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FDIC Enforcement Decisions and Orders |
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Civil money penalties were assessed against several persons based on their purchase of control of a bank in violation of the Change in Bank Control Act, which requires that persons who acquire control of a bank provide the appropriate federal banking agency with 60 days prior written notice of the proposed acquisition. The Respondents purchased control of the bank without giving any prior notice.
[.1] Change in Bank Control ActCompliance
[.2] Civil Money PenaltiesNotice of AssessmentFailure to Answer
[.3] Civil Money PenaltiesNotice of AssessmentFailure to Answer
[.4] Practice and ProcedureHearingsAdequacy of Notice
[.5] Practice and ProcedureAnswerTime
[.6] Practice and ProcedureAnswerFailure to File
In the Matter of * * * , individually and
I. Introduction
This proceeding, brought by the Federal Deposit Insurance Corporation ("FDIC"), seeks civil money penalties against * * * , * * *, * * *, * * *,1 * * *, * * * and * * * ("Respondents"), based upon their purchase of control of * * * Bank, * * * ("Bank"), in violation of section 7(j) of the Federal Deposit Insurance Act ("FDI Act"), commonly referred to as the Change in Bank Control Act (the "Control Act"), 12 U.S.C. § 1817(j).
[.1] The Control Act requires that persons who acquire control of a bank provide the appropriate Federal banking agency, here, the FDIC, with 60 days prior written notice of the proposed acquisition. The Respondents in this case, acting as a group, purchased control of the Bank without giving any prior notice. Based upon their violation of this statutory provision, the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice") in this proceeding seeks civil money penalties against each of the seven Respondents.
[.2] The Board of Directors of the FDIC ("Board") has reviewed the record, the parties' motions, and the Recommended Decisions of the Administrative Law Judge ("ALJ"). The Board agrees with the ALJ that each of the six Respondents dealt with in this Decision and Order to Pay Civil Money Penalties failed to file an answer within the time required by section 308.06 of the FDIC Rules of Practice and Procedures ("FDIC Rules"), 12 C.F.R. § 308.06. Accordingly, pursuant to section 308.06(d) of the FDIC Rules, the Board finds that Respondents have waived their right to appear and contest the allegations contained in the Notice and finds the facts to be as alleged in the Notice.
II. Procedural History
On May 14, 1986, the FDIC issued the Notice to Respondents pursuant to the Control Act. As evidenced by return receipts, Respondents * * * , * * * and * * * received their Notices on May 19, 1986; Respondent * * * received his Notice on May 20, 1986; and Respondent * * * received his Notice on May 21, 1986. Respondent * * * received his Notice on July 29, 1986. As stated in the Notice, pursuant to section 308.69(b) of the FDIC Rules, a written request for hearing may be filed within ten days of receipt of the Notice. Respondents * * * , * * * , * * * , and * * *2 made timely requests for a hear-
III. Failure to Answer
Section 308.06 of the FDIC Rules provides:
[.4] Respondents * * * and * * *4 argue that there were inadequacies in the Notice which excuse their failure to answer. Those arguments lack merit. We discuss each argument briefly. Respondents first argue that the Notice does not contain a Notice of Hearing as defined in section 308.05 of the FDIC Rules. This section provides that the Notice of Hearing "shall indicate the time, place, and nature of the hearing." Respondents assert that the Notice sent by the FDIC does not state the date, time, or place of the hearing. The language on the face of the Notice renders this argument untenable. The Notice of Hearing states that:
[.5] Respondents next argue that the Executive Secretary failed to comply with section 308.81 of the FDIC Rules which provides that a hearing on the Notice is to commence within 30 days after receipt of a request for hearing. Respondent's argument fails on the facts since their own failure to answer was a waiver of a hearing within thirty days, or at any other time.
IV. Default Judgment
Section 308.06(d) of the FDIC Rules entitled "effect of failure to answer" provides:
V. Respondents' Violation of the Control
The Control Act requires a person seeking to acquire control of a state nonmember bank, directly or indirectly or through or in concert with one or more persons, to file a written notice of the proposed acquisition with the FDIC sixty days prior to the transfer.5 That notice must contain, among other things, detailed information regarding each acquiring person's background, material business activities, pertinent legal proceedings, and financial condition, as well as the terms and conditions of the acquisition. The FDIC is authorized to disapprove a proposed acquisition for any of the following reasons: (1) the proposed control would result in a monopoly; (2) the proposed control would lessen competition; (3) the financial condition of any acquiring person is such as might jeopardize the financial stability of the bank or prejudice the interests of the depositors of the bank; (4) the competence, experience, or integrity of any acquiring person or of any of the proposed management personnel is in question; or (5) the acquiring person neglects, fails, or refuses to furnish all the information required by the agency. 12 U.S.C. § 1818(j)(7). Willful violations of the Control Act carry civil penalties of $10,000 per day for each day the violation continues.
No Notice of Acquisition of Control was filed with the FDIC sixty days prior to the group's August 7, 1985, purchase of control, as required by the Control Act (12 U.S.C. § 1817(j)(1)). Indeed, no notice under the Control Act had been filed as of the date the Notice was issued, May 14, 1986. One Respondent, * * * , did file some financial and biographical information with the FDIC on October 2, 1985, but even this belated information from Mr. * * * did not set forth all of the information required under the Control Act.
Eight credits booked by the Bank after August 7, 1985 (the seven listed above, plus an extension of credit to * * * , originated August 8, 1985, with $276,000 outstanding as of August 26, 1985, and $24,000 undisbursed as of August 26, 1985), are classified "substandard." Each of these loans was presented to the loan committee (which con-
VI. Penalties
As previously stated, the Control Act carries civil money penalties of up to $10,000 per day for each day during which the violation continues. Each Respondent's violation of the Control Act began on or about August 7, 1985. The fragmented information provided by Mr. * * * indicates that he surrendered his stock to Respondent * * * on December 18, 1985. Thus, Respondent * * * was in violation of the Control Act for at least 130 days. The maximum civil money penalty that could have been assessed for Respondent * * *' violation was $10,000 per day for a total of approximately $1,300,000. The materials submitted by Mr. * * * indicate problems regarding his competence and experience in banking, and his financial ability to support the purchase of Bank stock. Therefore, questions exist regarding whether his application for change of control would have been approved even if it had been timely made. Taking into account Respondent * * *' efforts to cooperate, his divestiture of Bank stock and his poor financial condition, a civil money penalty of $10,000 (to which we are limited by the Notice) is appropriate.
ORDER TO PAY CIVIL MONEY
The Board of the Federal Deposit Insurance Corporation, on the basis of the record in this proceeding, including the Adminis-
{{4-1-90 p.A-982}}trative Law Judge's Recommended Decisions dated July 14, 1986, August 12, 1986, and September 8, 1986, adopts the Recommended Decisions of the Administrative Law Judge, incorporates them herein by reference and finds * * *, * * *, * * *, * * *, * * * and * * *, individually and as acquiring persons of * * * Bank * * * to be in violation of § 7(j) of the Federal Deposit Insurance Act, 12 U.S.C. § 1817(j), and accordingly,
IT IS FURTHER ORDERED, that civil money penalties assessed against each of the named individuals shall not be paid directly or indirectly by the Bank, but shall be paid by the individual against whom the penalty is assessed. These amounts are to be paid within 60 days of the date of this Order.
FDIC-86-107k
RECOMMENDED DECISION
On this 12th day of August, 1986, the Motion for Finding of Waiver of Hearing and/or Recommended Decision filed by the Federal Deposit Insurance Corporation came on for hearing. The Court considered the documents on file and the argument pertaining to the failure and/or refusal of Respondent * * * to file an answer as specified in Section 308.06 of the FDIC Rules of Practice and Procedures and page eight of the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice"). Based thereon, and on all relevant considerations, the Court hereby finds that Respondent * * * has failed to file an answer within the time required by 12 C.F.R. § 308.70 of the FDIC Rules of Practice and Procedures. Pursuant to Section 308.06(d) of the FDIC Rules and Practice and Procedures the Court finds that the Respondent is deemed to have waived his right to appear and contest the allegations of the notice of hearing, and finds the facts to be as alleged in the Notice.
FDIC-86-107k
RECOMMENDED DECISION
On this 14th day of July, 1986, the Motion for Recommended Decisions filed by the Federal Deposit Insurance Corporation came on for hearing. The Court considered the documents on file and the argument pertaining to the failure and/or refusal of Respondents * * *, * * *, * * * and * * * to file an answer as specified in Section 308.06 of the FDIC Rules of Practice and Procedures and page eight of the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice"). Based thereon, and on all relevant considerations, the Court hereby finds that Respondents * * *, * * *, * * * and * * * have failed to file an answer within the time required by 12 C.F.R. § 308.70 of the FDIC Rules of Practice and Procedures. Pursuant to Section 308.06(d) of the FDIC Rules of Practice and Procedures the Court finds that those Respondents are deemed to have waived their right to appear and contest the allegations of the notice of hearing, and finds the facts to be as alleged in the Notice.
FDIC-86-107k
RECOMMENDED DECISION
On this 8th day of September, 1986, came on to be heard the Federal Deposit Insurance Corporation Notice of Motion and Motion for Recommended Decision and whereas the court having considered the arguments and exhibits herein pertaining to the failure and/or refusal of the Respondent * * * to file an answer as specified in Section 308.06 of the FDIC Rules of Practice and Procedures (12 C.F.R. § 308.06) and page eight of the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice") hereby finds that Respondent * * * has failed to file an answer within the time required by Section 308.06(a) of the FDIC Rules of Practice and Procedures (12 C.F.R. § 308.06(a)). Pursuant to Section 308.06(d) of the FDIC Rules of Practice and Procedures (12 C.F.R. § 308.06(d) the court finds that the Respondent is deemed to have waived his right to appear and contest the allegations of the notice of hearing and finds the facts to be as alleged in the Notice.
NOTICE OF MOTION AND MOTION
FDIC-86-107k
NOTICE OF MOTION AND MOTION
Now comes the Federal Deposit Insurance Corporation ("FDIC") in this its Notice of Motion for Recommended Decision against Respondent * * * pursuant to Sections 308.06(d) and 308.12 of the FDIC Rules of Practice and Procedures (12 C.F.R. §§ 308.06(d) and 308.12) and in support thereof and as factual grounds states the following:
NOTICE OF ASSESSMENT OF CIVIL
FDIC-86-107k
NOTICE OF ASSESSMENT OF CIVIL
The Federal Deposit Insurance Corporation ("FDIC") has determined that * * *, * * *, * * *, * * *, * * *, * * *, and * * * ("Respondents"), individually and as acquiring persons of * * * Bank * * * ("Bank"), have willfully violated section 7(j)(1) of the Federal Deposit Insurance Act ("Act") (12 U.S.C. § 1817(j)(1)) and section 303.4 of the FDIC Rules and Regulations (12 C.F.R. § 303.4). 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 the provisions of section 7(j)(15) of the Act (12 U.S.C. § 1817(j)(15)) and Part 308 of the FDIC Rules of Practice and Procedures (12 C.F.R. Part 308). In support thereof, the FDIC finds and concludes the following:
FINDINGS OF FACT AND
1. The Bank is a corporation existing and doing business under the laws of the State of * * * having its principal place of business in * * *. The Bank is, and has been at all times pertinent to this proceeding, a state-chartered bank insured by the FDIC but not a member of the Federal Reserve System, subject to the Act (12 U.S.C. § 1811-1831d) and the FDIC Rules and
{{4-1-90 p.A-985}}Regulations (12 C.F.R. Chapter III). For purposes of section 7(j)(1) of the Act, the FDIC has been the "appropriate Federal banking agency" with respect to the Bank at all times pertinent to this proceeding. The FDIC has jurisdiction over the Bank, each Respondent, and the subject matter of this proceeding.
4. Each Respondent had knowledge or had reason to know of the change in control notice and approval requirements of section 7(j) of the Act (12 U.S.C. § 1817(j)) prior to such acquisition of control on August 7, 1985.
12. The Bank paid * * * a $4,000 monthly consulting fee for the month of June, July, and August, 1985.
Eight credits booked by the Bank after August 7, 1985 (the seven listed above, plus an extension of credit to * * * originated August 8, 1985, with $276,000 outstanding as of August 26, 1985, and $24,000 undisbursed as of August 26, 1985), are liberal extensions of credit and are classified "Substandard."
ORDER TO PAY
After taking into account the appropriateness of each penalty with respect to the financial resources and the good faith of each Respondent, the gravity of the violations, and the data, views and arguments submitted by each Respondent, it is:
NOTICE OF HEARING
FURTHER ORDERED, that if any Respondent requests a hearing with respect to the changes in the NOTICE OF ASSESSMENT, the hearing shall commence 60 days from the date of receipt of such request at * * *. The hearing will be conducted in accordance with the provisions of the Act (12 U.S.C. §§ 1811-1831d), the Administrative Procedure Act (5 U.S.C. §§ 551559), and the FDIC Rules of Practice and Procedures (12 C.F.R. Part 308). The hearing will be held before an Administrative Law Judge to be appointed by the U.S. Office of Personnel Management pursuant to 5 U.S.C. § 3344. The exact time and location of the hearing will be determined by the Administrative Law Judge.
CERTIFICATE
Recommended Decision
I, Margaret M. Olsen, hereby certify that I am Deputy Executive Secretary, Federal Deposit Insurance Corporation, and as such that I am custodian of its official records. I hereby certify that I have reviewed the official record maintained in connection with the civil money penalty proceedings entitled * * *, et al., * * * Bank * * *, FDIC-86-107k. There is no Answer by * * * contained in the records. |
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Last Updated 6/6/2003 | legal@fdic.gov |