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FDIC Enforcement Decisions and Orders |
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FDIC concluded that the imposition of a civil money penalty against a bank director was inappropriate since the director attempted to comply with a cease and desist order, was a minority director in a family-run bank, and knew his tenure as a director would be over shortly.
[.1] Cease and Desist OrdersCivil Money Penalties for Violations
[.2] DirectorsDuties and Responsibilities
In the Matter of * * * individually, and in
SUMMARY
This proceeding seeks a civil money penalty in the amount of $2,500 against * * * ("Respondent")1individually and as a director of the * * * Bank * * * ("Bank"), for violation of a consent Cease-and-Desist Order under the authority of section 8(i)(2)(i) of the Federal Deposit Insurance Act (the "Act"), 12 U.S.C. §1818(i)(2)(i). For the reasons set forth below the Board of Directors (the "Board") of the Federal Deposit Insurance Corporation ("FDIC") concludes that imposition of a civil money penalty is inappropriate.
PROCEDURAL HISTORY
Based upon an examination of the Bank as of May 4, 1984, the FDIC informed the Bank of its intention to seek issuance of an order to cease and desist pursuant to section 8(b)(1) of the Act, which would require the Bank, its directors, officers and other persons participating in the conduct of the affairs of the Bank, to cease and desist from the alleged unsafe or unsound banking practices and violations of law and/or regulations, and to take affirmative action to correct the conditions resulting therefrom. Without admitting or denying any such violations or practices, the Bank, through its board of directors, agreed to the issuance of a final Order by entering into a Stipulation and Consent to the Issuance of an Order to Cease-and-Desist ("Consent Agreement") dated August 15, 1984. The Consent Agreement was executed by director * * * and the other directors of the Bank. The FDIC
FACTS
The essential facts of this case are not in dispute. In brief, the FDIC's 1984 examination found that the Bank was engaging in numerous unsafe or unsound banking practices and violations of federal and state law and regulations:
DISCUSSION
In view of the fact that violations of the Cease-and-Desist Order are clearly established by the record, this case turns on whether Respondent is responsible for them and if so, whether imposition of a civil money penalty in the amount assessed is appropriate.
[.1]The record substantiates the conclusion that the directors and officers of the Bank were, in varying degrees, responsible for the Bank's failure to comply with the Cease-and-Desist Order. On the basis of the record herein, it appears that Respondent * * * may have been the only director who made any attempt to comply with the Order. Nonetheless, he was handicapped in two respects: (1) he was a minority director in a family-run bank; and (2) he knew that he would not stand for re-election to the board and therefore, his tenure as a director would shortly be over. We think Respondent should have taken a more active role, but he should not be penalized for what he did.
[.2]We reiterate our previously expressed views with respect to the role of a board of directors, including minority or outside directors. The board of directors is legally responsible for the sound direction of a bank. It is obliged to select and maintain capable management and see that the bank operates in compliance with law and regulations. The board must formulate specific bank goals and policies covering investments, loans, asset, liability, and funds management, profit planning and budgeting, capital planning, internal routine and controls and personnel policies. The board is also obliged to avoid self-serving practices.
ORDER
On the basis of the record in this proceeding, including the ALJ's Recommended Decision dated February 20, 1987, and after taking into consideration the appropriateness of the penalty with respect to the financial resources and good faith of Respondent * * * , the gravity of the violations, the history of previous violations, and such other matters as justice may re-
{{4-1-90 p.A-1120}}quire, the Board has determined that the imposition of a civil money penalty is not appropriate in this case.
/s/ Hoyle L. Robinson
RECOMMENDED DECISION
This case is before the Administrative Law Judge upon a request for hearing filed by * * * , a former Director of the * * * Bank, * * * who disagrees with the monetary penalty imposed against him by the Federal Deposit Insurance Corporation (FDIC), individually and in his capacity as a Director of the Bank, under the authority of Section 8(i)(2)(i) of the Federal Deposit Insurance Act ("Act") 12 U.S.C. § 1818(i)(2)(i).
PROCEDURAL HISTORY
On May 4, 1984, the FDIC conducted an examination of the * * * Bank * * * , and concluded from the examination that the Bank had engaged in unsafe or unsound banking practices and had violated banking laws and regulations. The FDIC informed the Bank of its intention to seek issuance of an order to cease and desist ("Order" or "Cease-and-Desist Order"), which would require the Bank, its Directors, Officers and other persons participating in the conduct of the affairs of the Bank to cease and desist from the alleged unsafe or unsound banking practices and violations of law and/or regulations and to take affirmative action to correct the conditions resulting therefrom. Based upon a consent agreement dated August 15, 1985, the Bank through its Board of Directors agreed to the issuance of a final order to cease and desist. The consent agreement was executed by the Directors of the Bank, including Director * * *. On September 24, 1984, the FDIC issued its order which became effective on October 4, 1984.
EVIDENCE CONSIDERED
The Administrative Law Judge has carefully considered all of the hearing testimony, the arguments made, and the documents entered into the present record as Exhibits.
SUMMARY AND EVALUATION
The * * * Bank is located in * * *. It is a corporation existing and doing business un-
{{4-1-90 p.A-1121}}der the laws of the State of * * * and has been and is a State Nonmember Insured Bank. The Bank was and is now subject to the provisions of the Federal Deposit Insurance Act, 12 U.S.C. Section 1811, et. seq., and the rules and regulations of the FDIC, 12 C.F.R. Chapter III.
FINDINGS OF FACT
1. The * * * Bank, * * * is a corporation existing and doing business under the laws of the State of * * * with its principle place of business at * * *. At all times relevant to this proceeding, the Bank was a state nonmember insured bank.
CONCLUSIONS OF LAW
1. The FDIC has jurisdiction over * * * , Director of the * * * Bank, * * * and the subject matter of this proceeding.
PROPOSED ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended by the Administrative Law Judge that the following Order be entered:
/s/ Jack R. Reed |
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Last Updated 6/6/2003 | legal@fdic.gov |