Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders




FDIC Enforcement Decisions and Orders

ED&O Home | Search Form | Text Search | ED&O Help


{{9-30-00 p.A-3167}}

   [5262] In the Matter of Martha C. Gonzalez, individually and as an Institution-Affiliated party of International Bank of California, Los Angeles, California, (Insured State Nonmember Bank) FDIC Docket No. 99-006e (7-27-00).

   FDIC Board determined that Respondent Gonzalez' repeated failures to respond to a Notice of Intention to Prohibit from Further Participation and to two orders to show cause as well as her failure to file exceptions to the Recommended Decision were sufficient for a default judgment against her. Gonzalez is alleged to have engaged in unsafe or unsound banking practices and breaching her fiduciary duty, causing loss, or potential loss to the bank. The Board issued an Order to permanently prohibit Gonzalez from participating in the affairs of any federally insured financial institution.

   [.1] Default Judgment—Failure to file notice

   Failing to oppose or contest some of significant allegations in the Notice is not an answer to the Notice.

   [.2] Default Judgment—Failure to participate

   Failing to respond to the Motion for Entry of Default Judgment, to two Orders to Show Cause and to file exceptions to the Recommended Decision constitute a waiver of objections and constitute default.

   [.3] Default Judgment—Entry of Order

   Respondent's default in disregarding opportunities to participate in proceedings is considered consent to entry of an order of prohibition.
{{9-30-00 p.A-3168}}

   [.4] Unsafe or Unsound Practices—Contrary to Accepted Standards

   Respondent repeatedly caused or permitted the cashing of 166 United States Treasury tax refund checks by individuals not customers of the Bank, without the knowledge or consent of the payee and without imprinting an account number on the back of the check. Such actions are contrary to the Bank's practice and procedures and resulted in loss and possible damage to the bank and its depositors. As such, the actions constitute an unsafe or unsound practice.

In the Matter of
MARTHA C. GONZALEZ, individually,
and as an Institution-Affiliated Party of
INTERNATIONAL BANK OF CALIFORNIA
LOS ANGELES, CALIFORNIA
(Insured State Non-Member Bank)

FDIC-99-006e

DECISION AND ORDER
STATEMENT OF THE CASE

   This matter is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") following a Recommended Decision for Entry of Default ("Recommended Decision") issued by Administrative Law Judge Walter J. Alprin ("ALJ") on March 24, 2000.1 The ALJ recommended that Martha C. Gonzalez ("Respondent") be subject to an order of prohibition pursuant to section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. §1818(e).

   This is an uncontested proceeding. The record shows that Respondent received actual notice by personal service of the charges against her as set forth in the FDIC's Notice of Intention to Prohibit from Further Participation ("Notice") issued on August 4, 1999. Respondent failed to enter an appearance, file an answer to the charges, request a hearing, respond to either of two Orders to Show Cause, or file exceptions to the Recommended Decision.

BACKGROUND

   On August 4, 1999, the FDIC issued the Notice against Respondent pursuant to section 8(e) of the FDI Act concerning her conduct as an officer of the International Bank of California, Los Angeles, California ("Bank"). Respondent, a Branch Operations Officer for 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 probably suffer financial loss, and that the interests of the Bank's depositors have been or could be prejudiced. In addition, it is charged that such practices and/or breaches of fiduciary duty demonstrate Respondent's personal dishonesty and/or willful and/or continuing disregard for the safety or soundness of the Bank.

   Attorney's Diversified Services, a registered process server, was employed to effect service of the Notice on Respondent. On August 9, 1999, Daniel L. Schirmbeck, an employee of Attorney's Diversified Services, personally served Respondent, satisfying the requirements of section 308.11(c)(2) of the FDIC Regulations governing service of process upon a party who has not entered an appearance. Respondent's answer was due by August 30, 1999, but Respondent did not file an answer.

   On September 16, 19992, Enforcement Counsel filed a Motion for Entry of Default Judgment ("Motion") against Respondent based on her failure to answer the Notice. The Motion was served by Daniel L. Schirmbeck of Attorney's Diversified Services by personally delivering copies to the Respondent on October 6, 1999. In response to that Motion, the ALJ issued an Order to Show Cause on November 2, 1999, providing Respondent until November 16, 1999, to show why a default order should not be recommended against her. Respondent did not respond. However, on December 17, 1999, Enforcement Counsel filed a Notice of Receipt of Correspondence, attaching a letter that Respondent had addressed to the FDIC's Washington, D.C., office, dated October 25, 1999. In that letter, Respondent confirmed that she had been served with the Notice on August 9, 1999, but stated that she was unable to respond to it because she was preparing to go into the field with the United States Army at the time she received the


1 Citations to the Recommended Decision shall be "R.D. at .".

2 The Board notes that the ALJ refers to the filing of the Motion as having occurred on October 15, 1999. R.D. at 5. The Board hereby corrects this reference to reflect the actual filing date of September 16, 1999.
{{9-30-00 p.A-3169}} Notice, and had had difficulty obtaining an attorney.3 Respondent also stated that she had not cashed the checks with which she was charged in the Notice, and that other persons had had the ability to do so.4

   Following the review of this correspondence, the ALJ issued an Order delaying a ruling on the Motion, and giving Respondent until February 4, 2000 to file a response. Respondent again did not respond. A second Order to Show Cause was issued on February 25, 2000, giving Respondent until March 15, 2000 to show cause why an order of default should not be recommended against her. Respondent again filed no response.

   On March 24, 2000, the ALJ issued the Recommended Decision. He found that the Notice had advised Respondent of the time within which she was required to file an answer, and that the FDIC had executed proper, actual service of the Notice and the Motion. R.D. at 4-5. In view of the provisions of 12 C.F.R. §308.23 (providing that failure of a party to oppose a written motion is deemed consent by that party to the entry of an order substantially in the form accompanying the motion) and 12 C.F.R. §308.19(c) (providing that failure of respondent to file an answer constitutes waiver of his or her right to appear and contest the allegations of the Notice); and Respondent's failure to show good cause why an order of default should not be granted, the ALJ recommended that the Motion be granted, and that an Order of Prohibition from Further Participation under 12 U.S.C. §1818(e) be issued. R.D. at 5-7.

   No party has filed exceptions to the ALJ's Recommended Decision.

DISCUSSION

   [.1] The ALJ concluded that a default judgment against Respondent is warranted in this case. The Board agrees. A default judgment is appropriate for several reasons. First, Respondent failed to answer the Notice. The FDIC's Regulations provide that an answer must specifically respond to each paragraph or allegation of fact in the Notice, and admit, deny or state that the party lacks sufficient knowledge to respond. 12 C.F.R. §308.19(b). Any such answer must be filed with the Office of Financial Institution Adjudication (OFIA). 12 C.F.R. §308.10(a). Not only did the Respondent not file her letter of October 25, 1999, with the OFIA, but her letter also responded to only a small portion of the allegations of fact contained in the Notice. For instance, Respondent's letter does not deny that she exercised a controlling influence over the branch's check cashing activities, or that she breached her fiduciary duties by causing or permitting the check cashing transactions described in the Notice. Thus, it cannot be considered an answer to the Notice. In the Matter of Morton R. Michaels, Independence Bank, Encino, California, FDIC-95-178e, 1 FDIC Enf. Dec. and Ord. (Aspen Law & Business) ¶ 5241 at A-2825 (February 25, 1997).

   [.2] However, even if Respondent's letter were considered an answer, the failure to further participate in the proceeding would constitute default. Respondent did not respond to the Motion for Entry of Default Judgment or to the two Orders to Show Cause that resulted from it, even though she was given in total three opportunities and nearly six months to do so. Moreover, Respondent did not file exceptions to the Recommended Decision. Failure to file exceptions to a recommended decision is deemed to be a waiver of objection thereto. 12 C.F.R. §308.39(b).

   This case is patently distinguishable from decisions involving default judgments in

3 The Soldiers' and Sailors' Civil Relief Act of 1940, 50 App. U.S.C. §520, provides that in an action commenced in court an order of default shall not be entered against a defendant in the military service unless the court first appoints an attorney to represent that defendant. "Court" is further defined to include a "court of competent jurisdiction of the United States or of any State." 50 App. U.S.C. §511(4). Judicial decisions make clear that an administrative agency is not a "court" as that term is used in this Act, and therefore that the statute does not apply to decisions of the FDIC. See U.S. v. Frantz, 220 F.2d 123, 125 (3d Cir.), cert. denied, 394 U.S. 954 (1955); Polis v. Creedon, 162 F.2d 908, 911 (Em. App. 1947).

4 The Notice charges that from April 12, 1995, through May 27, 1995, Respondent caused or permitted the cashing of 166 United States Treasury tax refund checks totaling $339,175.63, while attempting to conceal her involvement by making it appear that these transactions were performed by one of her subordinate tellers. Each of the refund checks was brought to the Bank by a single individual who was not a customer of the Bank. Cashing the refund checks for a non-customer and without imprinting an account number on the back of the check was contrary to the Bank's practice and procedures.
   It is further charged that all or most of the 166 Treasury checks were presented and cashed without the knowledge or consent of the persons named as payees on those checks. Subsequently, 127 claims in the amount of $286,447.88 were filed against the Bank for improperly cashing these checks. Ultimately the Bank paid $75,000 of that amount, with the Bank's insurance carrier paying the remaining amount.
{{9-30-00 p.A-3170}} which the Respondents, though untimely in their answer, nevertheless attempted to explain to the ALJ the reason for their tardiness. See Oberstar v. FDIC, 987 F.2d 494 (8th Cir. 1993); Amberg v. FDIC, 934 F.2d 681 (5th Cir. 1991). In the present case, Respondent has openly disregarded opportunities provided in three separate orders, as well as in the Notice, to participate in this proceeding. Under the circumstances, it appears that Respondent has chosen consciously not to participate in the proceeding even after she has been given numerous opportunities. Consequently, the Board considers Respondent's action a waiver of her right to participate in the proceeding.

   [.3] For these reasons, a default judgment against Respondent is warranted. In the Matter of In Chul Song, Empire State Bank, New York, New York, FDIC-92-140e, 92-350k, 2 FDIC Enf. Dec. and Ord. (Aspen Law & Business) ¶5214 at A-2445 (May 17, 1994). Such defaults constitute consent to entry of an order of prohibition.

   While Respondent's default is clear on the record before us, the Board takes this opportunity to advise her that the Board will consider a motion for reconsideration on her behalf filed within 30 days of the effective date of this Order if she presents evidence with that motion that because of her service as a member of the United States armed forces she has been unable to participate in this proceeding, or if she presents any other good reason for reconsideration.

CONCLUSION

   After a thorough review of the record in this proceeding, and for the reasons set forth herein, the Board adopts and incorporates by reference the ALJ's Recommended Decision, except that it corrects page 5 of the Recommended Decision to reflect that Enforcement Counsel filed a Motion for Entry of Default Judgment on September 16, 1999, and issues the following order implementing its Decision.

ORDER

   [.4] The Board of the FDIC, having considered the entire record of this proceeding and finding that Respondent, Martha C. Gonzalez, as an officer of the Bank, was served with Notice of Intention to Prohibit from Further Participation based on violation of laws and regulations, unsafe or unsound banking practices, and breaches of her fiduciary duty, causing financial loss to the Bank and prejudice to the interest of its depositors, and that said actions involved personal dishonesty and a willful and continuing disregard for the safety and soundness of the Bank; that Respondent has not filed an answer to the Notice; that Enforcement Counsel has filed Motion for Entry of default Judgment to which Respondent has not responded; and that Respondent has not filed exceptions to the ALJ's Recommended Decision for Entry of Default, it is hereby ORDERED and DECREED that Martha C. Gonzalez is permanently prohibited from:

    a. participating in any manner in the conduct of the affairs of any federally insured financial institution or organization enumerated in 12 U.S.C. §1818(e)(7)(A);

    b. soliciting, procuring, transferring, attempting to transfer, voting or attempting to vote proxy, consent or authorization with respect to any voting rights in any financial institution enumerated in 12 U.S.C. §1818(e)(7)(A);

    c. violating any voting agreement previously approved by the appropriate federal banking agency; or

    d. voting for a director, or serving or acting as an institution-affiliated party.

   This ORDER shall be effective immediately twenty (20) days from the date of service.

   IT IS FURTHER ORDERED that copies of this Decision and Order shall be served on Martha C. Gonzalez (by personal service), FDIC Enforcement Counsel, the ALJ, and the Acting Superintendent of Banks for the State of California.

   By direction of the Board of Directors.

   Dated at Washington, D.C., this 27th day of July, 2000.

RECOMMENDED DECISION

In the Matter of MARTHA C. GONZALEZ, individually,and as an institution-affiliated party of INTERNATIONAL BANK OF CALIFORNIALOS ANGELES, CALIFORNIA (Insured State Non-Member Bank) FDIC Docket No.99-006e
{{9-30-00 p.A-3171}}

RECOMMENDED DECISION FOR ENTRY OF DEFAULT

(March 24, 2000)

   This matter comes before the Office of Financial Institution Adjudication on Enforcement Counsel's Motion of the Federal Deposit Insurance Corporation ("FDIC") for Entry of an Order of Default, filed September 16, 1999. Respondent has not, to date, filed an answer, nor any response to the motions and orders in these proceedings.

FACTS AND PROCEDURAL HISTORY

   On August 4, 1999, the Federal Deposit Insurance Corporation, through Enforcement Counsel, issued a Notice Of Intention To Prohibit From Further Participation against Martha C. Gonzalez. In its Notice, the FDIC alleges that Ms. Gonzalez directly or indirectly participated or engaged in unsafe or unsound banking practices, and/or acts, omissions, or practices which constitute breaches of her fiduciary duties to the Bank. The FDIC states that the Bank has suffered or will probably suffer financial loss or other damages and the interests of the Bank's depositors have been or could be prejudiced. In addition, the FDIC asserts that such practices, and/or breaches of fiduciary duty demonstrate Respondent Gonzalez's personal dishonesty and/or her willful and/or continuing disregard for the safety or soundness of the Bank.

   The FDIC brings this administrative action against Gonzalez to prohibit her from further participation in the conduct of the affairs in any insured depository institution or organization listed in section 8(e)(7)(A) of the Federal Deposit Insurance Act ("FDIC"), without the prior written approval of the FDIC and such other appropriate Federal Financial institutions regulatory agency. FDI 8(e)(7)(D); 12 U.S.C. §1818(e)(7)(D).

   On September 16, 1999, the FDIC filed a Motion for Entry of Default because Respondent Gonzalez failed to timely file an answer to the Notice. The undersigned issued a Show Cause Order on November 2, 1999, informing Ms. Gonzalez that she needed to show good cause why a default order should not be recommended against her. Ms. Gonzalez failed to respond to that Show Cause Order; however, she did write a letter to the FDIC. On December 17, 1999, Enforcement Counsel filed a Notice of Receipt of Correspondence. In that Notice, counsel reported that she had received a series of documents regarding Respondent from the FDIC's main office in Washington, D.C.

   The documents included a copy of a letter, written by Ms. Gonzalez on October 25, 1999, and addressed to the FDIC's Washington, D.C. office. In that letter, Respondent admitted she was served with "papers" on August 9, 1999 and October 6, 1999. Respondent further admits receiving a "Notice" on September 7, 1999, and another letter dated August 11, 1999, on October 10, 1999. Respondent stated that she was unable to respond to the original Notice in the allotted time because she was on active duty and working in the field for the U.S. Army. In her letter, Respondent also contested the alleged facts and denies the FDIC's accusations in detail.

   In light of her correspondence with the FDIC, the undersigned issued an Order on December 23, 1999, delaying a ruling on the Motion For Entry Of Default Judgment. That Order provided Respondent with additional time to file an answer in this matter. The answer was due February 4, 2000. Respondent failed to file an answer or motion for extension of time. A second "Order To Show Cause" was issued on February 25, 2000, providing Respondent with a final opportunity to show cause by March 15, 2000, why a default decision should not be recommended against her. Respondent failed to file a response. In fact, Respondent has never contacted this tribunal, in any manner.

   In light of the rules governing these proceedings, and for all the reasons stated below, the undersigned recommends the Board of the FDIC prohibit Respondent from further participation in the affairs of any depository institution by default. The undersigned makes the following findings to support the recommendation.

   First, the International Bank of California, is a corporation existing and doing business under the laws of the State of California, having its principal place of business in Los Angeles, California. At all times pertinent to these proceedings, the Bank was an insured State non-member bank, as defined in section 3(e) of the FDI Act, 12 U.S.C. §1813(3). The Bank was subject to the FDI Act, 12 U.S.C. §1811-1831(u), and the Rules and Regulations of the FDIC, 12 C.F.R.
{{9-30-00 p.A-3172}} Chapter III, and the laws of the State of California.

   Second, from September 1993 to June 1995, Gonzalez was an employee of the Bank and worked as the Branch Operations Officer for its Beverly Boulevard branch. In that capacity, Gonzales oversaw and managed the activities of four tellers. By reason of her position, Gonzalez was, at all times pertinent to the charges herein, an "institution-affiliated party" as that term is defined in section 3(u) of the Act, 12 U.S.C. §1813(u), and for purposes of sections 8(e)(7), 8(I) and 8(j) of the Act, 12 U.S.C. §§1818(e)(7), 1818(i), and 1818(j). As an institution-affiliated party of International Bank, Gonzalez was subject to the FDI Act, and the rules and regulations of the FDIC.

   Third, at all times pertinent to the charges, Gonzalez worked for the Bank in a managerial position and exercised controlling influence over the day to day operations of the check cashing activities at the Beverly Boulevard branch. In light of all the uncontested facts above, the FDIC and this tribunal have jurisdiction over this matter.

DISCUSSION

   In order to institute administrative proceedings against an institution-affiliated party, the appropriate Federal banking agency must meet specific requirements proscribed by the Code of Federal Regulations ("CFR") and perform proper service of process. The FDIC must file a Notice to commence proceedings. 12 C.F.R. §308.18. Pursuant to the C.F.R., a Notice must contain specific provisions, including, "the time within which to file an answer as required by law or regulation." 12 C.F.R. §308.18. Additionally, the agency must serve the Respondent with Notice in accordance with 12 C.F.R. §308.11.

   The Notice Of Intention To Prohibit From Further Participation, filed by the FDIC, complies with both rules. First, the Notice does contain a numbered paragraph that states in pertinent part, "Respondent is hereby directed to file an answer to the Notice of Intention to Prohibit From Further Participation within twenty (20) days from the date of service." Second, the FDIC personally served Gonzalez with the Notice on August 9, 1999, and the Motion for Order of an Entry of Default on October 6, 1999, through Attorney's Diversified Services. Enforcement Counsel has submitted copies of the return of service for each of the pleadings. See Original File.

   I find that the FDIC executed proper, actual service and that the time to file an answer to the Notice has elapsed. If a party fails to file an answer, 12 C.F.R. §308.19(c)(1) states that "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." In addition, the failure to respond to any motion, filed in accordance with 12 C.F.R. §308.23, "is deemed a consent by that party to the entry of an order substantially in the form of the order accompanying the order." See 12 C.F.R. §308.23(d)(2). The law is clear: if the administrative law judge finds no good cause for the failure to timely file an answer then the judge "shall file with the Board of Directors a recommended decision containing the findings and the relief sought in the Notice." See 12 C.F.R. §308.19(c).

   On October 15, 1999, Enforcement Counsel filed a Motion For Entry Of Default Judgment seeking recommendation by the undersigned to the Board of the FDIC for a final and unappealable order for failure to file an answer. According to 12 C.F.R. §308.23, the failure of a party to oppose a written motion is deemed consent by that party to the entry of an order substantially in the form of the order accompanying the motion. The failure of a Respondent to file an answer may also result in a default. 12 C.F.R. §308.19(c) states that "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." In addition, the regulations provide that Enforcement Counsel may file a motion for entry of an order of default and that upon a finding that no good cause has been shown, the administrative law judge shall file a recommended decision containing the findings and the relief sought in the Notice. I find that Respondent has failed to timely file a response to the FDIC's Motion for Entry of Default Judgment, and failed to respond to the Show Cause Orders. When a Respondent fails to file and answer, or appear in any fashion, a default order is appropriate. In the matter of Morton R. Michaels, FDIC 95-178e (1997) (prohibiting Respondent after he failed to file and answer, respond to motions, enter an appearance or otherwise
{{10-31-00 p.A-3173}} participate in the proceedings in any manner).

   I hereby recommend a default decision against Respondent because proper service was executed. Both the Notice and the Motion for Entry of Default Judgment (attached) demonstrate personal service upon Respondent. The copies of the process servers' affidavits evidence service of the pleadings and actual notice of the action to Respondent. In addition, Respondent admitted in her October 25, 1999, letter that she was served with papers. I find Respondent had personal knowledge of these proceedings and the consequences of failure to properly respond to the accusations. By failing to properly respond to the Notice by filing an Answer, and failing to respond to any other motion or order, Respondent has waived her right to contest the allegations. For all of the aforementioned reasons, I recommend prohibition by default and adopt as fact all the allegations in the Notice. See attached Notice.

   THEREFORE, it is this 24th day of March, hereby ORDERED that:

   WHEREAS, the Federal Deposit Insurance Corporation issued against Respondent, a Notice of Intent to Prohibit from Participation and Notice of Charges and of Hearing on August 4, 1999; and

   WHEREAS, Respondent's time for filing an Answer to the Notice expired under Section 308.19(a) Uniform Rules of Practice and Procedure (12 C.F.R. §308.19(a)); and

   WHEREAS, Respondent has thereby waived her right to appear and contest the allegations in the Notice, and has failed to show good cause, if any, why the Final Order recommended herein should not be issued.

   Pursuant to Uniform Rules of Practice and Procedure §§308.5(7) and 308.19(c), (12 C.F.R. §§308.5(7) and 308.19(c)), the undersigned recommends granting the Motion For Entry Of Default Judgment. Based on that recommendation, the undersigned further recommends entry of an Order Of Prohibition From Further Participation under 12 U.S.C. §1818(e).

   SO ORDERED.

ED&O Home | Search Form | Text Search | ED&O Help

Last Updated 6/6/2003 legal@fdic.gov