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[¶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 JudgmentFailure to file notice
Failing to oppose or contest some of significant allegations in the
Notice is not an answer to the Notice.
[.2] Default JudgmentFailure 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 JudgmentEntry of Order
Respondent's default in disregarding opportunities to participate in
proceedings is considered consent to entry of an order of prohibition.
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[.4] Unsafe or Unsound PracticesContrary 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.
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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.
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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
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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.
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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
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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.