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FDIC Enforcement Decisions and Orders

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   [8031] In the Matter of Ray C. Baas, Crescent City Bank & Trust Company, New Orleans, Louisiana, Docket No. FDIC-92-166e (1-27-95).

   FDIC denies Enforcement Counsel's request for interlocutory review of an ALJ's decision refusing to quash a subpoena for an FDIC official to appear at a prohibition hearing.

   [.1] Practice and Procedure—Interlocutory Review—Standard
   Though interlocutory review is appropriate when a policy issue is raised, and the subpoena of a senior FDIC official may raise such issues, the record must clearly demonstrate that such an issue is present.
   [.2] Practice and Procedure—Subpoena—Motion to Quash
   One who seeks to quash a subpoena should provide a complete affidavit with facts to support his motion to quash; if he does not provide such information, the ALJ should require parties to submit appropriate evidence on the matter.
   [.3] Evidence—Subpoena—FDIC Official
   The primary issue as to propriety of testimony from FDIC official is whether he has personal knowledge of facts that are the basis for the proceeding.

In the Matter of
RAY C. BAAS
CRESCENT CITY BANK &
TRUST COMPANY

NEW ORLEANS, LOUISIANA
(Insured State Nonmember Bank—in Receivership)
DECISION AND ORDER DENYING
REQUEST FOR INTERLOCUTORY
REVIEW

FDIC-92-166e

I. INTRODUCTION

   This matter arises from a request by Federal Deposit Insurance Corporation ("FDIC") Enforcement Counsel for interlocutory review of an Order issued by the Administrative Law Judge ("ALJ") refusing to quash a subpoena requiring A. David Meadows, Associate Director of the FDIC's Division of Supervision, to testify at the hearing in the prohibition proceeding.
   Ray C. Baas ("Respondent") sought the subpoena, asserting that Mr. Meadows corresponded directly with the Respondent and other directors of Crescent City Bank & Trust Company, New Orleans, Louisiana ("Crescent" or "Bank") and directly supervised Crescent. Respondent also argued that testimony of a review examiner establishes Mr. Meadows' involvement in the failed Bank. The ALJ issued the subpoena on June 13, 1994.
   FDIC Enforcement Counsel moved to quash the subpoena, arguing that Respondent's relevancy arguments are factually incorrect since Mr. Meadows does not possess personal knowledge of facts material to the case. However, FDIC Enforcement Counsel provided no evidence to support this argument. FDIC Enforcement Counsel also asserted that under prior decisions of the FDIC Board of Directors ("Board"), inquiry into the mental processes of administrative decision makers is prohibited.
   The ALJ's Order declining to quash the subpoena accepts Respondent's contention that the testimony of Mr. Meadows would establish his role in this matter as the former Regional Director. Distinguishing this case from Board decisions involving the mental process privilege, the ALJ reasoned that the Respondent seeks to question Mr. Meadows as a fact witness about his relevant involvement in the supervision and examination of Crescent. The ALJ cautioned that Respondent could not probe Mr. Meadows' privileged mental or deliberative processes.
   In the Request for Interlocutory Review, FDIC Enforcement Counsel establishes, by affidavit, that Mr. Meadows was not Memphis Regional Director during the years Crescent operated. FDIC Enforcement Counsel argues that Mr. Meadows had no direct involvement in the actual supervision of Crescent, but this issue is not addresses in the affidavit.
   Finding a lack of supporting documentation, the FDIC requested the parties supply {{3-31-95 p.I-106}}additional materials.1 The ALJ and FDIC Enforcement Counsel supplied these documents (discussed below). The Respondent asked for an extension of time without providing any explanation as to why it was necessary.2

II. DISCUSSION

   A. Request For Permission To Appeal.

   [.1] Section 308.28(b) of the FDIC Rules of Practice states that interlocutory review of a ruling of an administrative law judge may be granted if the Board of Directors finds that:

    (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 would cause unusual delay or expense. 12 C.F.R. § 308.28(b).
   The Board has recognized that a policy issue may be raised when a senior official is subpoenaed to testify in an enforcement proceeding.3 Where the testimony of senior officials is of little or no relevance to the resolution of the issues before the ALJ, public policy requires that these officials be protected from undue interference with their official duties. See In the Matter of Ronald J. Grubb, FDIC-88-282k, FDIC-89-111e, 1 FDIC Enf. Dec. ¶8006A (1990), In the Matter of Kenneth O. Arnold, FDIC-85-83k, 2 FDIC Enf. Dec. ¶8006A (1990). Enforcement of an inappropriate subpoena could seriously disrupt critical agency activities and functions. If a senior official has no firsthand knowledge of facts which are in issue in a proceeding, testimony by such official will have no apparent relevance to the proceeding. Under such circumstances, requiring testimony would be adverse to public policy.

   In the present proceeding, a policy issue may be implicated. Unfortunately, the record in this interlocutory appeal, despite the opportunity for supplementation, still contains insufficient evidence concerning Mr. Meadows' involvement in, and knowledge of, the underlying supervision of Crescent to enable the Board to conclude that a policy issue is present. Accordingly, the request for interlocutory review is denied. However, in light of the importance of the policy of protecting senior officials from the unnecessary waste of valuable time and interference with other critical agency functions that may be involved, additional guidance is set forth below.

B. The Subpoena

   [.2] Section 308.34 of the FDIC Rules of Practice requires that an application for subpoena be supported by a showing of general relevance. Respondent asserted general relevancy, and the ALJ issued the subpoena. The better practice would have been for FDIC Enforcement Counsel to provide a complete affidavit addressing the issue of Mr. Meadows' direct involvement in the supervision of the Bank and the timing of his various posts of assignment with the original motion to quash. Lacking such evidence and in light of the factual dispute, the ALJ should have required the parties to submit evidence establishing Mr. Meadows' personal knowledge and supervisory involvement in the Bank or the lack thereof.
   The parties were provided an opportunity to supplement the record and all materials alleged by the Respondent to demonstrate Mr. Meadows' involvement with Crescent have been examined. Specifically, the testimony of Review Examiner Nicholas Stacy, the three transmittal letters signed by Mr. Meadows, the Order of Correction, and the Notice of Intention to Prohibit From Further Participation signed by Mr. Meadows have been reviewed. The four volumes of transcripts of Mr. Stacy's testimony do not contain any mention or reference to Mr. Meadows by name.4 Similarly, the transmittal documents do not evidence direct involve-


1This request for supplemental documentation was by letters to the parties and the ALJ, dated October 3, 1994.

2The Board has noted in the past that extensions of time are ordinarily only granted for good cause shown. See 12 C.F.R. § 308.13.

3The Request for Interlocutory Review does not demonstrate the other criteria set forth for interlocutory review. Although not addressed, to the extent that the time of a senior official is unnecessarily expended, subsequent modification of the ALJ's ruling at the conclusion of the proceeding would be an inadequate remedy.

4To the extent that Respondent is interpreting references by Mr. Stacy to the Regional Director to be references to Mr. Meadows, it is noted that Mr. Meadows left the position as Regional Director for the Memphis Region in November 1983, prior to occurrence of the events upon which this proceeding is based. See Affidavit of A. David Meadows, dated July 20, 1994. Since the Bank came into existence on November 13, 1984, and was closed on December 15, 1988, it is clear that Mr. Meadows was not the Regional Director at any time during the Bank's existence.
{{7-31-95 p.I-107}}ment by, or knowledge of, relevant facts by Mr. Meadows. Mr. Meadows did execute, pursuant to delegated authority in his capacity as Associate Director, the Order of Correction and the Notice of Intention to Prohibit from Further Participation. However, execution of these documents initiating formal enforcement proceedings does not necessarily indicate any firsthand knowledge. Usually the exercise of delegated authority is based upon a written recommendation from the Regional Director, which has been subjected to review by a Washington review section and the Assistant General Counsel, Legal Division, Compliance and Enforcement Section. Accordingly, in the absence of other evidence, these documents neither support, nor refute Respondent's allegation that Mr. Meadows was directly involved in the actual supervision of Crescent and has direct knowledge of facts relevant to this proceeding.

   [.3] The primary issue as to the propriety of testimony by Mr. Meadows is whether he has personal knowledge of facts that are the basis for this proceeding. Given the inconclusive state of the current record on this issue and the importance of the policy of not burdening senior officials unnecessarily, the ALJ is commended to undertake further evidentiary investigation of this matter before any such testimony is required. If Mr. Meadows does, in fact, have personal knowledge of matters at issue in this proceeding, then he may be called to testify. However, if he does not have such knowledge then it is concluded that to testify would be an inappropriate waste not only of Mr. Meadows' time, but also that of the parties and the ALJ.

C. Request for Extension of Time

   Finally, it is unnecessary to reach the issue of Respondent's unsupported request for an extension of time. As set forth above, the ALJ should seek additional evidence of factual knowledge of Mr. Meadows before he is required to testify. Accordingly, Respondent will have a further opportunity to present any relevant factual evidence to ALJ for his consideration.

III. CONCLUSION

   Accordingly, the request for interlocutory review is denied.

ORDER

   For the foregoing reasons, it is hereby ORDERED that the request for interlocutory review is DENIED.
   Dated at Washington, D.C., this 27th day of January, 1995.
   Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.

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