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[¶5263] In the Matter of Gerald P Brickner, individually and as an
institutional-affiliated party of Bank of Hoven, Hoven, South Dakota
(Insured State Nonmember Bank), FDIC Docket No. 00-078ej; FDIC Docket
No. 83-152e (8-2-00)
The FDIC approved Respondent's request to serve as an employee of an
FDIC insured institution for the sole purpose of handling the bank's
credit life insurance business but did not otherwise modify a 1984
Order of Removal From Office and Prohibition from Further
Participation.
[.1] Prohibition, Removal or SuspensionModification
On the record as a whole the Respondent demonstrated his fitness to
participate in affairs of the Bank, and that his participation would
not pose a risk to the Bank's safety and soundness and would not erode
public confidence in the Bank. Based on those findings the FDIC
consented to allow Respondent employee status on a limited basis.
[.2] Prohibition, Removal or SuspensionModification
Consent granted to Respondent to serve as employee is limited solely to
participation in the Bank's credit life insurance business and does
not otherwise modify the order or grant consent to engage in other
activity.
In the Matter of
GERALD P. BRICKNER,
individually and as an institution-affiliated party of
BANK OF HOVEN
HOVEN, SOUTH DAKOTA
(Insured State Nonmember Bank)
DECISION AND ORDER APPROVING APPLICATION TO MODIFY ORDER OF REMOVAL FROM OFFICE AND PROHIBITION FROM FURTHER PARTICIPATION
FDIC-00-078ej
FDIC-83-152e
STATEMENT OF THE CASE
Introduction
On March 10, 2000, Gerald P. Brickner ("Respondent"),
through a letter ("Applica-
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tion") addressed to the Regional
Director of the Kansas City Regional Office of the Federal Deposit
Insurance Corporation, made application to the Federal Deposit
Insurance Corporation ("FDIC") for written consent to become an
employee of the Bank of Hoven, Hoven, South Dakota ("Bank"), an
institution regulated by the FDIC. This application arises under
section 8(e)(7)(B) of the Federal Deposit Insurance Act ("Act"),
12 U.S.C. §1818(e)(7)(B), and section 8(j) of the Act, 12 U.S.C.
§1818(j).
Background
Respondent served as a director and assistant cashier of the Bank
from 1975 through 1982. On July 5, 1983, the FDIC issued a Notice of
Intention to Remove from Office and to Prohibit From Further
Participation (the "Notice") pursuant to section 8(e) of the Act,
12 U.S.C. §1818(e), against Respondent. The Notice alleged that
Respondent had breached his fiduciary duties by failing to disclose to
the entire board of directors of the Bank and Federal banking
regulators the existence of unauthorized extensions of credit to a
particular borrower and failing to prevent the continued extensions of
credit to the borrower.
A formal administrative hearing was held before an administrative law
judge from November 15 to November 23, 1983. On March 22, 1984, the
administrative law judge issued a decision in which he recommended
finding that Respondent had breached his fiduciary duty to the Bank by
failing to disclose the unauthorized extensions of credit to the
Bank's board of directors as well as to the Federal banking regulators
and recommended the removal of Respondent as a director of the Bank.
After reviewing the recommended decision of the administrative law
judge, the Board of Directors of the FDIC ("Board") on July 9,
1984, issued an Order of Removal from Office and Prohibition from
Further Participation ("Section 8(e) Order") pursuant to section
8(e) of the Act, 12 U.S.C. §1818(e). The Board found that
Respondent's failure to report the illegal and unauthorized extensions
of credit to the board of directors or to the regulators and his
failure to take effective action to prevent another officer in the Bank
from continuing to make illegal extensions of credit to a Bank customer
constituted a breach of his fiduciary duties as a director and officer.
The Section 8(e) Order prohibited Respondent from participating in any
manner in the conduct of the affairs of the Bank or any other FDIC
insured institution without the prior written consent of the FDIC and
the appropriate Federal banking regulator pursuant to 12 U.S.C.
§1818(j) (amended by the Financial Institutions Reform Recovery and
Enforcement Act of 1989 at 12 U.S.C. §§ 1818(e)(7)(B) and 1818(j)).
Respondent appealed the Board decision, but the United States Court of
Appeals for the Eighth Circuit affirmed the Board decision in 1984,
finding that Brickner's conduct constituted continuing disregard for
the safety or soundness of the Bank. Brickner v. Federal Deposit
Insurance Corporation, 747 F.2d 1198 (8th Cir. 1984).
Prior Applications
Respondent has filed several previous requests to obtain approval
to reenter banking. On June 19, 1985 and March 21, 1986, Respondent
filed his initial two requests. These requests were both denied.
Respondent filed on September 30, 1986, his third request to obtain
written approval from the FDIC to serve as an employee of the Bank. The
Board denied his request on January 20, 1987, on the grounds that the
extensive involvement of Respondent's family in the affairs of the
Bank for a long period of time, combined with the proposed position
which Respondent would occupy, would place Respondent in the position
of having an opportunity of exercising substantial influence and
control over the affairs of the Bank. See Docket No.
FDIC-83-153e, FDIC ENFORCEMENT DECISIONS AND ORDERS Par. 5117,
A-1303 (1988).
On February 19, 1987, Respondent filed a request for reconsideration of
the January 20, 1987, denial. The Board issued a denial of
Respondent's request on August 9, 1988, on the grounds that
Respondent's participation in the conduct of the affairs of the Bank
would not be in the best interests of the Bank or its depositors in
light of the financial condition of the Bank and the proposed position
which Respondent would occupy. Docket No. FDIC-83-153e, FDIC
ENFORCEMENT DECISIONS AND ORDERS Par. 5117, A-1303 (1988).
On December 27, 1995, Respondent made application to the FDIC for
written consent to a modification or termination of the Section 8(e)
Order. By his application, Respondent sought to become a director of
the Bank.
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The FDIC determined that there were sufficient grounds to
approve Respondent's request to serve as a director of the Bank
pursuant to section 8(e)(7)(B) of the Act, 12 U.S.C. §1818(e)(7)(B).
First, Respondent and his family had sold most of their interest in the
Bank and their existing holdings of twelve percent of the total
outstanding shares of stock were subject to a voting agreement and must
be voted with other individuals who own a greater percentage of the
shares of stock in the Bank. Further, the financial condition of the
Bank was satisfactory and Respondent had stated that he did not intend
to become involved in the daily operations of the institution. Finally,
Respondent acknowledged his wrongdoing and expressed remorse for all
the problems he caused at the Bank. The conduct for which Respondent
was removed occurred more than fourteen years earlier and in those
intervening years, Respondent had served in positions of trust in the
community as well as run his own insurance agency.
The Present Application
By letter dated March 10, 2000, Respondent made application to the
FDIC for written consent to establish an employee relationship with the
Bank, pursuant to which his job responsibilities would be confined to
the conduct of the Bank's credit life insurance business. For 27
years, Respondent was the principal owner and operator of the P.J.
Hackl Insurance Agency, Hoven, South Dakota, which acted as agent for
the insurance companies that underwrite the Bank's credit life
insurance program. On March 1, 2000, Respondent sold his insurance
business and terminated his agency relationship with insurance
companies except for those companies underwriting the Bank's credit
life insurance business. Respondent had maintained errors-and-omissions
insurance coverage through his insurance agency. However, that coverage
was terminated because Respondent is no longer actively soliciting
insurance business. Reportedly, Respondent would qualify for coverage
under the Bank's errors-and-omissions insurance policy, if he became
an employee of the Bank.
FINDINGS OF FACT
In his application for consent of the FDIC to become an employee
of the Bank, Respondent asserts that his proposed employment would be
limited solely to the handling of the Bank's credit life insurance
business and would not involve any other aspects of the Bank's
operations. The Bank's credit life insurance program has not been
criticized by examiners and will not change as a result of
Respondent's request. By becoming an employee of the Bank, Respondent
would receive periodic compensation payments in lieu of an insurance
agent's commission for his services. Additionally, the FDIC has no
evidence that Respondent has had an unfavorable impact on the Bank
since becoming a director subsequent to obtaining the FDIC's consent
in 1997.
DECISION AND ORDER
Section 8(e)(7)(B) of the Act states in pertinent part:
(7) INDUSTRYWIDE PROHIBITION.
(B) EXCEPTION IF AGENCY PROVIDES WRITTEN CONSENT.If, on or
after the date an order is issued under this subsection which removes
or suspends from office any institution-affiliated party or prohibits
such party from participating in the conduct of the affairs of an
insured depository institution, such party receives the written consent
of
(i) the agency that issued such order; and
(ii) the appropriate Federal financial institutions regulatory agency
of the institution described in any clause of subparagraph (A) with
respect to which such party proposes to become an
institution-affiliated party, subparagraph (A) shall, to the extent of
such consent, cease to apply to such party with respect to the
institution described in each written consent.
12 U.S.C. §1818(e)(7)(B).
[.1] To obtain the FDIC's consent, Respondent must demonstrate: (1) his
Xfitness to participate directly or indirectly in the conduct of the
affairs of an insured depository institution; (2) that his
participation would not pose a risk to the institution's safety and
soundness; and (3) that his participation would not erode public
confidence in the institution. See In the Matter of Charles E.
Floyd, FDIC ENFORCEMENT DECISIONS AND ORDERS, Par. 5177, A-1976
(1992); In the Matter of Frederick M. Pfeiffer, FDIC
ENFORCEMENT DECISIONS AND ORDERS, Par. 5163A, A-1656 (1991);
Docket
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No. FDIC-83-153e, FDIC ENFORCEMENT DECISIONS AND
ORDERS Par. 5117, A-1303 (1988).
Upon review of the record as a whole, the FDIC finds that
Respondent has presented sufficient evidence to be granted consent to
become an institution-affiliated party pursuant to section 8(e)(7)(B)
of the Act, 12 U.S.C. §1818(e)(7)(B), for the sole purpose of
handling the Bank's credit life insurance business. Based upon the
foregoing, the FDIC sees no reason to object to Respondent's request
to serve as an employee of the Bank in a limited capacity.
Respondent is reminded, however, that banking depends upon the
commitment to the highest standards of fiduciary duty long required by
law for bankers. See Briggs v. Spaulding, 141 U.S. 132
(1891); Docket No. 85-291k, FDIC ENFORCEMENT DECISIONS AND
ORDERS, PAR. 5072, A-964, A-975 (1986); Docket No. 85-356e,
FDIC ENFORCEMENT DECISIONS AND ORDERS, Par. 5112, A-1228, A-1235
(1988); In the Matter of Donohoo, FDIC-92-249c & b, 92-250e,
1 FDIC Enforcement Decisions and Orders ¶ 5225 at A-2670
[Recommended Decision adopted in pertinent part] (1994), aff'd
in part sub. nom., Lindquist & Vennum v. FDIC, 103 F.3d 1409 (8th
Cir.), cert. denied, 522 U.S. 821 (1997); In the
Matter of Landry, FDIC-95-65e, 1 FDIC Decisions and Orders,
¶ 5256 at A-3017, aff'd at 204 F.3d 1125 (D.C. Cir.
2000); see also FDIC Policy "Statement Concerning the
Responsibilities of Bank Directors and Officers," 2 FDIC Law,
Regulations, Related Acts at 5369; and American Bankers
Association, Focus on the Bank Director, 97-125 (1984);
Schlichting, Rice & Cooper, Banking Law, 6.04 (1984).
[.2] Accordingly, the request dated March 10, 2000, is hereby approved
for Respondent to serve as an employee of the Bank of Hoven, Hoven,
South Dakota, in the manner hereafter described. The consent so granted
for Respondent to serve as an employee of the Bank is limited solely to
participation in the conduct of the Bank's credit life insurance
business and does not constitute consent to engage in any other conduct
not specifically authorized by this order which may violate the Section
8(e) Order or section 8(e)(7)(A) of the Act, 12 U.S.C.
§1818(e)(7)(A).
Pursuant to delegated authority.
Dated at Washington, D.C., this 2nd day of August 2000.