Federal Deposit
Insurance Corporation

{{6-30-92 p.A-1202}}
   [¶5111] FDIC Docket No. 86-43k (1-19-88).

   Civil money penalty was assessed against a person acquiring majority control of a nonmember bank for failure to give FDIC 60-days prior written notice of the acquisition in violation of the Change in Bank Control Act. Disgorgement of unlawful profit is significant aim of the penalty. (This decision was affirmed in part and remanded, 906 F.2d 972 (4th Cir. 1990) and affirmed, 956 F.2d 58 (4th Cir. 1992)).

   [.1] Practice and Procedure—Delay of Hearing
   The ALJ's delay in starting a hearing and issuing a recommended decision does not deprive FDIC of statutory authority to order payment of civil penalty for willful violation of the Change in Bank Control Act.

   [.2] Change in Bank Control Act—Compliance
   A person planning to acquire control of a nonmember bank must give 60-days prior notice to FDIC.

   [.3] Change in Bank Control Act—Violations—FDIC Authority to Prosecute
   FDIC has absolute discretion whether or not to prosecute or enforce CBCA violations. FDIC's failure to prosecute a violation in one case is irrelevant in another case.

   [.4] Change in Bank Control Act—Civil Money Penalties for Violation— Statutory Standard
   In determining the amount of the penalty for a violation, FDIC must consider the respondent's financial resources, good faith, the gravity of the violation, and any data, views and arguments submitted. It must also consider any financial or economic benefit gained from the violation.

   [.5] Change in Bank Control Act—Civil Money Penalties for Violation— Economic Benefit Obtained
   The financial and economic benefit obtained from the CBCA violation includes: the net profit from resale of minority shares; profit from resale of the remaining shares; and any indirect profit.

In the Matter of ***, individually and
as acquiring person of *** BANK
(Insured State Nonmember bank)


DECISION AND ORDER
FDIC 86-43k

I. INTRODUCTION

   This proceeding is a civil money penalty action brought by the Federal Deposit Insurance Corporation ("FDIC") against *** ("Respondent"), for his acquisition of the stock of *** Bank.
   *** (***), in willful violation of the Change in Bank Control Act, 12 U.S.C. § 1817(j) ("CBCA"). Respondent acquired approximately 56 percent of *** stock in mid-1985 without providing sixty days' prior written notice to the FDIC.
   Notice is required by the CBCA and the FDIC's regulations prior to acquisitions of "control", as defined by the CBCA. 12 U.S.C. § 1817(j); 12 C.F.r. § 303.4. After the acquiring party has submitted a complete, accurate and timely notice, the CBCA authorizes the FDIC to determine whether the {{4-1-90 p.A-1203}}proposed acquisition satisfies the statutory requirements for a change in control.¹
   On February 26, 1986, the FDIC issued a Notice of Assessment of Civil Money Penalty, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing ("Notice of Assessment") against the Respondent in the amount of $300,000 with an additional $500 penalty per day to accrue for each day Respondent remained in violation. The Respondent filed a timely request for hearing on March 10, 1986, and contested the FDIC's allegations and proposed relief at the hearing held September 22–26, 1986, before Administrative Law Judge John H. Powell (the "ALJ"). The ALJ issued his Recommended Decision on September 30, 1987. The ALJ found a willful violation of the CBCA and recommended that a $250,000 penalty be imposed. Both the FDIC and the Respondent filed exceptions.
   The Board of Directors of the FDIC ("Board") has reviewed the record, the parties' briefs and the Recommended Decision of the ALJ. The Board adopts the ALJ's Recommended Decision and Findings of Fact and Conclusions of Law except to the extent they are inconsistent with this Decision and Order. The Board agrees with the ALJ's determination that Respondent willfully violated the CBCA by acquiring control of *** without the required statutory notice to the FDIC. However, the Board concludes that the ALJ's recommended order to pay civil money penalty fails to fully reflect the extent of Respondent's profit from his violation or provide an adequate deterrent to CBCA violations. The Board finds that, on the basis of the record in this proceeding, an order to pay a civil penalty in the amount of $375,640 should be issued against the Respondent for his knowing and willful violation of the CBCA.

II. STATEMENT OF THE CASE²

   A. Facts Related to Respondent's Violation of the CBCA.
   Respondent was not in control of *** at any time prior to March, 1985. In March, 1985, the Respondent began solicitation of *** shareholders for purchase of their shares at $50.00 per share. Most of ***'s small stockholders tendered their shares and he obtained ownership of 2,294 *** shares ("Minority shares"), approximately 18 percent of ***'s outstanding 12,500 shares of stock. F.F. Nos. 15–16.
   Contemporaneous with his solicitation of *** shareholders, the Respondent began negotiations with the *** family to purchase approximately 4,700 shares of *** (38 percent of *** outstanding stock) under the control of Mrs. *** ("*** shares"). On April 23, 1985, the Respondent gave Mrs. *** a cashier's check for $470,600 and obtained a stock certificate, in his name, for 4,706 shares of *** stock. On the same day, the Respondent purchased a $94,120 repurchase agreement in the joint names of *** and *** ("joint repo"), giving Mrs. *** the right to one-half that amount, or $47,060. F.F. Nos. 25, 27.
   On April 17, 1985, approximately one week prior to his purchasing the *** shares, the Respondent reached an agreement with ***, Chairman of the Board of Directors of *** National Bank, *** for *** to purchase 7,000 shares of *** stock from the Respondent at some future time in an effort by *** to merge or otherwise acquire ***. At the time of this agreement, *** loaned the Respondent $840,000, part of which was used to finance his acquisition of the *** shares the following week. F.F. Nos. 19, 25. The Respondent signed a note for the $840,000, payable on demand at 12.75 percent annual interest. FDIC Ex. 6. This loan was subsequently secured by 7,000 shares of *** stock. F.F. No. 22. In addition, the Respondent received a $300,000 cashier's check from *** when he made the agreement to sell the 7,000 *** shares to ***. F.F. No. 20.
   The Respondent filed his first purported Notice of Change in Bank Control on April 10, 1985, indicating that he had purchased 2,294 shares of *** stock. On April 26,

B. Summary of the Board's Decision.

   The ALJ found that the Respondent knowingly acquired control of *** in violation of the CBCA. He recommended a penalty of $250,000, approximately 20 percent less than the $311,000 sought by FDIC enforcement counsel. The Board agrees that Respondent violated the CBCA. However, the Board finds that a $375,640 penalty should be assessed to disgorge Respondent's profit from the transactions to the extent possible and to deter him from future violations. The Board finds the ALJ's estimate of Respondent's profit from the CBCA violation to be incomplete because the ALJ's calculation of the sale price does not reflect ***'s cancellation of the accrued interest on the $840,000 note, a significant part of the consideration Respondent received for the 7,000 *** shares. Further, the ALJ's estimate is incomplete because it does not include in the overall estimate of Respondent's profit certain other financial benefits Respondent received from his willful violation of the CBCA.

III. DISCUSSION

   A. The ALJ's Delay In Scheduling a Hearing and Issuing His Recommended Decision Do Not Affect the Authority of the Board to Issue An Order To Pay Civil Penalties.
   In his exceptions, Respondent argues that the ALJ's failure to conduct a timely hearing and issue a timely recommended decision render the Recommended Decision "void and without force and effect since it was issued contrary to 12 C.F.R. §308.13(b)."³
   Although the CBCA does not establish any requirement for agency action within specified time periods, Respondent argues the FDIC's procedural rules were violated by the ALJ's delays in commencing the hearing and issuing his Recommended Decision. FDIC rules governing assessment of civil penalties for willful violation of the CBCA require the Executive Secretary to order a hearing to commence within thirty days after receipt of a request for a hearing. 12 C.F.R. §308.81. In this case the Notice of Assessment was issued February 26, 1986. Although Respondent did not make his timely request for hearing until March 10, 1986, the FDIC's Office of the Executive Secretary had anticipated his request and already sought appointment of an ALJ from the United States Office of Personnel Management.⁴However, none was appointed until April 18, 1986, and it was not possible to actually commence the hearing until more than 30 days elapsed following Mr. ***'s request. Although the Executive Secretary was unable to obtain an ALJ who could more promptly commence a hearing, we find no violation of the plain language of the rule. The Board finds that the Office of the Executive Secretary complied with the rule insofar as it timely sought the appointment of an ALJ who could commence the hearing.
   Respondent also argues that the ALJ violated the requirement in 12 C.F.R. §308.13(b) that he file his recommended

A statutory time period is not mandatory unless it both expressly requires an agency or public official to act within a particular time period and specifies a consequence for failure to comply with the provision.

   [.2] The CBCA requires sixty days' prior written notice to the FDIC by any person planning to acquire control of a state nonmember bank whose acquisition is not otherwise exempt from the Act. 12 U.S.C §1817(j)(1). "Control" is defined in the CBCA as "the power, directly or indirectly, to direct the management or policies of an insured bank or to vote 25 per centum or more of any class of voting securities of an insured bank." 12 U.S.C. §1817(j)(8)(B).
   Prior to his acquiring the *** shares, the Respondent owned 18 percent of ***, i.e., the Minority shares. F.F. No. 16. Since this level of stock ownership does not constitute "control" under the CBCA or FDIC regulations, advance notice to the FDIC of this purchase was not required.⁶Therefore, Respondent's first filing with the FDIC on April 10, 1985, reflecting the Minority shares purchase consummated during March and April, did not fulfill any statutory obligation.⁷Moreover, his April 10 filing did not constitute CBCA notice of his plan to acquire control, because, among other inaccurate or incomplete statements, that filing did not disclose his plan to purchase the *** shares.
   On April 23, Respondent's ownership in *** increased to approximately 56 percent when he acquired the *** shares. Since this

   C. The FDIC's Decision Not to Prosecute Violations of the CBCA in Other Cases Is Within Its Discretion and Irrelevant to Respondent's Violation.

   [.3] In his exceptions Respondent argues that the FDIC should not collect penalties from him for his CBCA violation since it has not always enforced the CBCA as to others. There is no provision in the CBCA for processing notices which are not filed sixty days prior to the proposed change in control. However, the FDIC, in its discretion, may decide not to seek penalties from acquirers who have violated the CBCA. "[A]n agency's decision not to prosecute or enforce, whether through civil or criminal process, is a decision generally committed to an agency's absolute discretion." Heckler v. Chaney, 470 U.S. 821, 831, 105 S.Ct. 1649, 1656 (1985). See also Investment Co. Institute v. FDIC, 728 F. 2d 518 (D.C. Cir. 1984).
   The Court in Heckler, supra, recognized that,

   . . . the agency must not only assess whether a violation has occurred, but whether agency resources are best spent on this violation or another, whether the agency is likely to succeed if it acts, whether the particular enforcement action requested best fits the agency's overall policies, and indeed, whether the agency has enough resources to undertake the action at all. An agency generally cannot act against each technical violation of the statute it is charged with enforcing.

   D. The ALJ's Recommended Assessment of $250,000 in Civil Money Penalties Against the Respondent Does Not Adequately Reflect Respondent's Total Profit From His Violation and Is Properly Increased to $375,640.

   [.4] Section 7(j)(16) of the CBCA, 12 U.S.C. 1817(j)(16), directs the FDIC to give due consideration to the appropriateness of the penalty with respect to the size of financial resources and good faith of the person charged, the gravity of the violation, and any data, views, and arguments submitted.
   An important consideration which the Board weighs in determining the amount of a civil money penalty is the financial or economic benefit the person obtained from the violation. See Interagency Policy Regarding The Assessment Of Civil Money Penalties By The Federal Financial Institutions Regulatory Agencies, 45 Fed. Reg. 59423 (1980).
   Both parties recognize that disgorgement of unlawful profit is a significant aim of the penalty. Thus, the record contains substantial evidence and argument intended to address profit from Respondent's purchase and resale of the *** shares. Specifically, the parties differ as to whether profit on the sale of all *** shares Respondent sold should be disgorged, the characterization of certain monetary transfers to Respondent as profit, and the most accurate way to estimate the value of Respondent's profit.

   1. The Financial or Economic Benefit Respondent Obtained from the Violation

   [.5] The Board finds that the financial or economic benefit Respondent obtained from the CBCA violation is composed of the following elements: (1) the net profit from his resale of the Minority shares; (2) the profit from his resale of the *** shares; and (3) that portion of the $300,000 payment to Respondent which constitutes indirect profit as compensation for his services in connection with the anticipated merger of *** and ***.

   a. Profit on the Minority Shares

   Respondent argues that he should not be penalized for profit generated in connection with his acquisition of the Minority shares. He contends that profit on the transfer of these shares "cannot be considered in assessing the Respondent's `illegal profit' as these stocks were legally acquired and in turn legally transferred." Respondent's Ex-

   b. Profit on the *** shares

   There is no dispute regarding the inclusion of net profit from the resale of the *** shares in the overall profit determination. The sale price, properly calculated as discussed above, is $134 per share. The purchase price contains two elements. First,

   c. Indirect Profit from the $300,000 Check

   Respondent argues that the entire $300,000 he received on April 17, 1985 from *** constituted prepayment of two $100,000 ten-year notes owed to him by Messrs. *** and ***, due April 21, 1991.¹⁵ This argument is not tenable because the notes had an actual value of less than $300,000 on the day they were paid. The difference between the value of the notes at the time of prepayment and $300,000, constitutes consideration Respondent received for his services in connection with the anticipated merger of *** and ***.
   The ALJ did not accept FDIC enforcement counsel's position that the present value of the notes on April 17 was $223,000 and that consequently, Respondent's fee amounted to approximately $77,000.¹⁶ The ALJ refused to assign a specific value to the notes on the day they were paid because he believed that the notes' unassignability could not be accounted for accurately in the present value analysis.¹⁷ R.D. at 16.
   The ALJ's concern with respect to the notes' unassignability is not without merit. The present value of the notes on the day they were paid cannot be calculated with certainty because the record contains no evidence of the April 1985 interest rates on unassignable instruments in the *** market. However, the Board can use information available to it in this record to obtain a reasonable estimate of their value for purposes of establishing a penalty. It would be inconsistent with the purpose and intent of the enforcement provisions of the CBCA, as well as illogical, to omit any estimate of Respondent's profit from the $300,000 payment on the grounds that such estimate cannot be established with certainty.¹⁸
   FDIC enforcement counsel used a 12 percent discount rate in his analysis, indicating that interest rates in 1985 were approximately at that level. FDIC's Exceptions at 5. The only evidence in the record regarding relevant interest rates is that Respondent agreed to pay 12.75 percent on the $840,000 demand loan the same day he accepted prepayment of the notes. This evidence supports the Board's decision to estimate the value of the prepayment to Respondent using a 12 percent discount rate and to accept the FDIC enforcement counsel's estimate of $77,000 as Respondent's profit from the $300,000 check.¹⁹

   d. Summary of Respondent's Profit From His CBCA Violation

   Ordinarily the Board establishes a civil penalty which fully disgorges all ill-gotten gains from the violation and, in addition, is sufficient to deter future unlawful conduct. In this case, a penalty of $375,640 would disgorge Respondent's unlawful profit from the CBCA violation as well as provide a sufficient deterrent to future violations.²⁰

   2. Other Factors FDIC Has Considered In Setting the Penalty

   The Board has also considered Respondent's willfulness and lack of good faith, as well as the gravity and length of the violation, the impact of the unlawful acquisition on the bank, and Respondent's financial resources in its determination to assess a $375,640 penalty. See Interagency Policy Regarding The Assessment Of Civil Money Penalties By The Federal Financial Institutions Regulatory Agencies, 45 Fed. Reg. 59423 (1980).
   As the ALJ concluded, ***'s violation was knowing and willful. F.F. No. 88. He is a practicing attorney who had previously filed notices incident to the acquisition of control of three other banking institutions in compliance with the CBCA. F.F. Nos. 28-30. Although he did not advise the FDIC of his acquisition of control of ***, after the fact, the evidence supports the conclusion that he knew or should have known that the CBCA required sixty days' advance notice of a change in control. He offered no good faith justification for his failure to provide timely notice prior to his acquisition of control of ***. Thus, Respondent has established no grounds to mitigate the amount of the penalty on this basis of "good faith."
   The length of the violation also supports a substantial penalty. The violation lasted from April 23, 1985, when Respondent illegally acquired control, until March 20, 1986, when he divested the stock. F.F. No. 89. Under the statute, the FDIC could have assessed a penalty of $10,000 for each day of Respondent's unlawful ownership or a maximum penalty of more than $3 million. 12 U.S.C. §1817(j)(16). Respondent argues that he might have divested sooner if the Office of the Comptroller of the Currency had approved his July 1985 merger plan. When he knowingly violated the CBCA, Respondent assumed the risk that he would be unable to divest control as quickly as he anticipated. The Comptroller's failure to approve Respondent's July 1985 plan, therefore, does not excuse or diminish the violation. Moreover, as the ALJ noted, the FDIC regularly objected to his continuing violation and never gave him any basis to believe his acquisition of control would be approved. F.F. No. 83.
   The Board has also considered the harm to the acquired institution as a result of the unlawful acquisition. The ALJ found that *** was in poor financial condition when Respondent acquired control. F.F. No. 13. However, FDIC enforcement counsel did not assert, nor do we find any evidence in the record, that any actions taken by Mr. *** during the period of his control directly harmed ***. F.F. No. 92. Therefore, the amount of the penalty need not be increased to reflect any direct harm, or loss, to ***, as a result of Respondent's violation.
   A substantial penalty is also reasonable and appropriate in light of Respondent's resources. The ALJ found that Respondent's assets are valued at approximately $2,000,000 and this conclusion is supported by the evidence. F.F. No. 81. In 1985, Respondent's taxable income was approximately $218,000, which does not include the profit from these transactions. FDIC Ex. 60. There is no evidence that Respondent will be unable to earn a substantial income in the future.

IV. CONCLUSION

   The Board finds that a $375,640 civil penalty is justified and appropriate based on the entire record in this matter, after considering Respondent's total profit from the transactions, the gravity and length of

ORDER TO PAY CIVIL PENALTY

   The Board of Directors of the Federal Deposit Insurance Corporation has considered the entire record in this proceeding, including briefs filed on behalf of Respondent and FDIC enforcement counsel, the ALJ's Recommended Decision dated September 30, 1987, and exceptions to the Recommended Decision filed by the Respondent and FDIC enforcement counsel. The Board finds on the record before in that *** willfully violated Section 7(j) of the Federal Deposit Insurance Act, 12 U.S.C. §1817(j).
   NOW, THEREFORE, IT IS ORDERED, that a civil penalty in the amount of $375,640 be, and hereby is, assessed against ***.
   IT IS FURTHER ORDERED that this penalty shall be paid within 30 days of the date of this Order.
   By direction of the Board of Directors.
   Dated at Washington, D.C., this 19th day of January, 1988.

/s/ Hoyle L. Robinson
Executive Secretary

RECOMMENDED DECISION

FDIC 86-43k

   This case is before the Administrative Law Judge on a request for hearing filed by the Respondent, ***, on March 10, 1986.

PROCEDURAL HISTORY

   On February 26, 1986, the Federal Deposit Insurance Corporation ("FDIC") issued a Notice of Assessment of Civil Penalty against Respondent, ***, in the amount of $311,000.00 for alleged violations of Section 7(j) of the Change in Bank Control Act of 1978, 12 U.S.C. Section 1817(j). The Respondent filed a timely request for hearing on March 10, 1986. A hearing commenced on September 22, 1986 before the undersigned Administrative Law Judge in ***. Following submission of post-trial briefs the matter is before the Administrative Law Judge for a recommended decision.

BACKGROUND

   The *** Bank ***, is a banking corporation existing and doing business under the Laws of the State of ***. ***s principle place of business is in ***. At all times relevant hereto, *** was a "state nonmember insured bank" within the meaning of Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), and an "insured state nonmember bank" within the meaning of Section 303.4 of the F.D.I.C. Rules and Regulations, 12 CFR Section 303.4. For the purposes of Section 7(j) of the Change in Bank Control Act (hereinafter the "ACT") (12 U.S.C. Section 1817(j)), the F.D.I.C. is the "appropriate Federal banking agency" with respect to ***. Consequently, the F.D.I.C. has jurisdiction over any person who purchased control of, or applied to purchase control of, ***. Respondent, ***, is a practicing attorney and majority owner, director, and executive officer of the *** Bank at ***, (whose principle place of business and residence are located in or near ***).
   *** has been in existence since long prior to 1984. Prior to May 1985, the majority of the voting stock of *** (approximately 72 percent) was owned or controlled by the *** family. From at least 1984 and continuing until at least July 1985, *** experienced problems relating to poor management, financial instability, and poor capitalization. Many unsuccessful attempts were made to sell, merge, recapitalize, or otherwise provide answers to the various problems of ***. The impetus for these efforts was the need to avoid ***s loss of its insured status with the FDIC and the concommittant need of said institution to satisfy requirements imposed by the State of *** relating to banking corporations doing business in that state.
   In March, 1985 the Respondent, *** (hereinafter ***), began solicitation of *** shareholders for purchase of their shares at $50.00 per share. Pursuant to these solicitations, *** was able to obtain control and ownership of 2,294 shares of *** by April 23, 1985. Contemporaneous with the solicitation of the shareholders, *** began negotiations with the ***/*** family (hereinafter "***") to purchase the stock under the control of Mrs. ***. Mrs. *** had control over more than 4,700 shares of *** by virtue of a Power of Attorney executed by her father, Mr. ***. As such she was able to sell controlling interest in *** to a bona fide purchaser.
   On April 17, 1985, an agreement was reached between *** and one ***, Chairman of *** National Bank, that *** National Bank (hereinafter ***) would purchase 7,000 shares of *** stock from *** at some {{4-1-90 p.A-1211}}future time in an effort by *** to merge or otherwise acquire ***.
   *** (hereinafter ***) had in the past unsuccessfully attempted to negotiate purchase of the *** stock. The exact reasons for failure of *** to reach an agreement with *** is unclear, but appears to be related to demands made by *** concerning hospitalization coverage for Mr. ***, a permanent position for Mrs. *** at ***, and an unwillingness of Ms. *** to negotiate directly with ***. In any case *** was able to arrange for purchase of 4,706 shares of *** stock from *** for a purported price of $120.00 per share. This agreement was reached some time between April 17, 1985 and April 23, 1985. The agreement was consummated on April 23, 1985 when *** signed over the stock certificate for 4,706 shares to ***, the stock certificate being placed in his name. The stock was paid for using some of the proceeds from $840,000.00 that *** obtained from *** on April 17, 1985. At the same time that *** obtained the $840,000.00 from ***, he also obtained a $300,000.00 cashier's check from ***. It is clear that *** was actively involved in making arrangements for the issuance of the check. At the time that *** obtained the $840,000.00 he signed a "demand note" which on its face obligates *** to repay the money at 12.75 percent interest. When *** purchased the shares from *** on April 23, 1985, *** gave her a cashier's check for $470,600.00. On the same day *** also purchased a $94,120.00 repurchase agreement in the joint names of *** and ***. *** purportedly gave *** the certificates on the same day after he had signed them "in blank" on April 23, 1985. On April 24, 1985, *** informed an F.D.I.C. official *** of his purchase of an additional 4,706 *** shares on April 23, 1985.
   On April 10, 1985 *** filed his first Notice of Change in Bank Control indicating that he had purchased 2,294 shares of *** stock. The Notice was filed ostensibly because the F.D.I.C. (per *** an F.D.I.C. official) had requested *** to do so, despite the fact that *** did not own more than 25 percent of the outstanding *** stock.
   On April 26, 1985, *** filed a second Notice of Change in Bank Control which "revised" the first notice showing the change in control by purchase of the additional 4,706 *** shares. On May 1, 1985, the F.D.I.C. (per ***) mailed a letter to *** raising the spectre of a proposed violation of the Change in Bank Control Act. It is unknown when the letter was actually received by *** as the letter was sent to the wrong zip code address. However, it is clear that *** obtained the letter some time in May 1985. On May 3, 1985, a third Notice of Change in Bank Control was filed by ***. ***, on May 29, 1985, responded to the letter from the F.D.I.C. (per ***). This letter told the F.D.I.C. of the purchase of the shares of stock and indicated that the funds used for the purchase came from a loan from *** of $840,000.00 which was secured by 7,000 shares of *** stock. Ultimately the shares of *** stock represented by two certificates in ***'s name which he had signed "in blank" were transferred to *** on March 20, 1986.
   The F.D.I.C. has alleged that *** violated Section 7(j) of the Change in Bank Control Act of 1978, 12 U.S.C. Section 1817(j). In order to establish a violation of Section 7(j) of the Act, the F.D.I.C. must establish that *** did not have "control" of the *** Bank ***, that he subsequently obtained "control" of the bank, and that he failed to file a notice with the F.D.I.C. at least 60 days before obtaining control.¹ As is usually the case, resolution of the factual issues presented in the case for the most part will resolve the legal issues presented.
   The undisputed facts in the case are that the ***/*** group had controlling interest of 7,000 shares of 12,500 outstanding shares of *** stock prior to April, 1985 ***, by his own admission, purchased 2,294 shares of *** stock from minor shareholders at a price of $50.00 per share. These purchases were made from March 14, 1985 through April 23, 1985 with the exception that approximately 50 shares of the stock were still in transit as of April 23, 1985 *** contends, however, that when he negotiated and consummated the deal with *** he never became the legal or beneficial owner of the 4,706 shares of *** stock purchased from ***. He contends that *** or *** were the actual owners and that he was merely acting

FINDINGS OF FACT AND
CONCLUSIONS OF LAW

   Based upon all of the credible evidence of record the Administrative Law Judge makes the following findings of fact and conclusions of law:

JURISDICTION

   1. *** Bank ***, ***, is a banking corporation existing and doing business under the laws of the State of ***. ***'s principle place of business is in ***.
   2. At all times relevant to this proceeding, *** was a "State nonmember insured bank" within the meaning of Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), and an "insured state nonmember bank" within the meaning of Section 303.4 of the FDIC's Rules and Regulations, 12 C.F.R. Section 303.4.
   3. For purposes of Section 7(j)(1) of the Act (12 U.S.C. Section 1817(j)(1)), the FDIC has been the "appropriate Federal banking agency" with respect to *** at all times relevant to this proceeding.
   4. At all times relevant to this proceeding, the FDIC has had jurisdiction over any person who purchased control of, or applied to purchase control, of, ***.
   5. Respondent *** resides and has his principle place of business in or near ***.
   6. *** is a practicing attorney, a majority owner, a director, and an executive officer of *** National Bank at ***, ***.
   7. In April and May 1985, *** filed with the FDIC three documents labeled as Notices of Change in Bank Control. Those documents relate to ***'s purchases of *** stock, including his April 23, 1985 purchase of control of ***.
   8. The FDIC has jurisdiction over *** and over the subject matter of this proceeding.
   9. The FDIC issued a "Notice of Assessment of Civil Money Penalty" alleging a violation of Section 7(j) of the Change in Bank Control Act of 1978, 12 U.S.C. Section 1817(j) by Respondent *** and assessing a civil monetary penalty of $311,000.00.
   10. Respondent, ***, filed a Request for Hearing on March 10, 1986.
   11. A hearing was held before the undersigned Administrative Law Judge commencing on September 22, 1986.
   12. Prior to March 1985, *** and members of his family owned or controlled approximately 72 percent of ***'s voting stock. Mr. ***' daughter, *** ("Ms. ***"),
{{4-1-90 p.A-1219}}held a Power of Attorney under which she could, inter alia, sell Mr. ***' stock in ***.
   13. From at least 1984 forward, *** had serious problems including operating losses and inadequate capital. These problems were of such magnitude that *** was approaching an imminent failure by March 1985.
   14. Prior to March 1985, there were unsuccessful efforts to sell, merge, liquidate, or recapitalize ***.
   15. *** was not in control of *** at any time prior to March 1985.
   16. On or about March 14, 1985, *** began to solicit, by mail, tenders of shares of *** stock at $50.00 per share. The majority of ***'s small stockholders tendered their shares to *** at his $50.00 per share offering price. Through that offer, *** acquired a total of 2,294 *** shares (18 percent of the outstanding stock) at that $50.00 price.
   17. By mid-March 1985, *** had spoken to Ms. *** concerning *** stock, including a possible sale of the *** stock under her control.
   18. In March and April 1985, the book value of *** stock was less than $50.00 per share. A that time *** had a serious capital deficiency, lacked adequate management, was losing money, and was in serious danger of being closed by the State of ***. There was no active market for *** stock. Absent a merger or acquisition, *** stock was worth substantially less than $50.00 per share. Had *** closed, it stock would probably have been worthless.
   19. On April 17, 1985, Messrs. ***, *** (*** National's Chairman), and *** (*** National's president) negotiated an agreement under which *** National Bank, *** ("*** National ") contracted to purchase 7,000 *** shares from *** as part of a merger of *** into *** National. Major terms of that agreement included that: (a) *** National would immediately give *** a check for $300,000.00, (b) *** National would immediately loan *** an additional $840,000.00 to be secured by 7,000 *** shares, (c) *** would promptly use a portion of the loan proceeds to purchase 4,706 CBW shares controlled by Ms. ***, and (d) when the merger was consummated, *** National would cancel the $840,000.00 note, including all accrued interest, in exchange for ***s 7,000 CBW shares.
   20. On April 17, 1985 pursuant to that agreement, *** National delivered a $300,000.00 cashier's check to ***. That check would not have been issued but for the leverage *** had as a result of his actual, and anticipated, ownership of *** stock.
   21. On April 17, 1985, pursuant to that same agreement, *** National loaned *** $840,000.00 on a demand note to be secured by 7,000 shares of *** stock. The loan "value" of each share was $120.00.
   22. At the time the $840,000.00 was delivered to ***, he owned approximately 2,200 *** shares. *** delivered no collateral for the loan until at least April 23, 1985.
   23. At the time *** National delivered the $840,000.00 to ***, it was impossible for *** to obtain a total of 7,000 *** shares without buying *** shares owned by Mr. *** or his family.
   24. The $840,000.00 and the $300,000.00, was given to *** under an agreement that *** would promptly purchase 4,706 *** shares from Ms. ***. While no precise time limit appears to have been set, it is clear that when he took the $1.14 million, *** agreed and intended to purchase the control block of *** stock from Ms. *** long before the minimum 60 day waiting period under the Change in Bank Control Act would have expired.
   25. April 23, 1985, Ms. *** sold her father's 4,706 *** shares to ***. *** caused a $470,600.00 cashier's check ($100.00 per share) to be delivered to Ms. *** in payment for those *** shares. *** National's April 17, 1985, $840,000.00 loan to *** provided the funds used to purchase that cashier's check.
   26. The 4,706 CBW shares constitute 38 percent of ***'s 12,500 issued and outstanding shares. On or about April 23, 1985, ***'s board of directors learned that *** owned over 50 percent of ***'s stock.
   27. Also on April 23, *** purchased a $94,120.00 repurchase agreement (the "$94,120.00 joint repo") in the joint names of *** and Ms. ***. That $94,120.00 is equal to $20.00 for each of the 4,706 *** shares controlled by Ms. ***.
   28. Prior to March 1985, *** had purchased control of three other banks, ***
{{4-1-90 p.A-1220}}Bank, ***, *** National Bank, ***, and *** Bank.
   29. In each of those three prior instances, *** had filed a timely Notice of Change of Bank Control before purchasing control of those banks.
   30. At all relevant times, ***, a practicing attorney and banker, had actual knowledge that a purchase of control (over 25 percent) of ***'s stock without giving 60 days prior written notice to the FDIC would violate the Control Act.
   31. ***'s April 17, 1985 agreement with *** National's *** and *** was entered into by *** despite his actual knowledge at that time that his purchase of the 4,706 *** shares from Ms. *** without 60 days prior written notice to the FDIC would violate the Control Act.
   32. *** gave the FDIC no prior notice of the actual change in control#151;his purchase of the 4,706 *** shares from Ms. ***.
   33. *** consummated the April 23, 1985 purchase of the 4,706 *** shares from Ms. *** with actual knowledge that the purchase violated the Control Act.
   34. ***'s purchase of control of *** constituted a knowing and willful violation of the Change in Bank Control Act.
   35. On April 24, 1985, *** orally told ***, an Assistant Regional Director in the FDIC's *** Regional Office, that he had purchased the 4,706 *** shares from Ms. *** on April 23, 1985.
   36. *** stated to Mr. *** that he, ***, knew at the time he purchased those 4,706 *** shares that the purchase was made in violation of the Control Act.
   37. At that April 24, 1985 meeting, *** falsely stated that the purchase had been financed by two $250,000.00 loans, one from *** Bank and the other from *** Bank & Trust Co., ***. *** also falsely stated at that meeting that he decided to merge *** into *** National on April 23, 1985, and that the decision to merger was made after he had purchased the stock from Ms. ***.
   38. ***'s oral statements to Mr. ***, even if true, would not have constituted notice under the Control Act, said Act expressly requiring 60 days prior written notice.
   39. Respondent, ***, filed three Notice of Change in Bank Control. These notices were filed on April 10, 1985, April 26, 1985, and May 3, 1985.
   40. None of the notices filed by *** were filed more than 60 days prior to his acquisition of control of *** by the purchase of 4,706 shares from Ms. *** on April 23, 1985.
   41. At all times from April 23, 1985 until March 20, 1986, *** was the legal and beneficial owner of approximately 56 percent (7,000 shares) of ***'s stock. This majority ownership gave *** the power to control ***. As a matter of law that stock ownership gave *** control of ***.
   42. *** effectively exercised control over *** by agreeing to a purchase of *** stock by *** National. In furtherance of that agreement, on April 29, 1985, ***, as the owner of 7,000 *** shares, gave his proxy to vote his *** shares in favor of a merger of *** into *** National. Also in furtherance of that agreement, in or about July 1985, *** signed a Shareholders Agreement in which he agreed that he could, and would, cause the 7,000 *** shares owned by him to be voted in favor of the proposed merger of *** into *** National. In that Shareholders Agreement, *** represented that he had the capacity to vote, and had "good title to," 7,000 *** shares. The proposed merger failed to occur due to a rejection of the merger by the Comptroller of the Currency.
   43. *** exercised additional influence over ***. In late July 1985, *** proposed to purchase from *** a large block of newly issued *** stock. *** advised Mr. *** that he, ***, would act against any such proposal. Shortly thereafter, Mr. *** terminated his proposal.
   44. On or about August 1, 1985, *** and ***, president of ***'s *** Bank, were made unpaid consultants to ***.
   45. In the fall of 1985, ***, or Mr. *** on ***'s behalf, recommended that *** be made president of ***. Shortly thereafter, Mr. *** was made president of ***.
   46. After Mr. *** became the president of ***, *** spoke to him on a weekly basis concerning the condition, including the profitability, of ***.
   47. Also in the fall of 1985, ***, or Mr. *** on ***'s behalf, recommended that Mr. *** be made a *** director. Mr. *** is associated with ***'s law firm. Shortly after this recommendation was made, Mr. *** was made a director of ***.
   48. On January 22, 1986, *** gave his proxy to vote his 7,000 *** shares at a *** stockholders meeting. This proxy was given {{4-1-90 p.A-1221}}to ***'s management and not to *** National or its management.
   49. The merger of *** into *** National was not consummated at the time *** had expected it to be consummated when he bought his *** stock. However, on March 20, 1986, *** surrendered his 7,000 *** shares to *** National in exchange for cancellation of the $840,000.00 note and all accrued interest on that note. That accrued but unpaid interest totalled approximately $99,000.00. That transaction yielded to *** the precise net purchase price he had agreed to on April 17, 1985.
   50. At all times since at least April 1985, *** has had serious cash flow problems.
   51. In March, 1985, and at all relevant times thereafter, the bulk of ***'s assets were invested in relatively illiquid assets, e.g., real estate and control blocks of stock in banks.
   52. At all times subsequent to March 1985, *** lacked sufficient available cash flow to pay interest on, much less retire the principal of, the money he borrowed to finance his purchases of *** stock.
   53. *** National foreclosed on that *** stock only after *** stated that he could not pay the $840,000.00 plus interest secured by his *** stock.
   54. Consistent with the policy underlying the Control Act, *** was required by law to give the FDIC an adequate opportunity to approve any change of control before he purchased control of ***. By his action of purchasing control of *** without first giving the FDIC the required 60 days prior written notice, *** prevented the FDIC from carrying out its statutory mandate.
   55. *** anticipated, and realized, a substantial profit from his violation of the Control Act. That profit is composed of two principal elements: (a) a $160,580.00 profit on resale of the 2,294 *** shares purchased at $50.00 per share, and (b) a $47,060.00 profit on resale of the 4,706 *** shares purchased from Ms. ***, less $7,000.00 in expenses attendent with the purchase of the first 2,294 shares. *** realized a net profit of $200,640.00.
   56. *** paid $50.00 per share for each of 2,294 *** shares. His anticipated and actual profit from his violation of the Control Act included his profit on resale of those *** shares. He resold those shares to *** National for $120.00 per share. ***'s profit from resale of these shares was $160,580.00 (2,294 shares times $70.00 per share profit equals $160,580.00).
   57. Absent his purchase of 4,706 *** shares from Ms. ***, *** would not have been able to resell his 2,294 *** shares at a price even approaching $120.00 per share.
   58. *** paid an effective price of $110.00 per share for the 4,706 shares controlled by Ms. ***. That $110.00 per share figure contains two elements. First, *** caused a check for $100.00 per share, $470,600.00 to be delivered to Ms. *** in payment for the shares.
   59. Second, *** used $94,120.00 to purchase from *** Bank a repurchase agreement (the $94,120.00 joint repo) in the joint names of himself and Ms. ***. That $94,120.00 amounts to $20.00 per share for the 4,706 *** shares.
   60. The proceeds of the $94,120.00 joint repurchase agreement were transferred to a savings account at ***. That savings account was in the joint names of *** (or his business associate ***) and Ms. ***.
   61. On the face of the account documents, *** had a one-half interest in the $94,120.00 joint repo and he (or he and his associate Mr. ***) had a one-half interest in the savings account to which that money was transferred.
   62. *** demonstrated his control over, and apparent beneficial interest in, the $94,120.00 repo by, among other things, causing or allowing his *** Bank to use that $94,120.00 joint repurchase agreement as security for a loan to himself. While *** denied that he authorized this use, his denial is not credible in light of his apparently authorized signature on the note, which note cross-references to the $94,120.00 joint repo as security, and in light of his testimony that he received the proceeds of the loan documented in that note.
   63. The preponderance of the credible evidence indicates that the price *** paid for the 4,706 *** shares consisted of the $100.00 per share paid by check plus one-half of the $20.00 per share put into the $94,120.00 joint repo, i.e., an additional $10.00 per share, yielding an effective purchase price of $110.00 per share.
   64. ***'s resale of those 4,706 *** shares at $120.00 per share yielded a profit to him
{{4-1-90 p.A-1222}}of $47,060.00 (4,706 shares times $10.00 per share profit equals $47,060.00).
   65. The difference between the price *** paid for these 4,706 shares and the price he received for them was part of his profit from his violation of the Control Act.
   66. *** had legitimate business expenses of $7,000.00 related to his purchase of the first 2,294 shares.
   67. Neither *** National nor *** and *** would, on April 17, 1985, have given *** all or any part of the additional $300,000.00 that *** National paid to him on that date had *** not agreed to sell a control block, 7,000 shares, of *** in a merger with *** National. *** obtained the $300,000.00 check by using the "leverage" he could exert by promising to sell a control block of *** in a merger with *** National.
   68. The $300,000.00 came from the funds of *** National Bank.
   69. The preponderance of the credible evidence indicates that part of the consideration given by *** for the $300,000 was his release of the two *** notes.
   70. These two ten year notes contained several unusual terms. The notes were expressly non-assignable. Each note was in the principal amount of $100,000.00, provided for 12 percent per year simple interest, and required no payment of principal or interest until April 1991.
   71. Until at least April 17, 1985, it was the position of *** and *** that all of their liability on the notes was contingent on an event that had not yet occurred, and might never occur, i.e., their profitable resale of the *** Bank stock.
   72. Each note provided in substance that on April 21, 1991, $220,000.00 would be due and owing ($100,000.00 principal amount plus 12 percent simple interest for ten years equals $220,000.00).
   73. The ***' position that the notes were contingent tends to diminish their value.
   74. Absent the purchase of 4,706 *** shares from Ms. ***, *** would have received none of the additional $300,000.00 paid to him by *** National on April 17, 1985.
   75. *** obtained substantial financial benefit by the receipt of $300,000.00 in exchange for cancellation of the notes, the exact value of which cannot be calculated.
   76. *** received preferential treatment in obtaining the $300,000.00 payoff for the notes by virtue of his agreement to purchase control of *** and subsequently to merge *** with *** National Bank.
   77. *** obtained substantial economic and financial benefits from the use of part of the funds from *** to ease his cash flow problems.
   78. *** purchased charged off accounts from *** for $77,000.00 in an effort to recapitalize ***.
   79. The value of the charged off accounts is unknown.
   80. Neither the $77,000.00 given to *** for the charged off accounts or the interest on the loan used to obtain the $77,000.00 can be used to diminish his profit on the purchase and resale of the 7,000 shares of stock for the following reasons:
   a) The value of the charged off accounts received for the $77,000.00 is unknown;
   b) The addition of $77,000.00 in cash to *** assets is reflected in the sale price of $120.00 per share received by ***; and
   c) *** received interest free funds from *** National Bank in excess of the amount needed to pay off the $77,000.00.
   81. *** has assets valued at approximately $2,000,000.00, the bulk of which are assets with little, if any, short term liquidity, i.e. real estate and stock in other banks which he controls.
   82. *** did not, and could not, have relied on failure of the FDIC to timely respond to the three Notices of Change in Bank Control as he purchased control prior to expiration of 60 days from the filing of the notices.
   83. The FDIC expressly and regularly objected to ***'s purchase of control. *** lacked any reasonable basis for believing that the FDIC agreed to excuse, or acquiesced in, his violation of the Control Act.
   84. In setting the amount of a civil money penalty for violation of the Control Act, the FDIC is required to consider, inter alia, (a) Respondent's economic benefit from the violation and the prophylactic benefits of assessing civil money penalties that do more than simply remove the Respondent's actual profit from the violation, (b) the gravity of the violation, (c) Respondent's financial resources, and (d) Respondent's good faith.
   85. For purposes of assessing civil money penalties here, it is appropriate to first de-
{{4-1-90 p.A-1223}}termine the order of magnitude or approximate range of ***'s profit from his violation and then to consider the gravity of the violation, ***'s net worth, and his good faith#151; or lack thereof.
   86. ***'s profit from his violation of the Control Act is $200,640.00.
   87. *** also received other economic benefits by the use of funds which improved his cash flow at a time when he was experiencing cash flow difficulties and preferential treatment in the early payoff of two $100,000.00 notes for $300,000.00.
   88. ***'s violation of the Control Act was knowing, willful, and "intentional."
   89. *** remained in violation of the Control Act from the day he purchased control on April 23, 1985, until he divested his *** stock on March 20, 1986. His violation continued for those 11 months despite the FDIC's objections to the violation and the FDIC's statements, beginning by May 1, 1985, that it expected to impose civil money penalties based upon this continuing violation.
   90. *** admitted in April 1985 that he purchased control of *** in violation of the Control Act.
   91. There is no evidence that ***'s purchase of control on April 23, 1985 and subsequent dealings with *** in any way injured or harmed ***.
   92. Given the state in which *** was in when *** acquired control, it is doubtful that he could have harmed *** any further by poor managerial skills, etc.
   93. It is difficult to perceive how ***'s dealings with *** could cause any loss of public confidence in *** as *** was on the verge of closing its doors at about the time which he purchased control.
   94. As regards Factor 7, ***'s anticipated and actual profit from his violation of the Control Act is $200,640.00. He also received a substantial additional benefit in terms of improved cash flow and preferential treatment.
   95. There is no proof of any other violations of Federal banking laws and regulations by ***.
   96. The other "Factors" set forth in the Interagency Policy Statement have little apparent application to the instant case.
   97. In order to achieve the purpose of deterring violations of the Control Act, civil money penalties generally should do more than simply return the violator to the financial position he would have enjoyed had he not been caught breaking the law.
   98. ***'s lack of good faith and the gravity of his willful violation of the Control Act indicate that for a civil money penalty which is heavier than a baseline penalty equal to, or somewhat in excess of, ***'s expected or actual profit from the violation is appropriate.
   99. Taking into account: (a) that *** willfully violated the Change in Bank Control Act; (b) that his violation was undertaken with the expectation that it would produce a large profit for ***; (c) that the violation did in fact produce a large profit for ***; (d) that unless his profit is removed in the form of civil money penalties, *** will profit from his decision to willfully break the law; and (e) considering all of the other factors and arguments discussed above and at the hearing, a civil money penalty of $250,000.00 is clearly appropriate.
   100. *** violated the Control Act with the expectation that he would make a large profit. ***'s knowing, intentional, and willful violation of the Control Act continued for 11 months. Moreover, during the course of more than a year *** repeatedly made false statements about the situation. These factors support the imposition of a penalty that does more than simply remove the profit ***'s made by breaking the law. They support imposition of a penalty of $250,000.00.

   RECOMMENDED DECISION

   It is the Recommended Decision of the Administrative Law Judge that based upon a finding that Respondent *** purchased and held control of *** Bank ***, in willful violation of the Change in Bank Control Act of 1978, 12 U.S.C. Section 1817(j), and after taking into account Respondent's profit from that violation, the gravity of that violation, Respondent's financial resources, Respondent's lack of good faith, and the data, views, and arguments submitted by Respondent, it is hereby
   ORDERED that a civil money penalty in the total amount of $250,000.00 be, and hereby is, assessed against Respondent ***; and it is further
{{4-1-90 p.A-1224}}
   ORDERED that said $250,000.00 civil money penalty shall be paid within ninety days of the entry of this Order to pay.
   Date this 30th day of September, 1987.

/s/ John H. Powell
Administrative Law Judge

FDIC 86-43k

RECOMMENDED ORDER TO PAY

   Based upon a finding that Respondent *** purchased and held control of *** Bank ***, in willful violation of the Change in Bank Control Act of 1978, 12 U.S.C. Section 1817(j), and after taking into account Respondent's profit from that violation, the gravity of that violation, Respondent's financial resources, Respondent's lack of good faith, and the data, views, and arguments submitted by Respondent, it is hereby
   ORDERED that a civil money penalty in the total amount of $250,000.00 be, and hereby is, assessed against Respondent ***; and it is further
   ORDERED that said $250,000.00 civil money penalty shall be paid within ninety days of the entry of this Order to pay.
   By direction of the Board of Directors.
   Dated at Washington, D.C. this ____ day of ____, 1987.

Hoyle L. Robinson
Executive Secretary

APPENDIX A

   Section 1817(j) of the Change in Bank Control Act provides, in pertinent part:

   (j)(1) No person, acting directly or indirectly or through or in concert with one or more other persons, shall acquire control of any insured bank through a purchase, assignment, transfer, pledge, or other disposition of voting stock of such insured bank unless the appropriate Federal banking agency has been given sixty days prior written notice of such proposed acquisition and within that time period the agency has not issued a notice disapproving the proposed acquisition or extending for up to another thirty days the period during which such a disapproval may issue. The period for disapproval may be further extended only if the agency determines that any acquiring party has not furnished all the information required under paragraph (6) of this subsection or that in its judgment any material information submitted is substantially inaccurate. An acquisition may be made prior to expiration of the disapproval period if the agency issues written notice of its intent not to disapprove the action. For purposes of this subsection, the term "insured bank" shall include any "bank holding company", as that term is defined in Section 1841 of this title, which has control of any such insured bank, and the appropriate Federal banking agency in the case of bank holding companies shall be the Board of Governors of the Federal Reserve System.

   (6) Except as otherwise provided by regulations of the appropriate Federal banking agency, a notice filed pursuant to this subsection shall contain the following information:
   (A) The identity, personal history, business background and experience of each person by whom or on whose behalf the acquisition is to be made, including his material business activities and affiliations during the past five years, and a description of any material pending legal or administrative proceedings in which he is a party and any criminal indictment or conviction of such person by a State and Federal Court.
   (B) A statement of the assets and liabilities of each person by whom or on whose behalf the acquisition is to be made, as of the end of the fiscal year for each of the five fiscal years immediately preceding the date of the notice, together with related statements of income and source and application of funds for each of the fiscal years then concluded, all prepared in accordance with generally accepted accounting principles consistently applied, and an interim statement of the assets and liabilities for each person, together with related statements of income and source and application of funds, as of a date not more than ninety days prior to the date of the filing of the notice.
   (C) The terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made.
   (D) The identity, source and amount of the funds or other consideration used or to be used in making the acquisition, and if any part of these funds or other consideration has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the
{{4-1-90 p.A-1225}}transaction the names of the parties, and any arrangements, agreements, or understandings with such persons.
   (E) Any plans or proposals which any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any company or to make any other major change in its business or corporate structure or management.
   (F) The identification of any person employed, retained, or to be compensated by the acquiring party, or by any person on his behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition, and a brief description of the terms of such employment, retainer, or arrangement for compensation.
   (G) Copies of all invitations or tenders or advertisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition.
   (H) Any additional relevant information in such form as the appropriate Federal banking agency may require by regulation or by specific request in connection with any particular notice.

   (8) For the purposes of this subsection, the term#151;
   (A) "person" means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed herein; and
   (B) "control" means the power, directly or indirectly, to direct the management or policies of an insured bank or to vote 25 per centum or more of any class of voting securities of an insured bank.

   (15) Any person who willfully violates any provision of this subsection, or any regulation or order issued by the appropriate Federal banking agency pursuant thereto, shall forfeit and pay a civil penalty of not more than $10,000 per day for each day during which such violation continues. The appropriate Federal banking agency shall have authority to assess such a civil penalty, after giving notice and an opportunity to the person to submit data, views, and arguments, and after giving due consideration to the appropriateness of the penalty with respect to the size of financial resources and good faith of the person charged, the gravity of the violation, and any data, views, and arguments submitted. The agency may collect such civil penalty by agreement with the person or by bringing an action in the appropriate United States District Court, except that in any such action, the person against whom the penalty has been assessed shall have a right to trial de novo.
   12 CFR 304.4(a) of the F.D.I.C. Regulations provides in pertinent part:
   (a) Acquisitions of control. Under the Change in Bank Control Act of 1978, acquisitions by a person or persons acting in concert of the power to vote 25 percent or more of a class of voting securities of an insured nonmember bank, unless exempted, require prior notice to the Corporation. In addition, a purchase agreement, transfer, pledge, or other disposition of voting stock through which any person will acquire ownership, control, or the power to vote ten percent or more of a class of voting securities of an insured state nonmember bank will be presumed to be an acquisition by such person of the power to direct that institution's management or policies if:
   (1) The institution has issued any class of securities subject to the registration requirements of Section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 781); or
   (2) Immediately after the transaction no other person will own a greater proportion of that class of voting securities. Other transactions resulting in a person's control of less than 25 percent of a class of voting shares of an insured state nonmember bank would not result in control for purposes of the Act. An acquiring person may request an opportunity to contest any presumption established by this paragraph (a) of this subsection with respect to a proposed transaction. The Corporation will afford the person an opportunity to present views in writing, or, where appropriate, orally before its designated representatives either at informal conference discussions or at informal presentations of evidence.
   FDIC Policy Statement entitled "Changes In Control In Insured Nonmember Banks", 44 Fed. Reg. 7226 (February 6, 1979) provides in pertinent part:
   The Change in Bank Control Act of 1978, Title VI of the Financial Institutions Regu-
{{4-1-90 p.A-1226}}latory and Interest Rate Control Act of 1978, gives the Federal bank supervisory agencies the authority to disapprove changes in control of insured banks and bank holding companies.

   The Act requires any person (broadly defined) seeking to acquire control of any insured bank or bank holding company to provide 60 days prior written notice to the appropriate Federal banking agency. This requirement applies to all covered transactions that will be consummated after March 9, 1979.

   The Act describes the factors that the Corporation and the other Federal banking agencies are to consider in determining whether a transaction covered by the Act should be disapproved. These factors include the financial condition, competence, experience, and integrity of the acquiring person (or persons acting in concert) and the effect of the transaction on competition. The Corporation's objectives in its administration of the Act are to enhance and maintain public confidence in the banking system by preventing identifiable serious adverse effects resulting from anticompetitive combinations of interests, inadequate financial support, and unsuitable management in these institutions.

   Under the Act, the Corporation will require a "person" proposing to acquire control of an insured State nonmember bank to file a notice with the Corporation containing personal and biographical information, detailed financial information, details of the proposed acquisition, information on any structural or managerial changes contemplated for the institution, and other relevant information required by the Corporation.
In order to be filed properly in accordance with the Act a notice must be substantially complete and responsive to every item specified in paragraph 6 of the Act.

   The Act defines "control" as the power#151; directly or indirectly #151;to vote 25 percent or more of any class of voting securities or to direct the management or policies of a bank holding company or an insured bank. Therefore, any transaction, unless exempted by the Act, that results in the acquiring party having voting control of 25 percent or more of any class of voting securities or results in the power to direct the management or policies of such an institution would trigger the notice requirement.
   With respect to persons who have the power to vote less than 25 percent of an institution's shares, the Corporation's regulations establish the following rebuttable presumptions for purposes of the notice requirements of the Act:
   (1) Where the institution to be acquired has issued any class of securities subject to the registration requirements of Section 12 of the Securities Exchange Act of 1934 (15 U.S.C. Subsection 781), and a transaction would result in a person (or group of persons acting in concert) having voting control of ten percent or more of any class of voting securities of that institution, the transaction results in control.
   (2) Where a transaction involving any class of voting securities of an insured State nonmember bank would result in a person (or group of persons acting in concert) having voting control of ten percent or more and after the transaction the acquiring person would be the largest shareholder of that institution, the transaction results in control.

   Other transactions resulting in a person's control of less than 25 percent of a class of voting shares of an insured State nonmember bank would not result in control for purposes of the Act. In addition, customary one-time proxy solicitations and the receipt of pro rata stock dividends would not be subject to the Act's notice requirements.

   Persons contemplating an acquisition that would result in a change in control of an insured State nonmember bank should request appropriate forms and instructions from the Regional Director of the Region in which the affected institution is located. If there is any doubt whether a proposed transaction requires a notice, the acquiring person should consult the Regional Director for guidance. The Act places the burden of providing notice on the prospective acquiring person and substantial civil penalties can be imposed for willful violations.
   FDIC Policy Statement entitled "Interagency Policy Regarding the Assessment of Civil Money Penalties by the Federal Financial Institutions Regulatory Agencies" provides in pertinent part:
   Under provisions of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 ("FIRA"), 92 Stat. 3641, the Federal financial institutions regulatory agencies are authorized to assess civil money penalties for violations of various Federal statutes and regulations promulgated thereunder. The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are each authorized to assess civil money penalties for violation of:

   (3) a willful violation of the Change in Bank Control Act of 1978 (12 U.S.C. 1817(j)).

   The maximum civil penalty that may be assessed is generally $1,000 per day for each day the violation continues. The maximum civil penalties are $100 per day for a violation of Section 19 of the Federal Reserve Act and $10,000 per day for a violation of the Change in Bank Control Act and the Change in Savings and Loan Control Act. In determining the amount of the penalty, the FIRA provisions require the appropriate agency to consider the financial resources and good faith of the company or person charged, the gravity of the violation, any history of previous violations, and such other matters as justice may require.

   Under the FIRA civil penalty provisions, the person against whom a penalty is assessed has the opportunity to challenge the assessment in a formal administrative hearing and, following the hearing, to obtain judicial review of any assessment in an appropriate United States Court of Appeals. Under the Change in Control Act and the Change in Savings and Loan Control Act, the person is entitled to a trial on the assessment in an appropriate United States District Court.
   To provide guidance in the procedures and criteria used by the agencies in the assessment of civil money penalties under the FIRA provisions and to promote coordination among the agencies in the assessment of penalties, the agencies have adopted this supervisory policy.