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FDIC Enforcement Decisions and Orders

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   [5230] In the Matter of Hiram L. Fong Jr., Liberty Bank, Honolulu, Hawaii, FDIC Docket No. 94-81e (12-7-95)

   FDIC orders respondent permanently prohibited from participating in the affairs of any federally insured financial institution without the prior written consent of the FDIC and the appropriate federal financial institutions regulatory agency.

   [.1] Practice and Procedure—Answer—Failure to Answer
   Respondent's failure to file an answer or request a hearing clearly demonstrates an intentional disregard of, or willful failure to follow, the FDIC's procedural requirements.

   [.2] Practice and Procedure—Hearings—Failure to Appear
   Respondent defaulted by his failure to appear at hearing and to respond to FDIC enforcement counsel's written submission of its case-in-chief.

   [.3] Practice and Procedure—Recommended Decision—Waiver of Objection
   Respondent's failure to file exceptions to administrative law judge's recommended decision must be deemed a waiver of any objection to the decision.

In the Matter of
HIRAM L. FONG, JR., individually and as an
institution-affiliated party of
LIBERTY BANK
HONOLULU,HAWAII
(Insured State Nonmember Bank)
DECISION AND ORDER
FDIC-94-81e

I. INTRODUCTION

   This matter is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") following the issuance of a Recommended Decision by Administrative Law Judge Arthur L. Shipe ("ALJ") in an uncontested proceeding to prohibit from fur- {{5-31-96 p.A-2750}}ther participation in the conduct of the affairs of any insured depository institution, pursuant to the provisions of section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e). The Recommended Decision found, after a hearing on the written record as to which Hiram L. Fong, Jr. ("Respondent") failed to answer or appear at the hearing, that as a result of violations of law, unsafe or unsound banking practices, and breaches of fiduciary duty by Respondent as an institution-affiliated party of Liberty Bank, Honolulu, Hawaii ("Bank"), Respondent demonstrated a willful and continuing disregard for the safety and soundness of the Bank. The ALJ recommended that a Final Order be entered prohibiting Respondent from further participation in the affairs of any federally insured depository institution.
   After a thorough review of the Recommended Decision and the entire record in this proceeding, and for the reasons set forth below, the Board adopts and incorporates the ALJ's Recommended Decision.

II. BACKGROUND

   On August 15, 1994, the FDIC issued a Notice of Intention to Prohibit from Further Participation ("Notice") against Respondent, individually and as an institution-affiliated party of the Bank, 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 Procedure, 12 C.F.R. Part 308. On September 14, 1994, Respondent was served personally with the Notice at his residence. Paragraph 51 of the Notice directed Respondent to file an answer within twenty (20) days from the date of service, as provided in section 308.19 of the FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.19.
   Respondent failed to file an answer within the twenty-day period that expired on October 4, 1994, as stated in the Notice. However, in a one-page letter dated October 5, 1994 ("Letter"), to the Office of the Executive Secretary ("OES"), which was referred by OES to the ALJ, Respondent requested an extension of the time to answer so he could obtain legal counsel. He stated that if the extension was not granted, the Letter was to serve as a general denial of the allegations set forth in the Notice. The address noted in the Letter was the same as the address at which Respondent was personally served with the Notice. In an order dated October 14, 1994, the ALJ granted Respondent's request for extension of the deadline for filing an answer until November 4, 1994. Respondent failed to file an answer in accordance with the ALJ's order.
   On December 14, 1994, the FDIC filed a Motion for Issuance of Order Setting Case for Hearing ("Hearing Motion"). The Hearing Motion and a proposed order setting the case for hearing were sent to Respondent on that date by first class mail at the address set forth in the Letter. Respondent did not reply to the Hearing Motion or the proposed order.
   On January 20, 1995, the ALJ issued a Prehearing Order On Motion for Issuance of Order Setting Hearing ("Hearing Order") directing the parties to proceed by written testimony and to submit, on or before February 24, 1995, prehearing statements, including lists of witnesses whose testimony would be submitted, lists of exhibits to be offered into evidence, and lists of disputed issues to be resolved in the matter. Respondent did not reply to the Hearing Order. In fact, Respondent failed to reply to all subsequent papers filed by FDIC Enforcement Counsel and all subsequent orders issued by the ALJ.1
   On March 24, 1995, the FDIC submitted its written Case-in-Chief to the ALJ, including three written declarations and 52 exhibits. A copy of the Case-in-Chief was sent to Respondent by Airborne Express to the address noted in Respondent's Letter. Respondent did not submit his own Case-in-Chief or respond to the FDIC's submission. In response to an order dated May 15, 1995, the FDIC submitted on June 14, 1995, proposed findings of fact, conclusions of law, and a brief in support thereof. This filing was also sent to Respondent by Airborne Express to the address noted in Respondent's Letter. Again, Respondent did not submit any posthearing papers or respond to the FDIC's submission.
   The ALJ's Recommended Decision finds that Respondent engaged or participated in violations of law, unsafe or unsound banking practices, and breaches of fiduciary duty as an institution-affiliated party resulting in prejudice to the interests of the Bank's depositors. He further finds that Respondent


1 These consisted of FDIC's Prehearing Statement, including List of Witnesses and List of Exhibits; FDIC's Written Submission of Its Case-in-Chief and accompanying declarations; ALJ's Prehearing Order on Closure of Record of Proceeding; FDIC's Proposed Findings of Fact and Conclusions of Law and Posthearing Brief; and, the ALJ's Recommended Decision.
{{10-31-99 p.A-2751}}demonstrated personal dishonesty and willful and continuing disregard for the safety and soundness of the Bank. The ALJ recommended that Respondent be prohibited from further participation in the affairs of any federally insured depository institution. The Recommended Decision was sent to Respondent on August 1, 1995, by first class mail at the address set forth in the Letter. Neither party has filed exceptions to the Recommended Decision.
III. DISCUSSION

   The Board concurs in and adopts the ALJ's Recommended Decision. The Recommended Decision is supplemented by the discussion below.

   [.1,.2,.3] This is an uncontested proceeding. The record shows that Respondent received actual notice of the proceedings by being served personally with the Notice and had several opportunities to appear at the hearing and contest the allegations in the Notice. Although Respondent appeared to request an extension of time to file an answer, he subsequently failed to file an answer or request a hearing. Respondent's conduct, therefore, clearly demonstrates an intentional disregard of, or willful failure to follow, the FDIC's procedural requirements as noted in several earlier default cases. See In the Matter of Harold Dean Ingram, First State Bank, Elmore City, Oklahoma, FDIC-92-343k, 2 P-H FDIC Enf. Dec. ¶ 5217, at A-2471 (August 2, 1994); In the Matter of Billy Gene Humphrey, Jr., Bay City Bank & Trust Co., Bay City, Texas, FDIC-93-55e, 2 P-H FDIC Enf. Dec. ¶5207, at A-2346 (November 23, 1993); In the Matter of George W. Glover, Bay City Bank & Trust Co., Bay City, Texas, FDIC-93-54e, 2 P-H FDIC Enf. Dec. ¶5206, at A-2343 (November 23, 1993). Unlike those default cases, however, this Respondent had additional opportunities to contest the allegations because the ALJ permitted FDIC Enforcement Counsel to put on a prima facie case and made findings and conclusions based on the evidence. The ALJ reviewed the evidence submitted and made factual and legal findings. In such cases, however, it is also appropriate for the ALJ to make an alternative finding of default, and based on Respondent's failure to appear at the hearing and to respond to FDIC Enforcement Counsel's written submission of its Case-in-Chief, the Board expressly finds that Respondent has defaulted. The Board also notes that Respondent's failure to file Exceptions to the Recommended Decision pursuant to 12 C.F.R. § 308.39 must be deemed a waiver of any objection to the ALJ's Recommended Decision. See In the Matter of In Chul Song, Empire State Bank, New York, New York, FDIC-92-140e, 92-350k, 2 P-H FDIC Enf. Dec. ¶5214, at A-2444.

IV. CONCLUSION

   After a thorough review of the Recommended Decision and the entire record in this proceeding, and for the reasons set forth above, the Board adopts the ALJ's Recommended Decision.

ORDER

   The Board of the FDIC, having considered the entire record of this proceeding, finds that Respondent, as a director of the Bank and an institution-affiliated party, engaged or participated in violations of law, unsafe or unsound banking practices, and breaches of fiduciary duty resulting in prejudice to the interests of the Bank's depositors and that said actions involved personal dishonesty and a willful and continuing disregard for the safety and soundness of the Bank.
   ACCORDINGLY, IT IS HEREBY ORDERED, that Respondent is permanently prohibited from participation in the affairs of any federally insured financial institution pursuant to section 8(e)(7) of the FDI Act, 12 U.S.C. § 1818(e)(7), without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency.
   IT IS FURTHER ORDERED, that the Order shall be final and become effective at the expiration of thirty (30) days after service upon Respondent and until such time as it is stayed, modified, terminated, or set aside by the FDIC or a court of competent jurisdiction.
   By direction of the Board of Directors.
   Dated at Washington. D.C., this 7th day of December, 1995.

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