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FDIC Enforcement Decisions and Orders

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   [5232] In the Matter of Raymond M. Phillips, The Greenville Banking Co., Greenville, Ga., FDIC Docket No. 94-208e (4-23-96().

   FDIC adopts administrative law judge's recommended decision on default and permanently prohibits respondent from participation in the affairs of any federally insured financial institution.

   [.1] Answer—Failure to File—Prohibition, Removal, or Suspension
   Respondent's failure to respond to notice, motion for entry of default order, and show-cause order clearly indicates an intentional and willful disregard of the FDIC's procedural requirements.

   [.2] Practice and Procedure—Recommended Decisions—Failure to File Exceptions
   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
RAYMOND M. PHILLIPS
THE GREENVILLE BANKING COMPANY
GREENVILLE,
GEORGIA
(Insured State Nonmember Bank)
DECISION AND ORDER
FDIC-94-208e

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 On Default ("Recommended Decision") by Administrative Law Judge Arthur L. Shipe ("ALJ"). In his Recommended Decision, the ALJ adopted the findings set forth in the Notice of Intention to Prohibit From Further Participation ("Notice") and recommended that Raymond M. Phillips ("Respondent") be permanently prohibited from further participation in the conduct of the affairs of any insured depository institution pursuant to section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e).
   The Notice alleged that Respondent, while employed at The Greenville Banking Company, Greenville, Georgia ("Bank"), participation in and/or engaged in violations of applicable laws, unsafe or unsound banking practices and breaches of fiduciary duty, which caused financial loss as follows: 1) Respondent caused the Bank on approximately 220 occasions to extend credit to individuals who transferred all or part of the proceeds to Respondent; 2) Respondent caused extensions of credit to be made to fund the purchase of automobiles from Respondent's automobile dealership; 3) Respondent knew or should have known that the automobiles lacked sufficient value to serve as collateral for the loans; 4) Respondent, in his capacity as the Bank's Collection Officer, subsequently repossessed automobiles from individuals to whom he had sold the automobiles and to whom he had caused the Bank to extend credit; 5) Respondent caused the value of repossessed cars to diminish by failing to maintain, repair, or market the automobiles in a reasonable manner; and 6) Respondent caused false entries to be made in the Bank's records regarding fictitious persons and entities. (Notice at ¶¶7, 14.) The Notice also alleges that Respondent has received financial gain or other benefit through the extensions of credit. It alleges that over a period of six years, Respondent caused the Bank to deposit into Respondent's account approximately $741,000 from proceeds of extensions of credit. (Notice at ¶8.) By reason of the Respondent's conduct, the Bank suffered financial loss in an amount of at least $145,000. (Notice at ¶10.) These violations demonstrate Respondent's personal dishonesty or a willful disregard for the safety and soundness of the Bank.
   Enforcement Counsel caused the Respondent to be personally served with the Notice as evidenced by the U.S. Marshal Service's signed Process Receipt and Return and his adult daughter's indication that Respondent, in fact, received the Notice. Respondent also failed to reply to Enforcement Counsel's Motion for Entry of Order of Default and the ALJ's Show Cause Order on Default ("Order to Show Cause") why the entry of Order of Default should not be made. The ALJ {{6-30-96 p.A-2760}}recommended a Decision on Default after Respondent failed to reply to any of the papers personally served on him at his residence.
   After a thorough review of the Recommended Decision and the entire record in this proceeding, for the reasons set forth below, the Board adopts the ALJ's Recommended Decision.

II. BACKGROUND

   On February 28, 1995, the FDIC issued the Notice against Respondent pursuant to section 8(e) of the FDI Act, 12 U.S.C. § 1818(e), and section 308 of FDIC Rules of Practice and Procedure, 12 C.F.R. Part 308. According to Enforcement Counsel, on May 22, 1995, Respondent consented to service by delivery to his adult daughter, Susan Hargett at Respondent's usual place of residence. On May 26, 1995, Enforcement Counsel caused delivery of the Notice by the U.S. Marshal Service as evidenced by the signed Process Receipt and Return. Enforcement Counsel indicates that Ms. Hargett later informed them that Respondent, in fact, received the Notice. Respondent reportedly departed the U.S. for Japan on May 28, 1995, with intentions of returning on December 20, 1995, but without responding to the Notice.
   Paragraph 25 of the Notice directed Respondent to file an answer and request for hearing within twenty (20) days from the date of service, as required in section 308.19 of FDIC Rules of Practice and Procedure, 12 C.F.R. § 308.19. Respondent, however, failed to file an answer or otherwise respond to the Notice within the required time period. Enforcement Counsel attempted to avoid seeking a default and requested a hearing; however, the ALJ denied that request on October 17, 1995. After the ALJ denied Enforcement Counsel's request for an uncontested hearing, Enforcement Counsel moved for entry of an Order of Default on November 20, 1995. Respondent again failed to respond. On December 13, 1995, the ALJ issued an Order to Show Cause why the FDIC's Motion for Default should not be granted. Enforcement Counsel indicates that on December 22, 1995, Ms. Hargett confirmed Respondent received the Order. The Respondent once again failed to appear and the ALJ granted Enforcement Counsel's Motion for Entry of Order of Default.
   Accordingly, the ALJ issued a Recommended Decision on Default permanently prohibiting Respondent from further participation in the conduct of the affairs of any insured depository institution under the provisions of section 8(e) of the FDI Act, 12 U.S.C. § 1818(e).

III. DISCUSSION

   The Board affirms and adopts the ALJ's Recommended Decision on Default. The Recommended Decision is supplemented by the discussion below.

   [.1,.2] The record reflects that Respondent received actual notice of the proceedings through personal service by delivery of the Notice to his adult daughter at his usual place of residence. Respondent's adult daughter later informed Enforcement Counsel that Respondent, in fact, received the Notice. Although Respondent was served personally, he failed to respond to the Notice, Enforcement Counsel's Motion for Entry of Order of Default, and the ALJ's Order to Show Cause why an Order of Default should not be entered. Respondent's conduct clearly indicates an intentional and willful disregard of 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. § 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, A-2343 (November 23, 1993). Respondent also has failed to file Exceptions to the Recommended Decision pursuant to 12 C.F.R. § 308.39. This failure therefore, 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 City (Manhattan), New York, FDIC-92-140e, FDIC-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, 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 against Respondent adopts all of the findings set forth in the Notice.
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   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 this 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 23rd day of April, 1996.

__________________________________________
RECOMMENDED DECISION ON DEFAULT

In The Matter of
RAYMOND M. PHILLIPS
THE GREENVILLE BANKING COMPANY
GREENVILLE,
GEORGIA
(Insured State Nonmember Bank)
RECOMMENDED DECISION ON DEFAULT
FDIC-94-208e
(2-12-96)

   ARTHUR L. SHIPE,Administrative Law Judge
   This uncontested action arises from a Notice of Intention to Prohibit Further Participation, issued by the Federal Deposit Insurance Corporation ("FDIC") on February 28, 1995.
   The FDIC brings the matter pursuant to Section 8(e) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(e), and seeks to determine whether Respondent Raymond M. Phillips should be permanently prohibited from future industry participation, for the violations and practices alleged in the Notice.
   After unsuccessful attempts at securing service of the Notice by United States Mail, the Enforcement Counsel caused its personal service upon the Respondent by delivery to the Respondent's adult daughter, who then resided at the Respondent's usual place of residence. The daughter subsequently informed Enforcement Counsel that Respondent Phillips actually received the Notice. Respondent filed no reply.
   On August 30, 1995, despite the fact that the Notice had been personally served, and despite that Respondent had failed to file an Answer, the Enforcement Counsel indicated his intention not to seek default, and requested that I schedule an uncontested hearing in the matter.
   I denied the request for hearing on October 17, 1995.
   On November 20, 1995, Enforcement Counsel moved for entry of an order of default, to which Respondent Phillips filed no reply. Accordingly, on December 13, 1995, I directed Respondent to show cause why the FDIC default motion should not be granted. The show cause order was personally served upon the Respondent, who again filed no reply.
   After careful consideration, I conclude that the FDIC Motion for Default should be GRANTED, for the reasons set forth below.
   Uniform Practice Rule 308.19 provides in pertinent part as follows:
   (c) Default - (1) Effect of Failure to answer. Failure of a respondent to file an answer required by this section within the time provided constitutes a waiver of his or her right to appear and contest the allegations in the notice. If no timely answer is filed, Enforcement Counsel may file a motion for entry of an order of default. Upon a finding that no good cause has been shown for the failure to file a timely answer, the Administrative Law Judge shall file with the Board of Directors a recommended decision containing the findings and relief sought in the Notice. Any final notice issued by the Board of Directors based upon a respondent's failure to answer is deemed to be an order issued upon consent.
12 C.F.R. § 308.19(c).
   This rule has been repeatedly applied by the FDIC Board of Directors in prohibition, cease and desist, and civil money penalty proceedings brought pursuant to section 8 of the Federal Deposit Insurance Act, 12 U.S.C. § 1818. See In the Matter of ***, 1 FDIC Enf. Dec. and Orders ¶ 5005 (February 9, {{6-30-96 p.A-2762}} 1981) (Failure to file an answer within the time provided shall authorize the ALJ, without further notice to the party, to recommend the findings and relief sought in the Notice); In the Matter of ***, 1 FDIC Enf. Dec. ¶5067 (June 30, 1986) (Failure to file an answer constitutes waiver of right to appear and contest the allegations); In the Matter of ***, 1 FDIC Enf. Dec. ¶5100 (November 24, 1987) (Respondent who failed to file answer was properly defaulted by ALJ, whereas parties who filed late answers were not in default, and case remanded for further proceedings); In the Matter ***, 1 FDIC Enf. Dec. ¶ 5116 (July 6, 1988) (party who files no answer, and who makes no attempt to later explain that failure, is in default); In the Matter of ***, 1 FDIC Enf. Dec. ¶5132 (February 7, 1989) (FDIC default rule "could not be more clear." An answer to the charges in the Notice must be filed by Respondent); In the Matter of Amberg, et. al., 2 FDIC Enf. Dec. And Orders ¶5154B (June 26, 1990) (Answers filed 3 days after date set by FDIC rules were deemed untimely, and ALJ's acceptance of late answers was reversed and default entered. Default Orders reversed on appeal to Fifth Circuit); In the Matter of Oberstar, 2 FDIC Enf. Dec. ¶5180 (August 4, 1992) (Answer filed 21 days after date set by FDIC rule was deemed untimely, despite obvious contest in parallel proceeding, and stated intent to defend action. Default Order entered, and later reversed on appeal to Eighth Circuit); In the Matter of McCune and Payne, 2 FDIC Enf. Dec. and Orders ¶5194 (March 16, 1993) (Failure to file answer after notice and service of show cause orders constitutes default); In the Matter of George W. Glover, 2 FDIC Enf. Dec. and Orders ¶5206 (November 23, 1993); and In the Matter of Billy Gene Humphrey, 2 FDIC Enf. Dec. ¶5207 (November 23, 1993) (Uncontested proceedings in which Respondents fail to file required papers are distinguishable from Oberstar and Amberg, which involved untimely filings due to inadvertence or neglect. Default is proper in uncontested cases).
   The proper question here is whether the facts of the instant case give rise to a litigable contest. If there is contest, default is improper. If uncontested, however, the allegations are deemed admitted, the Respondent waives any right to appear, and the relief sought in the notice is granted by default.
   This case is uncontested, as Respondent Phillips has filed no documents whatsoever, to include his Answer.
   Accordingly, pursuant to FDIC Practice Rule 308.19, and the authority cited above, I adopt the findings set forth in the Notice, and recommend that Respondent Raymond M. Phillips be permanently prohibited from further participation in the conduct of the affairs of any insured depository institution, under the provisions of Section 8(e) of the Act, 12 U.S.C. § 1818(e).

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