4000 - Advisory Opinions
Management Official Interlock
February 1, 1985
Pamela E. F. LeCren, Senior Attorney
The following is in response to your request that this office review the December 16, 1983 opinion of counsel for *** setting forth facts and arguments with respect to the issue of whether or not ***, chairman of the board of directors of ***, acts in that capacity as the representative or nominee of *** in violation of the Depository Institution Management Interlocks Act (12 U.S.C. 3201 et. seq.) and Part 348 of FDIC's regulations.
The facts as set forth in counsel's letter are as follows. ***, who, as we have indicated above, is chairman of the board of ***, owns and operates ***, a management consulting service which provides services to ***. *** and two other individuals own 100% of the stock of ***. (Counsel's letter does not indicate how the stock ownership is divided among the three.) *** owns and operates a bank management consulting service, ***, to which *** has no relationship. *** serves as a management official of ***, the ***, and the ***; all of which are located in the same consolidated metropolitan statistical area as each other and as ***. These three banks each own an equal amount of the stock of ***, a bank management and tax planning service. *** serves as president of ***.
This office cannot comment on whether or not *** would be involved in a management official interlock as a result of the fact that he is a management official of *** and also serves as president of the ***, the consulting firm that services the three banks for which *** is a management official, as the answer to that question depends upon the individual contracts and facts that are not available to us. Nor can this office comment upon whether or not *** association as a management official of the three unaffiliated institutions is a violation of the Depository Institution Management Interlocks Act as we have not been provided with any information as to the identity or precise location of the banks nor have we been informed how long *** has served as a management official of these three institutions. We will comment, however, on the issue of whether or not *** can be said to be the representative or nominee of ***. If *** is determined to be *** representative or nominee, *** would be considered to be a management official of ***. The resulting interlocks would presumably be in violation of the statute and Part 348 assuming that all of the institutions are in excess of $20,000,000 in total assets.
Section 348.2(k) of FDIC's regulations defines the term "representative or nominee" as follows:
Representative or nominee means a person who serves as a management official and has an express or implied obligation to act on behalf of another person with respect to management responsibilities. Whether a person is a "representative or nominee" depends upon the facts in individual cases. The appropriate federal supervisory agency or agencies will determine, after giving the affected parties the opportunity to respond, whether a person is a "representative or nominee." Certain relationships (including family, employment and agency relationships), or the ability and exercise of ability by a shareholder of a depository organization to elect a director, may be evidence of such an express or implied obligation.
According to bank counsel, *** and *** have no family, employment, or agency relationship to one another. *** does not work for, nor does he receive any compensation from, *** or ***. Although *** serves as president and *** serves as chairman of the board of ***, *** was chosen as president of that consulting firm by an "independent board of directors" which also establishes *** salary. There would appear to be some outstanding business relationship between *** and *** however, as both individuals are said to own stock in *** and *** which in turn, as indicated above, wholly own ***. Additionally, bank counsel's letter indicates that *** offers management services to these three banks "through the ***".
Bank counsel's letter indicates that *** recommended *** for the position of chairman of the board at ***, however, *** is said to have cast no vote or to have taken any other action to assure *** appointment to that position. *** has executed a blank proxy running to the president of the bank, ***, and through this mechanism has abstained from voting in any elections. A review of the information pertaining to the board of directors of the *** demonstrates that the members of the existing board of directors, with the exception of ***, have no relationship whatsoever to ***. We would therefore concur in bank counsel's characterization of the board of the bank as being independent of ***. We are also satisfied upon our review of *** qualifications that he is fully qualified to serve as a management official of the bank.
Although we are somewhat troubled by the fact that bank counsel indicate that *** participates in *** meetings as an observer and that the bank has adopted several policies and practices used by the three banks served by the *** consulting firm, after carefully weighing all the information set forth above, we do not feel that we should conclude at this time that *** is the representative or nominee of *** within the meaning of Part 348 of FDIC's regulations.