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[¶10,582A]In the Matter of Lurner O. Benton, III, Ollie F. Askew, Sr., Ann
Fitzpatrick, William Gordon Parrott, III, and Gary B. Vickers, The
Farmers Bank, Union Point, Georgia, Docket No. 92-105k (5-27-92).
Respondents agree to pay civil money penalties assessed by the FDIC.
This was an uncontested notice and became a final order by operation of
law.
In the Matter of
LURNER O. BENTON, III,
OLLIE F. ASKEW, SR.,
ANN FITZPATRICK,
WILLIAM GORDON PARROTT, III,
and GARY B. VICKERS,
individually, and as institution-affiliated parties of
THE FARMERS BANK
UNION POINT, GEORGIA
(Insured State Nonmember Bank)
NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTIES, FINDINGS OF FACT AND CONCLUSIONS OF LAW, ORDER TO PAY, AND NOTICE OF HEARING
FDIC-92-105k
NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTIES
The Federal Deposit Insurance Corporation ("FDIC") is of the
opinion that Lurner O. Benton, III, Ollie F. Askew, Sr., Ann
Fitzpatrick, William Gordon Parrott, III, and Gary B. Vickers,
individually, and as institution-affiliated parties
("Respondents") of The Farmers Bank, Union Point, Georgia
("Bank"), have violated: (a) section 22(h) of the Federal Reserve
Act, 12 U.S.C. § 375b; (b) Regulation O of the Board of Governors of
the Federal Reserve System ("Regulation O"), 12 C.F.R. Part 215,
made ap-
{{10-31-00 p.C-2482}}plicable to insured State nonmember banks pursuant to section
18(j)(2) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C.
§ 1828(j)(2), and section 337.3 of the FDIC's Rules and Regulations,
12 C.F.R. § 337.3; (c) sections 23A(c) and 23B of the Federal Reserve
Act, 12 U.S.C. §§ 371c(c) and 371c-1, made applicable to insured
State nonmember banks pursuant to section 18(j)(1) of the Act, 12
U.S.C. § 1828(j)(1); (d) section 349.3(a) of the FDIC's Rules and
Regulations, 12 C.F.R. § 349.3(a); (e) sections 7-1-286 and 45-8-12
of the Official Code of Georgia Annotated; and (f) sections 80-1-6-.03
and 80-1-2 of the Rules of the State of Georgia Department of Banking
and Finance.
Wherefore, the FDIC hereby issues this NOTICE OF ASSESSMENT OF CIVIL
MONEY PENALTIES, FINDINGS OF FACT AND CONCLUSIONS OF LAW, ORDER TO PAY,
AND NOTICE OF HEARING ("NOTICE OF ASSESSMENT") pursuant to
sections 8(i)(2) and 18(j)(4) of the Act, 12 U.S.C. §§ 1818(i)(2)
and 1828(j)(4), and Part 308 of the FDIC's Rules of Practice and
Procedure, 56 Fed. Reg. 37,968 (1991) (to be codified at 12 C.F.R. Part
308). In support thereof, the FDIC finds and concludes as follows:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
A. Jurisdiction and General
1. At all times pertinent to the charges herein, the Bank was a
corporation existing and doing business under the laws of the State of
Georgia and had its principal place of business in Union Point,
Georgia. The Bank is and has been at all times pertinent to the charges
herein, an insured State nonmember bank subject to the Act, 12 U.S.C.
§§ 811-1831t, the FDIC's Rules and Regulations, 12 C.F.R. Chapter
III, and the laws of the State of Georgia.
2. At all times pertinent to the charges herein, Respondent Lurner O.
Benton, III, was a "director" and an "executive officer" of
the Bank within the meaning of sections 215.2(c) and 215.2(d) of
Regulation O, 12 C.F.R. §§ 215.2(c) and 215.2(d), and an
"institution-affiliated party" of the Bank within the meaning of
sections 3(u), 8(i)(2) and 18(j)(4) of the Act, 12 U.S.C.
§§ 1813(u), 1818(i)(2) and 1828(j)(4).
3. At all times pertinent to the charges herein, Respondents Ollie F.
Askew, Sr., Ann Fitzpatrick, William Gordon Parrott, III, and Gary B.
Vickers were "directors" of the Bank within the meaning of
section 215.2(c) of Regulation O, 12 C.F.R. § 215.2(c), and
"institution-affiliated parties" of the Bank with the meaning of
sections 3(u), 8(i)(2) and 18(j)(4) of the Act, 12 U.S.C.
§§ 1813(u), 1818(i)(2) and 1828(j)(4).
4. Putnam-Greene Financial Corporation ("Putnam-Greene") is, and
was at all pertinent times, a bank holding company organized and doing
business under section 3(a) of the Bank Holding Company Act, 12 U.S.C.
§ 1842(a), and the laws of the State of Georgia and had its principal
place of business in Eatonton, Georgia.
5. At all times pertinent to the charges herein, Putnam-Greene owned
and controlled 99.9 percent of the capital stock of the Bank.
6. At all times pertinent to the charges herein, Putnam-Greene was the
"principal shareholder" of the Bank within the meaning of section
215.2(j) of Regulation O, 12 C.F.R. § 215.2(j).
7. At all times pertinent to the charges herein, the Respondents
exercised a controlling influence over the management, policies and
practices of the Bank.
8. The FDIC has jurisdiction over the Respondents, the Bank, and the
subject matter of this proceeding.
B. Violations of Regulation O
9. Pursuant to section 215.4(a)(1) of Regulation O, 12 C.F.R.
§ 215.4(a)(1), the Bank may not extend credit to any of its executive
officers, directors or principal shareholders, or to any related
interest of such persons, unless the extension of credit is made on
substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions by the Bank
with other persons that are not covered by Regulation O and who are not
employed by the Bank.
a. $58,000 unsecured interest-free loan to Putnam-Greene
10. On or about April 1, 1990, the Bank sold and transferred to
Putnam-Greene the Bank's entire computer system.
11. That transaction between the Bank and Putnam-Greene was not entered
on the Bank's books until June 5, 1990, when the Bank entered it as an
interest-free unsecured obligation owed to the Bank from Putnam-Greene
in the amount of $58,000.
12. That $58,000 unsecured interest-free obligation owed to the Bank
from Putnam-Greene remained on the Bank's books until November 2,
1990, when Putnam-Greene paid it in full.
13. That $58,000 unsecured interest-free
{{10-31-00 p.C-2482.1}} transaction between the Bank
and Putnam-Greene constituted an "extension of credit" by the
Bank to its principal shareholder under section 215.3(a) of Regulation
O, 12 C.F.R. § 215.3(a).
14. At the time the Bank entered into the $58,000 unsecured
interest-free transaction with Putnam-Greene, the Bank required persons
or entities who were not affiliated with it to: (i) repay extensions of
credit at the prevailing market rate of interest, (ii) deliver to the
Bank appropriate legal documents and appraisals in connection with the
extensions of credit, and (iii) pledge adequate collateral to secure
repayment of the loans.
15. The Respondents caused or permitted the Bank to enter into
the $58,000 unsecured interest-free transaction or extension of credit
with Putnam-Greene in violation of section 215.4(a)(1) of Regulation O,
12 C.F.R. § 215.4(a)(1), because the extension of credit was not made
on substantially the same terms as those prevailing at the time for
comparable transactions by the Bank with persons not affiliated with
the Bank since the obligation: (a) bore no interest charge, (b) was
made without requiring Putnam-Greene to produce appropriate legal
documentation and appraisals of collateral securing the loan and (c)
did not require Putnam-Green to pledge collateral to secure its
repayment.
b. $550,000 Benton loan
16. On or about July 3, 1990, the Bank granted two extensions of
credit to Nancy T. Benton in the amount of $550,000 and $100,000,
respectively. Nancy T. Benton transferred the proceeds of the $550,000
loan to her husband, Respondent Lurner C. Benton, III.
17. That $550,000 extension of credit to Nancy T. Benton constituted an
"extension of credit" by the Bank for the tangible economic
benefit of the Bank's president and director, Lurner O. Benton, III,
within the meaning of and pursuant to sections 215.3(a) and 215.3(f) of
Regulation O, 12 C.F.R. §§ 215.3(a) and 215.3(f).
18. At the time the Bank granted the $550,000 extension of credit
attributable to Lurner O. Benton, III, the Bank required persons and
entities who were not affiliated with it to repay similar extensions of
credit at an interest rate of 11.25 percent per annum. However, the
Bank allowed Nancy T. Benton and Lurner O. Benton, III, to repay the
$550,000 extension of credit at an interest rate of only 10 percent per
year, which was 1.25 percent below the prevailing market rate.
19. The Respondents caused or permitted the Bank to grant the $550,000
extension of credit attributable to Lurner O. Benton, III, in violation
of section 215.4(a)(1) of Regulation O, 12 C.F.R. § 215.4(a)(1),
because it was not made on substantially the same terms as those
prevailing at the time for comparable loans by the Bank with persons
and entities who were not affiliated with it due to the below market
interest rate.
c. $109,000 Hudson loan
20. On or about August 4, 1990, the Bank granted an extension of
credit to its executive vice president, James D. Hudson, Jr., in the
amount of $109,000.
21. That loan to ___ constituted an "extension of credit" by
the Bank to an executive officer within the meaning of section 215.3(a)
of Regulation O, 12 C.F.R. § 215.3(a).
22. At the time the Bank granted that loan to ___ the Bank required
persons and entities who were not affiliated with it to repay similar
extensions of credit at an interest rate of 11.25 percent per annum.
However, the Bank required ___ to repay the aforementioned
extension of credit at the rate of only 10 percent per year, which was
1.25 percent below the prevailing market rate.
23. The Respondents caused or permitted the Bank to grant the $109,000
extension of credit to ___ in violation of section 215.4(a)(1) of
Regulation O, 12 C.F.R. § 215.4(a)(1), because the extension of
credit was not made on substantially the same terms as those prevailing
at the time for comparable transactions by the Bank with persons not
affiliated with the Bank due to its below market interest rate.
d. Bank records - failure to list related interests
24. Section 215.7 of Regulation O, 12 C.F.R. § 215.7, requires
the Bank to maintain records necessary to comply with Regulation O
which: (a) identify all executive officers, directors, and
{{10-31-00 p.C-2482.2}}principal
shareholders of the Bank and the related interests of each of those
persons and (b) state the amount and terms of each extension of credit
by the Bank to its executive officers, directors and principal
shareholders and to their respective related interests. The Bank is
also required to request at least annually that each of its executive
officers, directors and principal shareholders identify their
respective related interests.
25. For the year 1990, the Bank failed to: (a) require its executive
officers, directors and principal shareholder to identify their related
interests and (b) maintain records which specified the amount and terms
of any extensions of credit by the Bank to any such related interests.
26. The Respondents caused or permitted the Bank to violate section
215.7 of Regulation O, 12 C.F.R. § 215.7, by failing to require the
Bank to maintain records which identified the related interests of each
executive officer, director and principal shareholder of the Bank and
which specified the amount and terms of any extensions of credit by the
Bank to their respective related interests for 1990.
C. Sections 23A and 23B of the Federal Reserve Act Violations
27. Section 23A(c)(1) of the Federal Reserve Act, 12 U.S.C.
§ 371(c)(1), provides in pertinent part that each loan or extension
of credit to an affiliate of the Bank must be secured at the time of
the transaction by collateral having a market value equal to 130
percent of the amount of the loan or extension of credit if the
collateral is composed of stock, leases, or other real or personal
property.
28. Putnam-Greene is an "affiliate" of the Bank within the
meaning of section 23A(b) (1)(A) of the Federal Reserve Act, 12 U.S.C.
§ 371c(b)(1)(A), so that the $58,000 unsecured interest-free
transaction between the Bank and Putnam-Greene cited above is a
"loan or extension of credit" by the Bank to an affiliate under
section 23A(c)(1) of the Federal Reserve Act, 12 U.S.C. § 371c(c)(1).
29. The Respondents caused or permitted the Bank to grant the $58,000
unsecured interest-free extension of credit to Putnam-Greene in
violation of section 23A(c)(1) of the Federal Reserve Act, 12 U.S.C.
§ 371c (c)(1), because the extension of credit was not secured by
collateral having a market value equal to at least 130 percent of the
amount of the extension of credit.
30. Section 23B(a) of the Federal Reserve Act, 12 U.S.C. § 371c-1(a),
provides in pertinent part that the Bank may engage in a "covered
transaction", as defined in sections 23A(b)(7) and 23B(d)(3) of the
Federal Reserve Act, 12 U.S.C. §§ 371c(b)(7) and 371c-1(d)(3), with
an affiliate only on terms and under circumstances, including credit
standards, that are: (i) substantially that are the same or at least as
favorable to the Bank as those prevailing at the time in the Bank's
comparable transactions with or involving nonaffiliated entities or
(ii) in the absence of comparable transactions, on terms and under
circumstances, including credit standards, that the Bank in good faith
would offer or would apply to nonaffiliated entities.
31. Putnam-Greene is an "affiliate" of the Bank within the
meaning of sections 23A(a)(1) and 23B(d)(1) of the Federal Reserve Act,
12 U.S.C. §§ 371c(b)(1) and 371c-1(d)(1), so that the $58,000
unsecured interest-free transaction between the Bank and Putnam-Greene
is a "covered transaction" under section 23B of the Federal
Reserve Act, 12 U.S.C. § 371c-1.
32. The Respondents caused or permitted the Bank to enter into the
$58,000 unsecured interest-free "covered transaction" with
Putnam-Greene in violation of section 23B(a) of the Federal Reserve
Act, 12 U.S.C. § 371c-1(a), because the extension of credit was not
made on substantially the same terms as those prevailing at the time
for comparable transactions with or involving entities that were not
affiliated with the Bank or was not made on terms that the Bank in good
faith would offer to an entity that was not affiliated with it since
the obligation: (a) bore no interest charge, (2) was made without
requiring Putnam-Greene to produce appropriate legal documentation and
appraisals and (3) did not require Putnam-Greene to pledge collateral
to secure its repayment.
D. Violations of Georgia State Law and Regulations
a. Failure to secure governmental entity's deposits
33. Section 45-8-12 of the Official Code of Georgia Annotated
provides that banks doing business in the State of Georgia must provide
a surety bond and/or pledge assets to secure funds deposited by
governmental entities in excess of 10 days. The surety bond and/or
assets pledged must equal at least 110 percent of the amount of the
governmental deposits being secured, after deducting the $100,000 FDIC
insurance on the governmental deposit.
{{10-31-00 p.C-2482.3}}
34. On or about December 1, 1990, the Bank accepted a deposit of
$140,665 from the Greene County, Georgia Board of Commissioners, a
governmental body.
35. At the time the Bank accepted the deposit from the Greene County
Board of Commissioners, and continuing for more than 10 days
thereafter, the Bank failed to provide a surety bond/or pledge assets
equal to at least 110 percent of that deposit, after deducting the
$100,000 FDIC insurance on that deposit.
36. The Respondents caused or permitted the Bank to accept that deposit
from the Greene County Board of Commissioners in violation of section
45-8-12 of the Official Code of Georgia Annotated because the Bank
failed to secure the deposit with a surety bond and/or pledge of assets
equal to at least 110 percent of the deposit, after deducting the
$100,000 FDIC insurance on that deposit.
b. Excessive regularly amortizing real estate loan
37. Section 7-1-286 of the Official Code of Georgia Annotated
provides in pertinent part that banks doing business in the State of
Georgia may make a regularly amortizing extension of credit secured by
improved or unimproved real estate only if the extension of credit does
not exceed 90 percent of the current fair market value of the real
estate that secures repayment of such loans.
38. On April 13, 1990, the Bank made a regularly amortizing extension
of credit to ___ of $200,240 even though the then-current fair
market value of the real estate equaled $150,000, so that the maximum
amount that the Bank could have lent was only $135,000 or 90 percent of
$150,000.
39. The Respondents caused or permitted the Bank to grant the $200,240
extension of credit to ___ in violation of section 7-1-286 of the
Official Code of Georgia Annotated because the extension of credit
exceeded 90 percent of the then-current fair market value of the real
estate securing repayment of the loan.
c. Failure to secure and retain financial statements
40. Chapter 80-1-6 of the Rules of the State of Georgia Department
of Banking and Finance ("Chapter 80-1-6") provides in pertinent
part that each director of a bank doing business in the State of
Georgia shall maintain a complete and accurate financial statement on
file with the chief executive officer of the bank.
41. For the years 1987, 1988, 1989 and/or 1990, Director Ann
Fitzpatrick submitted annual financial statements to the Bank pursuant
to Chapter 80-1-6 which were incomplete and did not fully disclose her
financial net worth.
42. Director Ann Fitzpatrick violated Chapter 80-1-6 by failing to
submit to the Bank a complete and accurate financial statement.
d. Unapproved bank-service contract with Putnam-Greene
43. Chapter 80-1-2 of the Rules of the Georgia Department of
Banking and Finance ("Chapter 80-1-2") provides in pertinent part
that the Bank must submit an application to the State of Georgia
Department of Banking and Finance for approval of all contracts for
bank services that any bank service corporation or other entity wishes
to render to the Bank. Section 80-1-2-.01(2) of the Rules of the State
of Georgia Department of Banking and Finance defines "bank
services" as including: (a) check and deposit sorting and posting,
(b) computation and posting of interest and other credits and charges,
(c) preparation and marking of checks, statements, notices and similar
items or (d) other clerical, bookkeeping, accounting, statistical or
similar functions performed by a bank.
44. On or about April 1, 1990, the Bank entered into an agreement with
Putnam-Greene under which Putnam-Greene would provide "bank
services" to or for the Bank. However, the Bank did not submit an
application to the State of Georgia Department of Banking and Finance
for approval of that bank service contract.
45. The Respondents caused or permitted the Bank to enter into the bank
service agreement with Putnam-Greene Financial Corporation in violation
of Chapter 80-1-2 because the Bank failed to submit an application to
the State of Georgia Department of Banking and Finance for approval of
the bank service agreement.
E. Violation of FDIC Regulation - Correspondent Bank Debt
46. Section 349.3(a) of the FDIC's Rules and Regulations, 12
C.F.R. § 349.3(a), re-
{{10-31-00 p.C-2482.4}}quires the Bank's principal shareholder to make
a written report to the Bank's board of directors at any time during a
calendar year if the principal shareholder has an extension of credit
outstanding from a correspondent bank of the Bank.
47. Continuously since July of 1988, the Bank has had a correspondent
banking relationship with Bank South, National Association, Atlanta,
Georgia 9 ("Bank South"), within the meaning of section 349.3(a)
of the FDIC's Rules and Regulations.
48. During 1989 and 1990, Putnam-Greene was a principal shareholder of
the Bank and had an extension of credit of about $4,000,000 outstanding
at Bank South.
49. The Respondents failed to require the Bank to obtain from
Putnam-Greene a written report concerning that approximately $4,000,000
extension of credit for the year 1990, in violation of section 349.3(a)
of the FDIC's Rules and Regulations, 12 C.F.R. § 349.3(a).
DEFINITION OF "VIOLATION"
50. Pursuant to section 3(v) of the Act, 12 U.S.C. § 1813(v),
the term "violation" includes any action (alone or with another
or others) for or toward causing, bringing about, participating in,
counseling, or aiding or abetting a violation.
ORDER TO PAY
By reason of the violations set forth in the NOTICE OF
ASSESSMENT, the FDIC has concluded that civil money penalties should be
assessed against the Respondents pursuant to sections 8(i)(2) and/or
18(j)(4) of the Act, 12 U.S.C. §§ 1818(i)(2) and/or 1828(j)(4)
(1989). After taking into account the appropriateness of the penalties
with respect to the size of financial resources and the good faith of
each Respondent, the gravity of the violations, the history of previous
violations, and such other matters as justice may require, it is:
ORDERED, that by reason of the violations set forth above, that a
penalty of $5,000 be, and hereby is, assessed against Lurner O. Benton,
III; a penalty of $1,000 be, and hereby is, assessed against Ollie F.
Askew, Sr.; a penalty of $1,000 be, and hereby is, assessed against Ann
Fitzpatrick; a penalty of $1,000 be, and hereby is, assessed against
William Gordon Parrott, III; and a penalty of $1,000 be, and hereby is,
assessed against Gary B. Vickers, pursuant to sections 8(i)(2) and/or
18(j)(4) of the Act, 12 U.S.C. §§ 1818(i)(2) and/or 1828(j)(4)
(1989).
FURTHER ORDERED, that the effective date of this ORDER TO PAY be, and
hereby is, stayed with respect to each Respondent until 20 days after
the date of receipt of the NOTICE OF ASSESSMENT by the Respondents,
during which time each Respondent may file an answer and request a
hearing pursuant to section 8(i)(2)(H) of the Act, 12 U.S.C.
§ 1818(i)(2)(H), and section 308.19 of the FDIC's Rules of Practice
and Procedure, 12 C.F.R. § 308.19. The original and one copy of the
answer, any such request for a hearing, and all other documents in this
proceeding must be filed with the Office of Financial Institution
Adjudication, 1700 G Street, N.W., Washington, D.C. 20552. Also, copies
of all papers filed in this proceeding shall be served upon the Office
of the Executive Secretary, Federal Deposit Insurance Corporation, 550
17th Street, N.W., Washington, D.C. 20429; Arthur L. Beamon, Associate
General Counsel, Compliance and Enforcement, Federal Deposit Insurance
Corporation, 550 17th Street, N.W., Washington, D.C. 20429; and John J.
Rubin, Regional Counsel (Supervision), Federal Deposit Insurance
Corporation, 245 Peachtree Center Avenue, N.E., Suite 1200, Atlanta,
Georgia 30303.
If any Respondent fails to file a request for a hearing within 20 days
from the date of receipt of this NOTICE OF ASSESSMENT, the penalty
assessed against that Respondent, pursuant to this ORDER TO PAY, will
be final and shall be paid within 60 days after the date of receipt of
this NOTICE OF ASSESSMENT.
NOTICE OF HEARING
IT IS FURTHER ORDERED that, if any Respondent requests a hearing
with respect to the charges alleged in the NOTICE OF ASSESSMENT, the
hearing shall commence 120 days from the date of receipt of this NOTICE
OF ASSESSMENT at Union Point, Georgia, or at such other date or place
upon which the parties to this proceeding and the Administrative Law
Judge mutually agree.
The hearing will be public and shall be conducted in accordance with
the provisions of the Act, 12 U.S.C. §§ 1811-1831t, the
Administrative Procedure Act, 5 U.S.C. §§ 551-559, and the FDIC's
Rules of Practice and Procedure, 12 C.F.R. Part 308. The hearing
{{10-31-00 p.C-2482.5}} will
be held before an Administrative Law Judge to be appointed by the
Office of Financial Institution Adjudication pursuant to 5 U.S.C.
§ 3105. The exact time and location of the hearing will be determined
by the Administrative Law Judge.
In the event that any Respondent requests a hearing, each such
Respondent shall also file an answer to the charges in this NOTICE OF
ASSESSMENT within 20 days after the date of receipt of the NOTICE OF
HEARING in accordance with section 308.19 of the FDIC's Rules of
Practice and Procedure, 12 C.F.R. § 308.19.
Failure of any Respondent to request a hearing shall render the
civil money penalty assessed in this NOTICE OF ASSESSMENT final and
unappealable as to that Respondent pursuant to section 8(i)(2)(E)(ii)
of the Act, 12 U.S.C. § 1818(i)(2)(E)(ii), and section 308.19(c)(2)
of the FDIC's Rules of Practice and Procedure, 12 C.F.R.
§ 308.19(c)(2).
Pursuant to delegated authority.
Dated at Washington, D.C., this 27th day of May, 1992.