noted, far exceeded the limits of 12 U.S.C. § 84. While Section 84 was not specifically applicable to the Bank its policy considerations were. Section 84 means to limit concentrations of credit, Congress concluding that too much concentration of credit is inherently risky.
   An excessive concentration of credit, I conclude, falls within the standard definition of unsafe and unsound, as given by the Federal Home Loan Bank Board Chairman John Horne:
   Generally speaking, an "unsafe or unsound practice" embraces any action or lack of action, which is contrary to generally accepted standards of prudent operation, the possible consequences of which, if continued, would be abnormal risk or loss or damage to an institution, its shareholders, or the agencies administering the insurance benefits. 112 Cong. Record 26474 (1966).
   Therefore, the Respondent's activity was an unsafe and unsound banking practice within the meaning Section 1818(e)(1) as well as being violative of Regulation O.

c. Breach of fiduciary duty.

   In general corporate matters, the Supreme Court has held, when directors and officers and directors place their personal interests above those of the corporation, or utilize corporate resources for personal gain, they have committed a serious breach of their common law fiduciary duty. Pepper v. Litton, 308 U.S. 295, 311 (1939). The standards are even higher in banking, where the officers and directors are charged with looking after other people's money. Indeed, given the paramount importance of a credible and safe and sound banking system, there can be no question that officers and directors of banks are held to the very highest standard of fiduciary duty. Thus, "directors of banking corporations generally owe a greater duty than other corporate directors." Gadd v. Pearson, 351 F. Supp. 895, 903 (M.D. Fla. 1972).
   Here the Respondent used the Bank's money to fund his various ventures in real estate. He did so in violation of prudent banking practices and regulatory lending limits. And for the most part, he did so without prior knowledge of the board of directors. At least, most of these loans were not approved in advance and there is no evidence the board knew of them. To use the Bank's money for his own personal gain is, I conclude, a breach of his fiduciary duty within the meaning Section 1818(e)(1).

2. Effect

   Under the second tier of Section 1818(e)(1), as applicable to this case, misconduct is deemed to have had an actionable effect if a) the Bank suffered, or would have probably suffered, substantial (deleted in the
{{4-30-92 p.A-1881}}FIRREA amendments) financial or other loss; or, b) the interests of the depositors were or could have been prejudiced; or, c) the Respondent received financial gain.
   Rustro was formed on April 28, 1986, for the purpose of taking title to certain real estate contracted for by the Respondent at an auction sale on March 27, 1986. The purchase price was $2,225,000, the Respondent having made a deposit of $100,000. (FDIC Ex. 1) The credit extended by the Bank on April 28 for $1,850,000 was for this purpose. By Rustro receiving the credit and completing the purchase to which the Respondent was committed, the Respondent was relieved from his obligation. From this I conclude that the Respondent financially benefitted from the transaction—that the Respondent's misconduct had an effect set forth in the second tier.
   The $383,000 balance of the June 16, 1986, loan to Star Trust was classified as substandard at the joint examination as of December 15, 1989. At the joint examination as November 13, 1990, the balance of $223,000 was considered other real estate and classified substandard in part and $3,000 was a loss.
   At the joint examination as of November 1, 1988, the $535,000 balance of the October 22, 1986, Star Trust loan was classified substandard. At the December 15, 1989, joint examination $466,000 of this was classified as substandard and $72,000 as loss. And at the November 13, 1990, joint examination, $407,000 was classified as substandard and $4,000 as loss.
   Similarly, the June 12, 1987, Star Trust loan for $550,000 was classified: November 4, $547,000 substandard; December 15, $462,000 substandard, $86,000 loss.
   The June 12, 1987, Star Trust loan for $850,000 was classified: November 4, $677,000 substandard; December 15, 1989, $396,000 substandard and $182,000 loss, November 13, 1990, $245,000 substandard and $5,000 loss.
   The July 13, 1987, Star Trust loan for $680,000 was classified: November 4, $676,000 substandard; December 15, $401,000 substandard and $280,000 loss; November 13, 1990, $351,000 substandard and $5,000 loss.
   The July 13, 1987, Star Trust loan for $600,000 was classified: November 4, $595,000 substandard; December 15, $421,000 substandard and $178,000 loss; November 13, $348,000 substandard and $94,000 loss.
   The $90,000 loan to Star Trust on September 27, 1988, was classified substandard at the joint examination as of November 4, 1988. The loan of $93,500 was classified as a loss at the joint examination as of December 15, 1989.
   As of November 4, 1988, the balance of the extension of credit to Danert was $202,000. This was classified as substandard, and again at the examinations as of December 15, 1989 and November 15, 1990.
   At the examination as of November 13, 1990, $464,000 of a former Star Trust loan was added to $1,500,000 of the former Raynham credit was classified $1,764,000 substandard and $200,000 loss. It was noted that $549,000 of these credits had been charged off since the December 15 examination. (FDIC Ex. 72, 2-a-26)
   It is therefore clear that the credits to Star Trust, Danert and Raynham caused substantial financial loss to the Bank. Indeed, the losses taken on these credits played a part in the Bank's insolvency and ultimate closure on March 15, 1991. The Respondent argues, however, that there will be no loss on these credits because they are in litigation and the Bank has a substantial chance of recovering and well as recovering on fidelity bonds. I reject this argument. The fact that the Bank may have a good case does not mean it will be successful, or if it does get a judgment, that it will recover all its losses. (T. 3-100) This defense is just too speculative to be sustained.
   The losses and potential losses are more than sufficient to establish the effects tier of Section 1818(e)(1).

   3. Culpability.

   The third tier provides three alternative standards of culpability: continuing disregard for the bank's safety and soundness; willful disregard for the bank's safety and soundness or personal dishonesty. I conclude the FDIC proved the existence of all three.
   Continuing disregard can be established simply by showing a mental stat akin to recklessness, whereas willful disregard requires proof of an awareness that the actions were detrimental to the bank's safety and sound- {{4-30-92 p.A-1882}}ness. See, Brickner v. FDIC, 747 F.2d 1198, 1203 (8th Cir. 1984).
   Personal dishonesty needs more proof that the activity was egregious. In evaluating the evidence under this standard, the Board of Governors of the Federal Reserve noted its legislative history, quoting a colloquy between Congressman Ashley, Chairman Horne and then General Counsel of the FHLBB Scott. Thus, the term personal dishonesty: "is intended to be a generic term that would encompass primarily, but not exclusively, the kinds of things that are actionable under the various State and Federal Criminal statutes" (Scott); "something that is selfdealing" (Ashley); "committing some kind of fraud on the association or if the person is dipping into the till and lining his own pocket—these are among the kinds of things that the section certainly is intended to reach." (Scott). Financial Institutions Supervisory Act of 1966: Hearings on S. 13158 Before the House Comm. on Banking and Currency, 89th Cong. 2d Sess. 55 (1966).
   The Board further said, instead of "fraud" a "More common understanding of the term would be something akin to a `failure to adhere to a standard of integrity'". And finally, personal dishonesty "was meant to include, but extend considerably beyond, the meaning of common law fraud, and certainly meant to include the kind of self-dealing diversion of bank assets for personal use at issue in this case." Stanford v. Stoddard, AA-EC-85-44 (reversed on other grounds, Stoddard v. Board of Governors, supra.)
   The evidence overwhelmingly proves that the Respondent used the Bank's funds to finance his investments in real estate. He repeatedly caused the Bank to extend credit to his related interests far in excess of the lending limits imposed by Regulation O and usually did so without prior approval of the Bank's board of directors. This was a consummate pattern of insider dealing.
   As a result, too high a concentration of the Bank's assets were placed in the interests of one individual, which is one of the unsafe and unsound practices sought to be eliminated by the lending limit proscriptions and Regulation O. This concentration of credit would have been unsafe and unsound had the Respondent not been an insider. That he was simply compound the seriousness of his actions.
   The Respondent's two principal defenses are: he did not know of the lending limit proscriptions; and lots of banks were lending money on real estate, which, at the time, was considered sound.
   Ignorance of basic banking law is no defense. See, e.g. Briggs v. Spaulding, 141 U.S. 132 (1891); del Junco v. Conover, 682 F.2d 1338, 1342 (9th Cir. 1982). Beyond that, I do not credit the argument. The Respondent did not testify concerning his knowledge, so I infer that as a diligent chief executive officer of a bank, he knew the law. Indeed, the lending limits are so basic that if the chief executive of a bank knows nothing else, he knows that there are limits to the amount of credit which can be extended to any one individual—whether or not an insider.
   That other banks also lost on real estate loans misses the point. This activity was unsafe and unsound because it created an unlawful concentration of credit to an insider in violation of his fiduciary duty, not because the underlying collateral was real estate. That the Bank suffered losses was a function of the New England real estate market. But, even in a good market, such a substantial concentration of credit posed a serious risk to Bank's safety and soundness.
   Accordingly I conclude that the FDIC established each element necessary to warrant an order of removal and prohibition against the Respondent. I shall so recommend to the FDIC Board, and recommend adoption of the following findings of fact, conclusions of law and order:

FINDINGS OF FACT

   1. Since February 13, 1986, and at all times material, Coolidge Corner Co-operative Bank, Brookline, Massachusetts (herein the Bank) was state chartered, not a member of the Federal Reserve System, and was insured by the FDIC.
   2. At all material times, the Respondent was a director, president and chief executive officer, and a participant in the conduct of the affairs of the Bank.
   3. On April 28, 1986, the Respondent caused the Bank to make an extension of credit to Rustro Realty Trust (herein Rustro) for $1,850,000.
   4. These funds were used to purchase certain real estate which the Respondent had committed to buy at an auction sale on March 27, 1986.
   5. The Respondent made a personal guarantee to the Bank to induce the Bank's acceptance of Rustro's note.
{{4-30-92 p.A-1883}}
   6. At this time, 15 percent of the Bank's unimpaired capital and unimpaired surplus was $653,400.
   7. This extension of credit was a financial benefit to the Respondent.
   8. Star Trust was created on April 11, 1986, a one-third beneficiary of which was the Respondent's then minor son, Gregory. The Respondent made financial contributions to Star Trust, and acted as custodian his son's beneficial interest.
   9. The Respondent caused the Bank to make the following extensions of credit to Star Trust, all but the last two of which were used to finance real estate purchases:

June 16, 1986 $939,000
October 22, 1986 660,000
June 12, 1987 550,000
June 16, 1986 $939,000
June 12, 1987 850,000
July 13, 1987 680,000
July 13, 1987 600,000
September 27, 1988 90,000
November 21, 1988 93,500

   10. The Respondent personally guaranteed the loans of October 22, 1986, and the two of July 13, 1987.
   11. The loans of October 22, 1986, June 12, 1987, July 13, 1987, and September 27, 1987, were made by the Respondent without prior approval of the Bank's board of directors.
   12. On the dates of the extensions of credit set forth in paragraph 9, the Bank's unimpaired capital and unimpaired surplus was:

Unimpaired Capital
Dateand Surplus15%5%
June 16, 1986$4,356,000$653,400$217,800
October 22, 19865,065,000759,750253,254
June 12, 19875,533,000829,950276,622
July 13, 19875,934,000890,100296,670
September 27, 19876,642,000996,300322,067
November 21, 19887,279,0001,091,750363,950

   13. In making the loans to Star Trust, the Respondent did not obtain prior approval of the Bank's board of directors for the following: October 22, 1986; both of June 12, 1987; both of July 13, 1987; September 27, 1988.
   14. At three joint examinations by the FDIC and the Commonwealth of Massachusetts, the Star Trust credits were classified as follows:

CreditExamination DateClassification
June 16, 1986November 4, 1988$443,00 Substandard
December 15, 1989383,000 Substandard
230,000 Substandard
November 13, 19903,000 Loss
October 22, 1986November 4, 1988535,000 Substandard
466,000 Substandard
December 15, 198972,000 Loss
407,000 Substandard
November 13, 199072,000 Loss
June 12, 1987(I)November 4, 1988547,000 Substandard
462,000 Substandard
December 15, 198986,000 Loss
June 12, 1987(II)November 4, 1988677,000 Substandard

{{4-30-92 p.A-1884}}
CreditExamination DateClassification
396,000 Substandard
December 15, 1989182,000 Loss
245,000 Substandard
November 13, 19905,000 Loss
July 13, 1987(I)November 4, 1988676,000 Substandard
401,000 Substandard
December 15, 1989280,000 Loss
351,000 Substandard
November 13, 19905,000 Loss
July 13, 1987(II)November 4, 1988595,000 Substandard
421,000 Substandard
December 15, 1989178,000 Loss
348,000 Substandard
November 13, 199094,000 Loss
September 27, 1988November 4, 198865,000 Substandard
November 21, 1988December 15, 198993,500 Loss

   15. On December 23, 1986, Danert Realty Trust was created and on that day the Respondent caused the Bank to extend to its a credit of $263,000, which the Respondent caused the Bank to extend to it a credit of $263,000, which the Respondent personally guaranteed.
   16. The Respondent was one of two beneficiaries of Danert at the time.
   17. The Bank's board of directors did not give prior approval of this extension of credit.
   18. On December 23, 1986, the Bank's unimpaired capital and unimpaired surplus was $5,065,000, of which 15 percent was $759,750 and five percent was $253,224.
   19. The balance of $202,000 was classified Substandard in the examinations of November 4, 1988, December 15, 1989 and November 13, 1990.
   20. Raynham Realty Trust was created on December 15, 1986, and during all material times the Respondent was a one-eight owner and controlled 37.5 percent.
   21. On June 12, 1987, the Respondent caused the Bank to grant an extension of credit to Raynham of $1,915,200, which was not approved in advance by the Bank's board of directors.
   22. At the time, the Bank unimpaired capital and unimpaired surplus was $5,533,000, of which 15 percent was $829,950 and five percent was $276,622.
   23. At the examination of December 15, 1989, $1,500,000 was classified as Substandard and $412,000 classified as Loss; and at the examination as of November 13, 1990, $1,764,000 was classified Substandard and another $200,000 as Loss.

CONCLUSIONS OF LAW

   1. The FDIC has jurisdiction over the Respondent, the Bank and the subject matter of this proceeding pursuant to 12 U.S.C. §1811 et seq. and the FDIC's Rules and Regulations, 12 C.F.R. Chapter III.
   2. At all material times, the Bank was an insured state non-member bank, having its principal place of business in Brookline, Massachusetts.
   3. At all material times, the Respondent was a director and an "executive officer" within the meaning of Regulation O, 12 C.F.R. Part 215, the provisions of which are applicable to the Bank and the Respondent by virtue of 12 C.F.R. §337.3.
   4. The entirety of each extension of credit to Rustro, Star Trust, Danert and Raynham set forth above are attributable to the Respondent and are combined for purposes of Regulation O.
   5. The Respondent violated 12 C.F.R. §215.4(c) in connection with the extension of credit to Rustro on April 28, 1986, which resulted in financial gain to himself.
   6. The Respondent violated 12 C.F.R. §215.4(c) in connection with the eight extensions of credit to Star Trust set forth above, which resulted in substantial loss to the Bank and financial gain to himself.
   7. In connection with the Star Trust credits, exclusive of the first and last, the Respondent violated 12 C.F.R. §215.4(b).
   8. Danert Realty Trust was a related interest {{5-31-92 p.A-1885}}of the Respondent and by causing the Bank to make an extension of credit to Danert on December 23, 1986, for $263,500 the Respondent violated 12 C.F.R. §§215.4(b) and (c).
   9. The Danert credit resulted in substantial loss to the Bank and financial gain to the Respondent.
   10. Raynham Realty Trust was a related interest of the Respondent and by causing the Bank to make the extension of credit on December 15, 1986, to Raynham for $1,915,000 the Respondent violated 12 C.F.R. §§215.4(b) and (c).
   11. By the Raynham transaction, the Bank suffered substantial loss and the Respondent realized a financial gain.
   12. By causing the Bank to make the above extensions of credit, the Respondent committed unsafe and unsound banking practices.
   13. By making the above extensions of credit, the Respondent breached his fiduciary duty as an officer and director of the Bank.
   14. By his course of conduct in causing the Bank to make extensions of credit to Rustro, Star Trust, Raynham and Danert set forth above, the Respondent demonstrated personal dishonesty a willful disregard for the Bank's safety and soundness and a continuing disregard for the Bank's safety and soundness.
   15. All of the requirements necessary to remove and officer or director from his position with a bank set forth in 12 U.S.C. §1818(e)(1), as it existed at the time of the events in this matter, have been established by a preponderance of the credible evidence.
   16. An order of removal and prohibition may be entered against the Respondent notwithstanding that his positions with the Bank were terminated prior to commencement of this action.
   17. Upon the entire record in this matter, issuance of the attached order by the FDIC Board is appropriate.
   Dated: October 15, 1991

/s/ James L. Rose
Administrative Law Judge

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