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   [8022] In the Matter of Charter Pacific Bank, Agoura Hills, California, Docket No. FDIC-92-253b (11-30-92).

FDIC Board denies request for private hearing and the filing of all documents under seal, finding that Respondent had not shown any reason to justify privacy.

   [.1] Practice and Procedure—Hearings—Public or Private—Burden
   Respondent must demonstrate that its situation differs so significantly from those involving other banks as to warrant special treatment.

   [.2] Practice and Procedure—Hearings—Public or Private—Privacy of Borrowers
   Borrowers' privacy interests can be served by disclosure of documents in redacted form; thus the filing of all documents under seal is not necessary for protection of borrowers.

In the Matter of
CHARTER PACIFIC BANK
AGOURA HILLS,CALIFORNIA
(Insured State Nonmember Bank)
DECISION AND ORDER ON
REQUEST FOR A PRIVATE
HEARING AND FOR FILING OF
ALL DOCUMENTS UNDER SEAL

FDIC-92-253b

BACKGROUND

   On August 10, 1992, the Regional Director (Supervision) of the Federal Deposit Insurance Corporation's ("FDIC") San Francisco Regional Office initiated this proceeding by issuing a Notice of Charges and of Hearing ("Notice"), alleging that Charter Pacific Bank, Agoura Hills, California ("Bank" or "Respondent"), had engaged or was engaging in unsafe or unsound banking practices and violations of law and/or regulations. The Notice sought the issuance of an appropriate order under section 8(b)(1) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(b)(1). On August 13, 1992, Administrative Law Judge Arthur L. Shipe ("ALJ") was designated to hear the case. Respondent filed an Answer to the Notice on August 27, 1992. Paragraph 16 of the Answer contains a request for a private hearing pursuant to the requirements of section 308.33 of the FDIC's Rules of Practice. The FDIC filed its opposition to the request for a private hearing on August 31, 1992. The Answer sets forth general and specific defenses to the charges issued in the Notice but fails to state any reason justifying a private hearing. On August 31, 1992, Respondent filed a Motion to the FDIC to Grant a Private Hearing and For Filing of All Documents Under Seal ("Motion") with an Affidavit of counsel for Respondent in support of the Motion. On September 2, 1992, FDIC Enforcement Counsel filed FDIC's Opposition to Motion By Charter Pacific Bank to Grant a Private Hearing and for Filing of All Documents Under Seal. On September 9, 1992, the Respondent filed a Memorandum in Response to FDIC's Opposition to Respondent's Request for Private Hearing.1

On September 14, 1992, the FDIC Enforce-


1 As an additional basis in support of its Motion the Respondent stated that the California State Constitution required a private hearing to protect the confidential financial information of the Bank's customers. The Respondent also attached "Exhibit A" to its responsive memorandum which purports to be an unaudited quarterly financial statement of the Bank as of June 30, 1992, prepared by Bank personnel.
{{2-28-93 p.I-71}}ment Counsel filed a Notice of Motion and Motion to Strike Response Memorandum Filed by Charter Pacific Bank dated September 9, 1992.2

DISCUSSION

   A. The Bank Has Not Demonstrated Entitlement to a Private Hearing.

   [.1] Respondent's request for a private hearing is based on a conclusory affidavit of its counsel asserting that: (1) "[t]he Bank believes that a private hearing and the filing of all documents under seal are necessary to prevent disclosure of the identities of borrowers whose loans have been criticized, with the concomitant illegal invasion of those borrowers' privacies and increased difficulties in collecting such loans to the detriment of the safety and soundness of the Bank"; (2) "identifying such borrowers and the criticized aspects of their loans will cause such borrowers to attempt to compromise the terms and conditions of their obligations to the Bank"; (3) the "charges set forth in the Notice are unsubstantiated and arbitrary in nature, thus shedding false light upon the Bank"; (4) the "Bank believes it will succeed on the merits"; (5) the "adverse public relations, rumor, and harm that will occur should the hearing be made public will far outweigh any marginal public policy that favors a public forum"; (6) "a public hearing and the filing of documents other [sic] under seal would cause the FDIC to be in violation of Section 3369 of the California Financial Code–"; and (7) "a public hearing and the filing of documents other than under seal in this proceeding would be detrimental to the reputation and image of the Bank in the eyes of its existing and potential customer base, thus compromising the Bank's future prospects."
Section 8(u)(2) of the FDI Act, 12 U.S.C. § 1818(u)(2), provides that:

    All hearings on the record with respect to any notice of charges issued by a Federal banking agency shall be open to the public, unless the agency, in its discretion, determines that holding the hearing would be contrary to the public interest.
See also 12 C.F.R. § 308.33.
   The legislative history of the statute "suggests increasing emphasis on the public nature of all aspects of section 1818 proceedings with any private proceedings being the exception to be justified by the party desiring privacy." In the Matter of The Citizens Bank of Clovis, FDIC-91-406b, 1 P-H FDIC Enf. Dec. ¶8012 (March 2, 1992). In order to qualify for a private hearing, a bank must "demonstrate in a concrete fashion how the effects of this proceeding differ so significantly from those involving other banks as to warrant special treatment." Clovis, at I-48. Further, "common sense suggests that concern for the safety and soundness of an institution should be the primary consideration in determining whether to mandate private proceedings in a particular case." Clovis, at I-48.
   Respondent has failed to make even a minimal showing why the presumption in favor of public hearings should be abandoned in this case. Contentions "which are essentially presented in conclusory form with no concrete support are insufficient to overcome the presumption in favor of public proceedings which the statute embodies." Clovis, at I-47-48.

   The FDIC, therefore concludes that Respondent has not pleaded any fact which demonstrates how the effects of a public hearing in this case differ so significantly from those involving other financial institutions as to warrant special treatment. There is nothing in the record here to support a determination that an open hearing would be contrary to the public interest.

   Accordingly, the Motion for a Private Hearing is denied.

   B. The Portion of the Bank's Motion Requesting the Filing of All Documents Under Seal Properly Belongs Before the ALJ for Resolution.

   [.2] The ALJ has jurisdiction to determine requests for filing of documents under deal. See 12 C.F.R. § 308.33(b). Section 1818(u)(6) of Title 12 of the U.S. Code provides, in part, that:


2 In its Motion, Respondent asserted that it "retains the right to file supplementary papers in support of these motions." However, section 308.23(d) of the FDIC Rules and Regulations, 12 C.F.R. § 308.23(d), does not permit the filing of a responsive memorandum. Accordingly, the contentions contained in the responsive memorandum will not be given weight in reaching a decision here. In any event, the Bank's responsive memorandum contains duplicative issues and arguments raised in its previous Motion. Moreover, it contains unsubstantiated, conclusory contentions and plainly fails to overcome the presumption in favor of a public hearing.
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    The appropriate Federal banking agency may file any document or part of a document under seal in any administrative enforcement hearing commenced by the agency if disclosure of the document would be contrary to the public interest.

   In Clovis, the Board of Directors of the FDIC ("Board") indicated that the parties and the ALJ are expected to "take all necessary steps to avoid any disclosure of examination reports," pursuant to 12 U.S.C. § 1818(u)(6). Clovis, at I-49. Moreover, "the Board is primarily concerned with the protection of innocent borrowers, and their privacy interests are likely to be served by the sealing (or redacting) of documents." Clovis, at I-49, n.3.
   Accordingly, the Respondent's motion for filing all documents under seal properly belongs before the ALJ and is therefore returned for resolution.

ORDER

   For the reasons set forth above, it is hereby ORDERED that the Bank's Motion for a Private Hearing is DENIED.
   The portion of the Bank's Motion requesting the filing of all documents under seal is returned to the Administrative Law Judge for resolution.
   Dated at Washington, D.C., this 30th day of November, 1992.
   Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.
/s/ Hoyle Robinson
   Executive Secretary

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