Federal Deposit
Insurance Corporation

   [¶10,927] In the Matter of Connecticut Bank of Commerce, Woodbridge, Connecticut, Docket No. FDIC-93-253b (12-21-93).

   (This order was terminated by order of the FDIC dated 4-2-99; see ¶16,216.)    Bank to cease and desist from such unsafe or unsound practices as failing to avoid conflicts of interest with its institution-affiliated parties; failing to monitor adequately payments to institution-affiliated parties; failing to keep owner from interfering with management and failing to give management sufficient authority to prevent unsafe and unsound practices; and operating in violation of applicable laws or regulations.

   [.1] Conflicts of Interest—Written Policy Required
   [.2] Institution-Affiliated Parties—Transactions With—Audit—Restitution
   [.3] Management—Qualifications—Review
   [.4] Management—Management Plan—Minimum Requirements
   [.5] Violations of Law—Eliminate/Correct
   [.6] Shareholders—Disclosure—Cease and Desist Order
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In the Matter of

CONNECTICUT BANK OF
COMMERCE
WOODBRIDGE, CONNECTICUT
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-93-253b
   Connecticut Bank of Commerce, Woodbridge, Connecticut ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on such alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated December 16, 1993, whereby solely for the purpose of this proceeding and without admitting or denying any unsafe or unsound banking practices or violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and had violated laws and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

   IT IS HEREBY ORDERED that the Bank and its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), cease and desist from the following unsafe or unsound banking practices and violations of law and/or regulations:
   (a) failing to avoid conflicts of interest in transactions between the Bank and its institution-affiliated parties and entities or natural persons related to such parties;
   (b) failing to monitor adequately payments made, directly or indirectly, by the Bank to institution-affiliated parties and entities or natural persons related to such parties;
   (c) failing to prevent Director/Owner from interfering with management in conducting the daily affairs of the Bank and failing to provide operating management adequate authority to perform its duties so as to prevent unsafe or unsound practices and violations of law and/or regulations; and
   (d) engaging in violations of applicable laws and regulations.
   IT IS FURTHER ORDERED that the Bank and its institution-affiliated parties take affirmative action as follows:

   [.1] 1. (a) By January 14, 1994, the Bank shall revise its written conflicts of interest policy ("conflicts of interest policy") which shall include, but not be limited to, the following:

   (i) specific guidelines relative to avoiding possible conflict of interest situations;
   (ii) specific guidelines prohibiting self-dealing;
   (iii) requirement that an institution-affiliated party abstain from voting on, speaking to, or being present for votes the outcome of which the institution-affiliated party will have a direct or indirect interest in, financial or otherwise;
   (iv) conditions pursuant to which payments are made, directly or indirectly, to any institution-affiliated party, or to any entity or natural person related to such party;
   (v) a provision requiring detailed documentation in support of any payments made to any institution-affiliated party providing goods or services, including a comparison with current market rates for non-affiliated parties providing comparable goods or services in the local area;
   (vi) a provision requiring the Bank to: maintain a list of all outside interests of each member of the Board of Directors, principal shareholder and executive officer of the Bank; keep such list current; and submit the current list on a quarterly basis to the Regional Director of the FDIC's Boston Regional Office ("Regional Director") and to the Banking Commissioner for the State of Connecticut ("Commissioner"). The first such submission shall be made {{2-28-94 p.C-3552}}within thirty days of the effective date of this ORDER;
   (vii) provisions to ensure compliance with the conflicts of interest policy as well as compliance with Section 23A and 23B of the Federal Reserve Act, 12 U.S.C. §§ 371c, 371c-1, and Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 215, including a provision requiring that members of the Board of Directors, principal shareholders and executive officers disclose all outside interests to the Bank on a quarterly basis.

[.2] 2. (a) Within fifteen (15) days from the effective date of this ORDER, the Bank shall cause an independent study or audit ("Audit") to be made of all transactions between the Bank and its institution-affiliated parties or entities or natural persons related to such parties between August, 1992 and the effective date of this ORDER. The Bank's Audit shall include a special emphasis on professional fees paid and on payments made pursuant to consulting service and other professional service contracts entered into by the Bank. Within ten (10) days following completion of the Audit, the Bank's Board of Directors shall promptly review the findings and recommendations of the Audit and report those findings in the minutes of the meeting at which it conducts its review.
   (b) Within fifteen (15) days of the completion of the Audit, the Bank shall seek restitution from any individuals or entities who or which have received unwarranted benefits from such transactions. The independent members of the Board of Directors shall develop a written report of the Bank's course of action in seeking restitution ("course of action report"), including a discussion of the extent to which the Bank had sought or will seek restitution from any individuals or entities. The Bank may consult with independent legal counsel to determine the propriety of instituting legal action based upon the Audit's findings and to develop the course of action report. The course of action report shall be completed and submitted to the Regional Director and the Commissioner for review and comment within fifteen (15) days of the completion of the Audit. Should the Bank's course of action report be inconsistent with any of the Audit findings and recommendations, the course of action report shall explain and document the disparity between the Audit and the course of action report and the reasons therefor. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after submission to the Regional Director and the Commissioner of the Bank's course of action report, the Board of Directors shall approve the course of action report, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Bank's Board of Directors. The Bank, its directors, officers and employees, shall follow the Bank's course of action report and/or subsequent modifications thereto.

[.3] 3. (a) Within sixty (60) days from the effective date of this ORDER, the Bank shall have and retain qualified management. At a minimum, such management shall include a President and Chief Executive Officer, Chief Lending Officer, and Chief Financial Officer with proven abilities to manage a bank of comparable size and quality, to the extent that the Bank has not already hired such management. The Board of Directors shall provide such management with the necessary written authority to implement the provisions of {{2-28-94 p.C-3553}}this ORDER at the time that such management is retained. Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management shall be assessed on its ability to:

   (i) comply with the requirement of this ORDER,
   (ii) operate the Bank in a safe and sound manner,
   (iii) comply with applicable laws and regulations, and
   (iv) restore all aspects of the Bank to a safe and sound condition, including: capital adequacy, asset quality, management effectiveness, earnings and liquidity.

   [.4] (c) Within sixty (60) days from the effective date of this ORDER, the Board of Directors shall develop a written analysis and assessment of the Bank's management and staffing needs ("management plan"), which shall include, at a minimum:

   (i) identification of both the type and number of officer positions needed to manage and supervise properly the affairs of the Bank;
   (ii) identification of the requisite authority needed by each officer to manage and supervise properly the affairs of the Bank;
   (iii) identification and establishment of such Bank committees as are needed to provide guidance and oversight to active management;
   (iv) evaluation of each Bank officer and staff member to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the Bank's established policies and practices, and maintenance of the Bank in a safe and sound condition;
   (v) a plan of action to recruit and hire any additional or replacement personnel with the requisite ability, experience and other qualifications, which the Board of Directors determines are necessary to fill Bank officer or staff member positions consistent with the Board's analysis, evaluation and assessment needs.
   (d) The written management plan shall be submitted to the Regional Director and the Commissioner for review and comment within sixty (60) days from the effective date of this ORDER. No sooner than thirty (30) days, but under no circumstances more than sixty (60) days after such submission, the Board of Directors shall approve the written management plan, taking into consideration any regulatory comments, and such approval shall be recorded in the minutes of the Board of Directors. Subsequent modifications to the written management plan may be made only after giving the Regional Director and the Commissioner written notice of the proposed modification, and after consideration of any responsive comments submitted by the Regional Director and/or the Commissioner within thirty (30) days from their receipt of the notice of proposed modification. No such modification shall become approval shall be recorded in the minutes of the Board of Directors. The Bank, its directors, officers and employees shall implement and follow the written management plan and/or any subsequent modification thereto.
   (e) (i) The written management plan shall also include the requirement that the Board of Directors of the Bank, or a committee thereof not less than a majority of whose members who are independent with respect to the Bank, provide supervision over lending, investment and operating policies of the Bank sufficient to ensure that the Bank complies with the provisions of this ORDER. For purposes of this ORDER, an individual who is "independent with respect to the Bank" shall be any individual (1) who is not an officer of the Bank or any of its affiliated organizations and who does not own, directly or indirectly, more than five (5.0) percent of the outstanding shares of the Bank, (2) who is not related by blood, marriage or common financial interest to {{2-28-94 p.C-3554}}an officer of the Bank or to any stockholder owning, directly or indirectly, more than five (5.0) percent of the Bank's outstanding shares, and (3) who is not indebted to the Bank, directly or indirectly (including the indebtedness of any entity in which the individual has a substantial financial interest), in an amount exceeding five (5.0) percent of the Bank's total equity capital and allowance for loan and lease losses.
   (ii) At the next meeting of the shareholders of the Bank, and at each succeeding meeting of the shareholders at which Bank directors are to be elected, the members of the Board of Directors who are also shareholders shall nominate and support the election of candidates to the Board of Directors who are independent with respect to the Bank, in such number as is necessary to cause a majority of the Board of Directors to be and to remain independent with respect to the Bank.

   [.5] 4. Within thirty (30) days from the effective date of this ORDER, the Bank shall correct all violations of law and regulations committed by the Bank, of which the Bank has been received notice by letter dated December 8, 1993 from the Regional Director.
   5. Within thirty (30) days from the effective date of this ORDER, and, thereafter, within thirty (30) days from the end of each calendar quarter, the Bank shall furnish written progress reports to the Regional Director and the Commissioner detailing the form and manner of any action taken to secure compliance with this ORDER and the results thereof. In addition, the Bank shall furnish such reports on request of either the Regional Director or the Commissioner. All progress reports and other written responses to this ORDER shall be reviewed by the Board of Directors of the Bank and made a part of the minutes of the Board meeting.

   [.6] 6. Following the effective date of this ORDER, the Bank shall send to its shareholders a description of this ORDER, (1) in conjunction with the Bank's next shareholder communication, and also (2) in conjunction with its notice or proxy statement preceding the Bank's next shareholder meeting. The description shall fully describe the ORDER in all material respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Registration and Disclosure Section, Washington, D.C. 20429, for review at least twenty (20) days prior to dissemination to shareholders. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.
   7. To the extent that any provision of this ORDER may be inconsistent with the CEASE AND DESIST ORDER issued on July 9, 1991, Docket Number FDIC-91-192b, the provisions of this ORDER shall prevail.
   This ORDER shall become effective ten (10) days after the date of its issuance.
   The provisions of the ORDER shall be binding upon the Bank and its institution-affiliated parties.
   This ORDER has been reviewed and concurred in by the Commissioner.
   The provisions of the ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of the ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.
   Dated at Westwood, Massachusetts this 21st day of December, 1993.
   Pursuant to delegated authority.