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FDIC Enforcement Decisions and Orders |
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FDIC Board adopts recommendation of ALJ and orders the removal and prohibition of a bank officer for participating in transactions for the benefit of his father, also a bank insider, in violation of Regulation O, and for engaging in unsafe or unsound banking practices, breaches of fiduciary duty, and conduct demonstrating personal dishonesty and willful disregard for the banks' safety and soundness.
[.1] Removal and ProhibitionViolation of Regulation O
In the Matter of
This case is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") following a Recommended Decision by Administrative Law Judge Walter J. Alprin ("ALJ"), which recommends removing and prohibiting James E. Baker ("Respondent") from participating in the affairs of federally insured financial institutions. The Board concurs in and adopts the ALJ's Recommended Decision, findings of fact, and conclusions of law except as modified below.1
[.1] The ALJ carefully analyzed each of the elements required to issue an order of removal and prohibition and made appropriate findings regarding the violations of Regulation O, unsafe or unsound banking practices and Respondent's breach of fiduciary duties, R.D. at 1117;3 the financial loss or other damage to the banks involved or prejudice to depositors, R.D. at 1819; and Respondents's personal dishonesty and willful and continuing disregard for the safety and soundness of the banks, R.D. at 1922. The Board finds that each of the loans at issue was demonstrably for Baker's benefit, and not for the asserted purpose of long range investment in Community Bankers, Inc., stock, and adopts these findings of the ALJ.4
The record establishes by a preponderance of the evidence that the elements of section 8(e) of the FDI Act, 12 U.S.C. § 1818(e), have been met. Accordingly, the Board will enter an Order of Prohibition from Further Participation against Respondent James E. Baker.5
For the reasons set forth above, the pursuant to section 8(e) of the FDI Act, 12 U.S.C. § 1818(e), the Board of Directors of the Federal Deposit Insurance Corporation hereby ORDERS that:
In the Matter of
On May 12, 1992, the Federal Deposit Insurance Corporation ("FDIC") issued a Notice of Intention to Remove Respondents Charles E. Baker (Baker), Thomas W. Keating (Keating), and James E. Baker (Respondent) from Office and/or to Prohibit them from further participation ("Notice"). After the issuance of the Notice, and without admitting or denying the allegations against them, Baker and Keating agreed to issuance of orders of removal and prohibition against them. Respondent remains as an adverse party.
The authority of the FDIC to remove officers and directors or institution-affiliated parties from an insured bank and to prohibit their future participation in the affairs of a federally insured financial institution is contained in 12 U.S.C. § 1818(e)(1), where the Respondent has:
The following findings of fact all relate to the times pertinent to the charges of the Notice herein.
1. Granbury, Rockwall, and Burleson were insured nonmember State banks, incorpo-
4. On or about February 20, 1991, Baker borrowed $500,000 from Granbury. Keating was the loan officer. Stip. No. 14. The stated purpose of the loan was "Business: Payoff Bonnet Bank." Stip. No. 15. Respondent was one of the Directors approving the loan. Supp. Stip. No. 24. The proceeds of the loan was wired to Baker's account at Burleson, account number 1195668. Stip. No. 16.
C. Utilization of Loan Proceeds and Repayment of Keating and Meyer Loans
10. On or about February 20, 1991, Baker was servicing a loan which had been in default since October 30, 1990, almost four months, at Bank One, Texas, N.A., of Forth Worth, Texas.4 TR. 2122. The stock of Granbury, Rockwall and Burleson was pledged as collateral on the loan, and upon foreclosure CBI would be left as no more than a shell corporation. TR 44, 176177. Also on or about that day, Baker wired $2,129,421.96 from his Burleson account to Bank One, Texas, N.A., Fort Worth, Texas. Stip. No. 45.
D. Misconduct of Respondent
13. The first issue in considering removal and prohibition from further participation in the affairs of federally insured financial institutions is whether Respondent violated a provision of law or regulation, or engaged in unsafe and unsound practices, or breached his fiduciary duties as a director, as individually discussed below.
18. The second issue in considering removal and prohibition from further participation in the affairs of federally insured financial institutions is whether any misconduct resulted in financial loss or other damage to the bank, or prejudice to depositors, or financial gain to Respondent, each of which is considered as follows.
22. The final issue in considering removal and prohibition from participating in the affairs of federally insured financial institutions is that of culpability, and whether Respondent's actions manifest personal dishonest, or manifest willful or continuous disregard for the safety and/or soundness of the bank.
27. The undersigned has hereby made findings of fact as discussed above which lead to his conclusion that the Respondent has violated regulations, and participated in unsafe and unsound banking practices, and breached his fiduciary duties as a bank officer and director; that such misconduct has resulted in financial loss to the bank, and prejudice to the bank's depositors; and, that such misconduct evidences personal dishonesty, and a willful and continuing disregard for the safety and soundness of the banks involved. He further finds that this constitutes violation of 12 U.S.C. § 1818(e) so as to warrant removal and prohibition of the Respondent from further participation in the affairs of a federally insured financial institution.
In view of all the above, the following Conclusions of Law are hereby recommended:
In consideration of the foregoing, the undersigned recommends a decision removing and prohibiting James E. Baker from participation in the affairs of federally insured financial institutions. A Proposed Order of Prohibition from Further Participation, in the form recommended and attached hereto, should issue against Respondent pursuant to the provisions of section 8(e) of the Act, 12 U.S.C. § 1818(e), prohibiting Respondent from further participation in the conduct of the affairs of Community Bank, Granbury, Texas, of Community Bank, Rockwall, Texas, and Farmers & Merchants State Bank, Burleson, Texas, and any other insured depository institution or organization listed in section 8(e)(7) of the Act, 12 U.S.C. § 1818(e)(7), without the prior written approval of the FDIC and such other appropriate Federal depository institution regulatory agency.
For the reasons set forth in the Decision in this proceeding, and pursuant to section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e), the Board of Directors of the Federal Deposit Insurance Corporation hereby ORDERS that: |
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Last Updated 6/6/2003 | legal@fdic.gov |