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FDIC Enforcement Decisions and Orders |
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Bank director ordered to cease and desist from an unsafe or unsound banking practice by serving as an officer and director of a bank while simultaneously holding employment with certain mortgage-banking companies which originated loans and presented them to the bank for funding.
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Pursuant to its authority under Section 8(b) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(b), the Federal Deposit Insurance Corporation issued a Notice of Charges against the above-named bank and individuals on March 30, 1981. The Notice charged the bank and the individuals with engaging in certain unsafe or unsound practices.
FINDINGS OF FACT
1. * * * State Bank is a corporation existing and doing business under the laws of the * * *. It has its principal place of business at * * *. At all times pertinent to this proceeding it has been, and it currently remains, an insured state nonmember bank.
FINDINGS OF FACT AND
Accordingly the Board of Directors adopts the Findings of Fact appended hereto. In addition, the Board of Directors adopts the following conclusion of law:
[.1] C. Mr. * * * has engaged in unsafe or unsound banking practices in that he has served as an officer and director of the Bank while simultaneously holding employment with certain mortgage-banking companies not affiliated with the Bank, which companies originated loans and presented them to the Bank for funding.
ORDER TO CEASE AND DESIST
NOW THEREFORE LET IT BE ORDERED that the respondent Mr. * * * cease and desist from the violations and the unsafe or unsound practices set forth in the Findings of Fact and Conclusions of Law above.
/s/ Hoyle Robinson
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FDIC-81-10b
APPEARANCES:
* * *, Esquire, * * *, and James L. Meador, Esquire, Washington, D.C., on behalf of Federal Deposit Insurance Corporation, * * * , on behalf of * * *
PROPOSED FINDINGS OF FACT
A. The Bank, a corporation existing and doing business under the laws of the * * * and having its principal place of business at * * * , * * * , is and has been at all times pertinent to this proceeding an insured State nonmember bank. * * * is and has been at all pertinent times a director and officer of the Bank. (Notice at 1; Answer at 1).
Unsafe or Unsound Practice
Resolution of the first issue has been complicated due to the language used in the charge. A literal reading of the charge would require FDIC to prove that * * * , while serving as an officer and director of the Bank and as an employee of independent mortgage companies, (1) received fees either directly or indirectly for origination of loans (2) which fees were excessive and (3) which fees were paid by the Bank. The record does not support a finding that * * * received fees for origination of loans at any time during the period in question nor is there any evidence to reflect that the fees in question were "excessive." The evidence is also uncontradicted that the fees in question were paid by the borrowers, not the Bank. Under these circumstances, it appears FDIC has alleged more than it could or had to prove. What the record does show is that * * * , while serving in a dual capacity as an officer and director of the Bank and as an employee of independent mortgage loan companies, placed himself in a position of dual loyalties, raising a conflict of interest which could and probably did cloud his credit judgment. Bank officers must scrupulously avoid such a situation. The evidence also shows * * * accepted and received personal benefits in the form of an increase in salary while working in a dual role as an officer and director of the Bank and an employee of * * *.
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Respondent * * * maintains that FDIC should be estopped from asserting violations in this case because he and other Bank officials were misled by certain acts, a failure to act, or assertions made by agency personnel during the course of bank examinations conducted by the agency prior to the issuance of formal charges on March 30, 1981.
The Relief
Having found that * * * has engaged in unsafe or unsound practices and that FDIC is not estopped from asserting these charges, I must now consider appropriate relief under the facts of this case. FDIC seeks both a cease and desist order to restrain * * * from all future engagement in unsafe or unsound practices and restitution of all funds diverted from the Bank during the period in question which are attributable to * * * commission of the illegal acts.
PROPOSED CONCLUSIONS OF LAW
A. The FDIC has jurisdiction over * * * and the subject matter of this proceeding. |
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Last Updated 6/6/2003 | legal@fdic.gov |