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FDIC Enforcement Decisions and Orders

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   [8019] In the Matter of Edward S. Buchanan, Massachusetts Bank and Trust Company, Brockton, Massachusetts, Docket No. FDIC-91-368e (9-1-92).

   FDIC Board upholds administrative law judge's denial of respondent's motion to stay prohibition proceedings during pendency of federal court action to determine propriety of bank's advancing payment of respondent's legal expenses.
   [.1] Practice and Procedure—Interlocutory Review—Standards
   In order for board to grant interlocutory review of an ALJ decision, one of the statutory criteria must be met: the request involves a controlling question of law; or immediate review may advance ultimate termination of the proceeding; or subsequent modification of the ruling at the end of the proceeding would be an inadequate remedy or would cause unusual delay or expense.
   [.2] Practice and Procedure—Stay of Proceedings—Pendency of Federal Court Action.
   The issue raised in district court proceedings—whether a bank may indemnify an officer for legal expenses incurred in FDIC enforcement proceedings—is not a controlling question of law in a prohibition proceeding.
   [.3] Practice and Procedure—Stay of Proceedings—Discretion of ALJ
   Where ALJ presents an explanation of his reasons for denying respondent's request for a stay of proceedings, the Board will uphold the denial unless it finds substantial basis for reversal.

In the Matter of
and as an officer, director,
person participating in the conduct
of the affairs, and institution
affiliated party of

(Insured State Nonmember Bank)



   On January 6, 1992, the Director, Division of Supervision of the Federal Deposit Insurance Corporation ("FDIC") initiated this proceeding by issuing a Notice of Intention to Prohibit From Further Participation ("Notice") alleging that Edward S. Buchanan ("Respondent"), a director and officer of Massachusetts Bank and Trust Company, Brockton, Massachusetts ("Bank"), engaged or participated in violations of regulation, unsafe and unsound banking practices, and breaches of fiduciary duty. The Notice sought Respondent's prohibition from participation in any manner in the conduct of the affairs of any financial institution pursuant to section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e).
   On January 23, 1992, Administrative Law Judge Walter J. Alprin ("ALJ") was designated to hear the case. During the pendency of the case, it came to the attention of the FDIC that, pursuant to the Bank's By-Laws, the Bank was advancing money to Respondent to permit him to pay his attorneys fees. {{11-30-92 p.I-64}}On April 23, 1992, the Regional Director (Supervision) of the FDIC's Boston Regional Office wrote a letter to the Bank's board of directors warning that advancing the attorneys fees was inappropriate and might leave the board's members or the Bank open to liability under the FDI Act.
   On May 5, 1992, the Bank filed a civil action in the United States District Court for the District of Massachusetts requesting a declaratory judgment concerning the propriety of advancing payment of Respondent's legal fees. At the same time, the Bank ceased paying Respondent's legal fees pending the outcome of the court case. Respondent was thus obliged to pay counsel himself or to defend this case pro se.
   On May 15, 1992, Respondent filed a Motion for Stay before the ALJ, alleging the need to stay proceedings pending the outcome of the district court proceedings. On May 27, 1992, FDIC Enforcement Counsel filed an Opposition to the Motion. By Order dated May 29, 1992, the ALJ denied the Motion.
   The ALJ noted that there were two bases for Respondent's Motion: (1) the pendency of the District Court proceeding, and (2) Respondent's alleged lack of funds sufficient to retain counsel in the absence of the Bank's indemnification (Order at 1). As to the first ground, the ALJ concluded that the District Court would not have jurisdiction to decide the issues presented because of 12 U.S.C. § 1818(i)(1), which precludes courts from preventing banking regulatory agencies from commencing enforcement actions (Order at 2). Moreover, he found that the serious nature of the charges against Respondent militated against any stay of the proceedings pending before him. Id.
   With regard to the second ground, the ALJ noted that Respondent had not presented any evidence to support the allegation of lack of funds to retain counsel (Order at 2–3). The ALJ also observed that since the proceedings was not criminal in nature, Respondent had no right to counsel at public expense and that his allegation of lack of funds undercut the argument that the Bank should advance payment of his legal bills since the indemnification was conditioned on his being able to repay the Bank if he lost the enforcement action (Order at 3). Accordingly, the ALJ denied the Motion for Stay.
   On June 5, 1992, Respondent filed with the ALJ a Request for Interlocutory Relief. FDIC Enforcement Counsel filed a Response in opposition on June 17, 1992.


   [.1] Requests for interlocutory review are governed by Rule 28 of the Uniform Rules of Practice and Procedure, 12 C.F.R. § 308.28. The Board of Directors ("Board") of the FDIC concludes, upon a review of the record and the reasons proffered by the Respondent in his request, that the Respondent has failed to satisfy any of the criteria for interlocutory review pursuant to that Rule. Accordingly, the Board denies the request.
   Rule 28 provides that the Board may grant interlocutory review of an ALJ ruling if:

    (1) The ruling involves a controlling question of law or policy as to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling at the conclusion of the proceeding would cause unusual delay or expense.
12 C.F.R. § 303.28(b). Although Respondent, filing his Request pro se, has failed to address the Rule 28 criteria, the Board nonetheless concludes that he cannot satisfy any of them.

   [.2,.3] In considering Respondent's request, the Board is mindful that the issue raised in the District Court case, i.e., the circumstances under which Respondent may receive indemnification of his legal expenses, is not presented in this case. However, the request before the Board raises two issues: (1) whether the ALJ properly declined to stay the proceedings, and (2) whether the proceedings in this case may continue even though Respondent may be forced to proceed pro se. In the Board's view, neither of these issues satisfies the first criterion for interlocutory review; they are not controlling questions of law and there is no basis for believing that substantial grounds for a difference of opinion could exist as to them. This proceeding is not criminal in nature and therefore, Respondent is not entitled to counsel at public expense. See e.g., Murray v. Giarratano, 492 U.S. 1, 6–7 (1989) (Sixth Amendment right to counsel limited to trial and appeal stage of {{9-30-97 p.I-65}}criminal proceeding). Moreover, a stay request is, in the first instance, addressed to the discretion of the ALJ, and based on the ALJ's reasoning, the Board finds no substantial basis for a reversal of that decision.
   It seems obvious that the request fails to satisfy the second criterion since granting a stay will delay rather than advance the termination of the proceeding. The last two criteria concerning subsequent modification of the Order denying a stay at the conclusion of the proceeding are inapplicable because the order denying the stay will be moot. Moreover, to the extent that the ALJ may have ruled on the question of whether Respondent was entitled to counsel at public expense, subsequent modification of that ruling at the conclusion of the proceeding will be an adequate remedy and will not cause unusual delay or expense, see In the Matter of The Citizens Bank of Clovis, Clovis, New Mexico, FDIC-91-406b, slip op. at 4 (May 5, 1992) (litigation expense does not constitute unusual expense for purposes of Rule 28).
   Accordingly, Respondent's Request for Interlocutory Relief fails to satisfy the criteria contained in Rule 28. Accordingly, the Request is hereby denied.


   For the reasons set forth above, it is hereby ORDERED that Respondent's Request for Interlocutory Relief is DENIED.
   By direction of the Board of Directors.
   Done at Washington, D.C., this 1st day of September, 1992.

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