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{{1-31-99 p.A-2988}}
[¶5252] In the Matter of Robert L. Jones, individually and as an institution-affiliated party of Commonwealth Thrift and Loan, Torrance, California (Insured State Nonmember Bank—In Receivership) FDIC Docket No. 97-41e (11-5-98)
[.1] Notice—Sufficient for party who has not entered an appearance
Sworn affidavit indicating attempts at personal service of notices, or service by first class or certified mail satisfy the service of process requirements of section 308.11(c)(2) of the FDIC Rules for party who has not entered an appearance.
[.2] Answer—Failure to File—Prohibition, removal or suspension
Respondent waived his right to contest the allegations by failing to answer charging him with engaging in unsafe or unsound banking practices and breaching his fiduciary duty, and waived his right to object to the ALJ's Recommended Decision to not filing exceptions to the Decision.
In the Matter of
ROBERT L. JONES,
Individually, and as an
institution-affiliated
party of
COMMONWEALTH THRIFT
AND LOAN
TORRANCE, CALIFORNIA
(Insured State Nonmember Bank — In Receivership)
DECISION AND ORDER
TO PROHIBIT FROM
FURTHER PARTICIPATION
FDIC-97-41e
This matter is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC"), following the May 14, 1998, issuance by Administrative Law Judge Walter J. Alprin ("ALJ") of an Order Recommending Granting Enforcement Counsel's Motion For Default and Decision Recommending Issuance of Order Prohibiting Robert Jones From Further Participation, in the matter of Robert L. Jones, individually, and as an institution-affiliated party of Commonwealth Thrift and Loan, Torrance, California ("Bank"). Upon a review of the entire record, the Board affirms and adopts the ALJ's recommendation, finding sufficient evidence in the record for the issuance of a prohibition order.
This is an uncontested proceeding. The record shows that Robert L. Jones ("Respondent") received actual notice by personal service of the charges against him as set forth in the FDIC's Notice of Intention to Prohibit From Further Participation ("Notice") dated November 26, 1997. Respondent failed to enter an appearance, file an answer to the charges, request a hearing, or participate in the proceeding in any other manner.
Following the filing by FDIC Enforcement Counsel of a Motion for Entry of Default Judgment ("FDIC's Motion"), on April 20, 1998, the ALJ issued an Order to Show Cause Why An Order of Default Should Not Issue ("Show Cause Order"). Respondent again failed to respond. Upon an unopposed motion for an order of default, and having found that the Respondent failed to file an answer, enter an appearance, request a hearing, or oppose the FDIC's Motion, the ALJ granted the FDIC's Motion. Based upon Respondent's failure to respond in any way, and upon the uncontested allegations of unsafe and unsound banking practices and breaches of fiduciary duty causing loss to the Bank as set forth in the Notice, the ALJ recommended that Respondent be prohibited from participating in any manner in the conduct of the affairs of any federally insured depository institution or organization enumerated in section 8(e)(7)(A) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. §1818(e)(7)(A).
Background
On November 26, 1997, the FDIC issued the Notice against Respondent 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. Respondent, majority shareholder and chairman of the board of directors of the Bank, was charged with engaging in unsafe or unsound banking practices and breaches of fiduciary duty, by virtue of which the Bank has suffered or will suffer financial loss or other damage, and the interests of the Bank's depositors may be prejudiced. Such actions by Respondent are further alleged to demonstrate a willful and/or continuing disregard for the safety or soundness of the Bank and/or evidence his personal dishonesty.
The services of James Hearn, a private process server ("Hearn"), were employed to effect service of the Notice on Respondent. On February 5, 1998, Hearn personally served Respondent at his residence.1 Service was also made by first class mail. The Notice directed Respondent to file an answer and request for a hearing within twenty (20) days from the date of service, as required by
1 Exhibit No. 1 is Hearn's affidavit attesting to his personal service on February 5, 1998.
section 308.19 of the FDIC Rules, 12 C.F.R. §309.19. Respondent's answer was due on or before February 25, 1998. Respondent has never filed an answer or responded in any manner.
[.1]Enforcement Counsel moved for entry of an Order of Default on March 31, 1998. Respondent again failed to respond. On April 20, 1998, the ALJ issued a Show Cause Order why the FDIC's Motion should not be granted. The record contains Hearn's sworn affidavits indicating that, on April 17, 1998, he attempted to personally serve Respondent with the FDIC's Motion for Entry of Default Judgment, Brief In Support of FDIC's Motion For Default Judgment, and Recommended Order of Default. On April 22, 1998, Hearn attempted to personally serve Respondent with the Show Cause Order dated April 20, 1998. Respondent was also served with all of these documents by first class United States mail and, with respect to the Show Cause Order, by certified United States mail (return receipt.)2 Either method independently satisfies the requirements of section 308.11(c)(2) of the FDIC Rules governing service of process upon a party who has not entered an appearance. In the first instance, Hearn observed Respondent and his wife at their residence. When they did not respond to his knocking and yelling he left the legal documents on the door mat. On the second occasion, Hearn was told by a male, apparently employed by Respondent and living on his property, that Respondent was "in Las Vegas," and the documents were served on the employee at Respondent's residence.
In the absence of a response to any of these documents the ALJ granted the FDIC's Motion and issued his recommended decision.
Discussion
The record reflects that Respondent received actual notice of the proceedings through personal service of the Notice. Although he was served personally, he failed to respond to the Notice, to the FDIC's Motion and to the Show Cause Order. As described in the record, his conduct clearly indicates an intentional and willful disregard of the FDIC's procedural requirements. See In the Matter of Kevin L. Jensen, FDIC-93-240e, FDIC-93-241k, 1 FDIC Enf. Dec. ¶ 5240 (Dec. 3, 1996); In the Matter of Raymond M. Phillips, FDIC-94-208e, IP-H FDIC Enf. Dec ¶5232 (April 23, 1996); In the matter of Hiram L. Fong, Jr., FDIC-94-81e, 1 P-H FDIC Enf. Dec. ¶ 5230 (December 7, 1995); In the Matter of Harold Dean Ingram, FDIC-92-343k, 2 P-H FDIC Enf. Dec. ¶ 5217 (August 2, 1994).3
[.2]By failing to answer, Respondent has waived his right to contest the allegations in the Notice under section 308.19(c) of the FDIC Rules. Respondent also has failed to file Exceptions to the Recommended Decision pursuant to 12 C.F.R. §308.39. This failure is deemed a waiver of any objection to the ALJ's Recommended Decision. See In the Matter of In Chul Song, FDIC-92-140e, FDIC-92-350k, 2 P-H FDIC Enf. Dec. ¶ 5214 (May 17, 1994).
Accordingly, the Board affirms the Recommended Decision of the ALJ and issues the following order implementing its 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.
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):
1. Robert L. Jones shall not participate in any manner in the conduct of the affairs of any insured depository institution, agency or organization enumerated in section 8(e)(7)(A) of the FDI Act, 12 U.S.C. §1818(e)(7)(A), without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the FDI Act, 12 U.S.C. §1818(e)(7)(D);
2 The certified copy of the Show Cause Order, identifying the Office of Financial Institution Adjudication as the sender, was refused by the Respondent and marked by the post office "refused" and "returned to sender.".
The FDIC's Motion was not returned, and it is reasonable to conclude that it was received by Respondent.
3 This case is clearly distinguishable from Amberg et al. v. FDIC, 934 F.2d 681 (5th Cir. 1991) and Oberstar v. FDIC, 987 F.2d 494 (8th Cir. 1992) in which default judgments were overturned where the courts found the respondents' failure to comply with the FDIC's Rules was merely technical
and that the respondents had indicated an intention to contest the charges against them. Here, no intention to comply has been shown by Respondent, and his failure to respond has been deliberate. In such a case, a default order is appropriate.
2. Robert L. Jones shall not solicit, procure, transfer, attempt to transfer, vote, or attempt to vote any proxy, consent or authorization with respect to any voting rights in any financial institution, agency, or organization enumerated in section 1818(e)(7)(A), without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the FDI Act, 12 U.S.C. §1818(e)(7)(D);
3. Robert L. Jones shall not violate any voting agreement with respect to any insured depository institution, agency, or organization enumerated in section 8(e)(7)(A) of the FDI Act, 12 U.S.C. §1818(e)(7)(A), without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the FDI Act, 12 U.S.C. §1818(e)(7)(D);
4. Robert L. Jones shall not vote for a director for a director, or serve or act as an institution-affiliated party, as that term is defined in section 3(u) of the FDI Act, 12 U.S.C. §1813(u), of any insured depository institution, agency, or organization enumerated in section 8(e)(7)(A) of the FDI Act, 12 U.S.C. §1818(e)(7)(A), without the prior written consent of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the FDI Act, 12 U.S.C. §1818(e)(7)(D).
IT IS FURTHER ORDERED, that this ORDER shall be final and become effective thirty (30) days after service upon Respondent. It shall remain effective 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 5th day of November, 1998.
In the Matter of
ROBERT L. JONES,
individually, and as an
institution-affiliated
party of
COMMONWEALTH THRIFT
AND LOAN
TORRANCE, CALIFORNIA
(Insured State Nonmember Bank — In Receivership)
FDIC-97-41e
ORDER RECOMMENDING GRANTING ENFORCEMENT COUNSEL'S MOTION FOR
DEFAULT AND
DECISION RECOMMENDING ISSUANCE OF ORDER
PROHIBITING
ROBERT JONES FROM
FURTHER PARTICIPATION
(Issued May 14, 1998)
On February 5, 1998, Respondent was personally served, at his residence by a process server, the Notice of Intention to Prohibit from Further Participation ("Notice"). Under the Uniform Rules of Practice and Procedure, service of a notice commences a proceeding and a respondent must file an answer within twenty days of service. 12 C.F.R. §19.19(a). If a respondent does not file an answer within the time provided, the respondent waives his right to appear and contest the allegations in the notice and Enforcement Counsel may file a motion for entry of an order of default. 12 C.F.R. §19.19(c)(1).
In the instant case, Respondent has failed to file an answer, enter an appearance, or participate in the proceeding in any manner. On March 31, 1998, Enforcement Counsel filed a Motion for Entry of an Order of Default. In addition, on April 20, 1998, the undersigned issued an Order To Show Cause Why A Default Should Not Issue and Respondent again failed to respond. Since no good cause has been shown for the failure to file a timely answer, the undersigned hereby recommends the Board issue a Default Order against Respondent and issue the below recommended decision.
The undersigned recommends the relief sought in the Notice against Respondent, a controlling shareholder and Chairman of the Board of Commonwealth Thrift And Loan, Torrance, California ("Bank"). By virtue of the default, the facts in the Notice are deemed to be true. Accordingly, Respondent engaged in or participated in unsafe or unsound practices and breached his fiduciary duty with the Bank.
THEREFORE, TAKE NOTICE the undersigned recommends prohibiting Respondent from further participation in any manner in the conduct of the affairs of any federally insured depository institution and any other institution, credit union, agency and entity referred to in 12 U.S.C. §1818(e), as amended, pursuant to 12 U.S.C. §1818 (e)(1).
By virtue of his default, Respondent has consented to the finding of facts and conclusions of law in the Notice, attached hereto and made a part thereof, and has waived the right to appear at a hearing and contest the charges.
SO ORDERED.
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