Federal Deposit
Insurance Corporation

{{7-31-92 p.A-1996}}
[¶5179] In the Matter of Lyndonville Savings Bank and Trust Company, Lyndonville, Vermont, Docket No. FDIC-91-57b&c (5-5-92).

   Board adopts ALJ's recommendation that a consent order which operates only prospectively (to prohibit future unsafe or unsound banking practices) be entitled "Order," not "Order to Cease and Desist" as requested by enforcement counsel.

   [.1] Consent Orders—Prospective Application
   Where respondent agrees to the imposition of an order which operates only to prohibit future unsafe or unsound practices, the title "Order" is appropriate; the title "Order to Cease and Desist" would mislead the public to believe that respondent had committed an unsafe or unsound practice.

   [.2] Unsafe or Unsound Practices—Remedies—Prospective Order
   Relief entitled "Order," which operates prospectively, will achieve the objectives of FDI Act Section 8(b) and will remedy all the unsafe or unsound practices FDIC alleged Bank was "about to engage in" in its notice of charges.

In the Matter of

LYNDONVILLE SAVINGS BANK
AND
TRUST COMPANY
LYNDONVILLE, VERMONT
(Insured State Nonmember Bank)

FDIC-91-57b&c

   The Board of Directors of the Federal Deposit Insurance Corporation ("FDIC"), having reviewed the record, including the Recommended Decision of the Administrative Law Judge, FDIC Enforcement Counsel's Exceptions, and applicable law, hereby adopts the Order of the Administrative Law Judge.
   By direction of the Board of Directors.

   Dated at Washington, D.C., this 5th day of May, 1992.
/s/ Hoyle L. Robinson
Executive Secretary

In the Matter of
Lyndonville Savings Bank and
Trust Company
Lyndonville, Vermont
(Insured State Nonmember Bank)
Docket No. FDIC-91-57b&c
STEVEN M. CHARNO, Administrative
Law Judge:
   At an August 14, 1991 prehearing conference, Lyndonville Savings Bank and Trust Company ("Respondent" or "Bank") made an oral motion for summary disposition. The Federal Deposit Insurance Corporation ("Petitioner") responded to the motion with a pleading filed September 9, 1991. Respondent did not exercise its right to reply to petitioner, but a conference call with the parties was conducted on October 3, 1991 in order to resolve certain outstanding questions.
   A Notice of Charges and of Hearing ("Notice") filed February 26, 1991 alleged that Petitioner had "reasonable cause to believe that the bank is about to engage in unsafe or unsound practices," which practices con-
{{7-31-92 p.A-1997}}sisted of making extensions of credit to or entering financial transactions with certain specified individuals and/or business entities. The Notice further alleged that the described practices were likely to have an adverse financial impact on Respondent. An Answer filed March 28, 1991 denied that Respondent was about to engage in any unsafe or unsound banking practice.
   The Notice in this case is directed at the possibility that Respondent may commit an unsafe or unsound practice at some point in the future. The Bank is not accused of having committed any unsafe or unsound banking practice in the past. Under these circumstances, Respondent correctly argues that the imposition of an order directing the Bank to "cease and desist" a concededly nonexistent past practice would be arbitrary, capricious and without any factual basis. In order to avoid the cost of litigating this case, Respondent has offered to accept the imposition of an order which operates prospectively to prohibit all of the unsafe or unsound practices set forth in the Notice.
   Petitioner poses a single objection to Respondent's offer:¹ the proposed remedy must be titled "Order to Cease and Desist," rather than simply "Order." Petitioner advances three arguments in support of its objection. First, Petitioner argues that an enforcing tribunal may fail to recognize that an "Order" issued in a proceeding brought pursuant to Section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b), falls within the generic class of orders to cease and desist. I find it highly improbable that any federal court could be possessed of so little legal insight. In any event, Respondent has waived any right to contest enforcement of the proposed remedy based on any infirmity in the form of the order.
   Petitioner next argues that "it is the FDIC's policy that enforcement orders which it issues should be as uniform as possible." Perusal of Petitioner's reported cease and desist orders discloses the existence of a number which bear the one-word title "Order." See, e.g., Docket No. FDIC-83-254b, 1985 F.D.I.C. Enf. Dec. (P-H) ¶5044 at 6061; Docket No. FDIC-84-71b, 1985 F.D.I.C. Enf. Dec. (P-H) ¶5046 at 6083; Docket No. FDIC-86-42b, 1987 F.D.I.C. Enf. Dec. (P-H) ¶5083 at 7052; Docket No. FDIC-87-79c&b, 1987 F.D.I.C. End. Dec. (P-H) ¶5100 at 7193.² I therefore conclude that Petitioner's policy favoring uniformity does not preclude use of the title "Order" on the remedy issued in a proceeding brought under Section 8(b) of the Act.

   [.1] Finally, Petitioner argues that a remedy "entitled 'Order' is likely to cause confusion to the public as to the nature of the order ..." Respondent replies that a remedy entitled "Order to Cease and Desist" is far more likely to confuse the public by prompting the not-unreasonable inference that the Bank has committed unsafe or unsound banking practices in the past and is being enjoined from past, present and future transgressions. Because the bank has not committed an unsafe or unsound practice, it is not in the same position as other institutions and institution-affiliated parties who have agreed to the imposition of consent orders. I find Respondent's argument persuasive and conclude that the title requested by Petitioner would mislead the public which, as Petitioner correctly notes, has come to recognize and understand the import of the words "cease and desist" in the context of FDIC remedial provisions.

   [.2] For the foregoing reasons, I find that the imposition of an order to cease and desist any past practice is unwarranted in this proceeding. I further find that neither facts, law nor policy have been shown to require that the remedy in this proceeding be entitled "Order to Cease and Desist." Finally, I find that relief entitled "Order" will achieve the objectives underlying Section 8(b) of the Act and will completely remedy the unsafe or unsound banking practices alleged in the Notice.³

   IT IS ORDERED that Lyndonville Savings Bank and Trust Company, Lyndonville, Vermont, and its institution-affiliated parties, shall not:
   (a) approve, purchase, grant, make, commit to or fund any loan or other extension of credit, or re-write or renew any existing loan or extension of credit, directly or indirectly, to or from Noel L. Lussier, Matthew S. Lussier, Gregory H. Lussier, Jonathon Lussier, R. Douglass Gilmour, Herbert C. Grey or Anthony Aiossa, or to their related interests, unless the loan or other extension of credit does not involve more than the normal risk of repayment or present other unfavorable features and has been approved in advance by a majority of the Bank's entire Board of Directors and, after written notification to the Regional Director of the FDIC's Boston Regional Office ("Regional Director"), the Bank has obtained the written nonobjection of the Regional Director or his designee;
   (b) enter into, participate in, or in any other manner engage in, directly or indirectly, any financial transaction with Noel L. Lussier, Matthew S. Lussier, Gregory H. Lussier, Jonathon Lussier, R. Douglass Gilmour, Herbert C. Grey or Anthony Aiossa, or their related interests, unless the financial transaction has been approved in advance by a majority of the Bank's entire Board of Directors and, after written notification to the Regional Director, the Bank has obtained the written nonobjection of the Regional Director or his designee;
   (c) approve, purchase, grant, make commit to or fund any loan or other extension of credit, directly or indirectly, or rewrite or renew any existing loan or extension of credit, directly or indirectly, to or from Bradford National Bank, Bradford, Vermont ("Bradford"), Caledonia National Bank, Danville, Vermont ("Caledonia"), First National Bank of Vermont, Springfield, Vermont ("FNB"), or Independent Bankgroup, Inc., Springfield, Vermont ("Independent"), or to any related interests of such entities, unless the loan or other extension of credit does not involve more than the normal risk of repayment or present other unfavorable features and has been approved in advance by a majority of the Bank's entire Board of Directors and, after written notification to the Regional Director, the Bank has obtained the written nonobjection of the Regional Director or his designee; and
   (d) enter into, participate in, or in any other manner engage in, directly or indirectly, any financial transaction with Bradford, Caledonia, FNB, or Independent, unless the financial transaction has been approved in advance by a majority of the Bank's entire Board of Directors and, after written notification to the Regional Director, the Bank has obtained the written nonobjection of the Regional Director or his designee.
   IT IS FURTHER ORDERED that Lyndonville Savings Bank and Trust Company shall take the following affirmative action:
   The bank shall prepare, each calendar quarter, a written report that provides current information on all outstanding relationships, direct or indirect, with Noel L. Lussier, Matthew S. Lussier, Gregory H. Lussier, Jonathon Lussier, R. Douglass Gilmour, Herbert C. Grey or Anthony Aiossa. Such information shall include, at a minimum: (1) the borrower's name, (2) the loan account number, (3) the current balance of the loan, (4) the principal and/or interest "paid to" date, (5) if delinquent as to principal or interest, the number of days overdue and (6) the scheduled maturity of the loan, as well as any other material changes in the lending relationship not specifically listed previously.

   For purposes of this ORDER, the terms:

   (i) "institution-affiliated party" shall be defined as set forth in Section 3(u) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(u);
   (ii) "loan or other extension of credit" shall be defined as set forth in Section 215.3 of Regulation O of the Board of Governors of the Federal Reserve System ("Regulation O"), 12 C.F.R. § 215.3;
   (iii) "related interest" shall be defined as set forth in Section 215.2 of Regulation O, 12 C.F.R. § 215.2;
   (iv) "financial transaction" may include, but is not limited to: the transfer, purchase {{3-31-93 p.A-1999}}or sale of any asset, or any contractual agreement for services; provided, however, the term "financial transaction" shall not include the standard and ordinary use of a bank savings and/or checking account or purchase of a certificate of deposit; and
   (v) "executive officer" shall be defined as set forth in Section 215.2 of Regulation O.
   Done at Arlington, Virginia, this 12th day of November, 1991.