Federal Deposit
Insurance Corporation

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   [¶5168A] In the Matter of Patrick G. Huycke, Bank of Southern Oregon, Medford, Oregon, Docket No. FDIC-91-086jj(8-26-91).

   Board adopts recommendation of hearing officer and disapproves applicant's Section 32 application to join the Bank's board of directors, based on opinions applicant rendered as counsel to another, failed federally insured institution.

   [.1] FDI Act Section 32—Application to Serve as Director—Competence and Experience

   Applicant's failure to exercise care and independent judgment as counsel to one institution, particularly regarding the rewriting of minutes of several directors' meetings, is specifically relevant to his ability to serve as a director of another bank.

   [.2] FDI Act Section 32—Application to Serve as Director—Character and Integrity

   Testimony regarding Applicant's good character and reputation for integrity, by witness unfamiliar with his advise as outside counsel, is non-responsive and therefore unpersuasive as to the evidence upon which denial of the Section 32 application is based.

In the Matter of
PATRICK G. HUYCKE
BANK OF SOUTHERN OREGON
MEDFORD, OREGON
(Insured State Nonmember Institution)
DECISION AND ORDER

   This proceeding is before the Board of Directors (the "Board") of the Federal Deposit Insurance Corporation ("FDIC") for final decision following the disapproval of a Notification of Addition of a Director or Employment of a Senior Executive Officer ("Notice") filed by Patrick G. Huycke and following the appeal of that disapproval. Mr. Huycke requested and received a hearing before a presiding officer after the Director of the FDIC's Division of Supervision ("Director") denied his appeal. The Presiding Officer issued a Recommended Decision
{{4-30-92 p.A-1808}}which upheld the disapprovals of the FDIC.¹ This Board has reviewed the record in its entirety and finds the Recommended Decision to be thorough and appropriate. As amplified by the discussion below, the Board adopts the findings and the conclusions of the Recommended Decision and affirms the disapproval.

   By Notice dated February 19, 1991, Patrick G. Huycke informed the FDIC that he was being added to the board of directors of the Bank of Southern Oregon, Medford, Oregon ("Bank"). Notification was given pursuant to the requirements of Section 32 of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1831i, as the Bank was newly organized and recently insured.
   The San Francisco Regional Office disapproved service of Mr. Huycke as a director of the Bank ("Notice of Disapproval") on the ground that it could not find favorably for him with respect to the statutory factors enumerated in Section 32(e) of the FDI Act. Mr. Huycke appealed this decision, but upon appeal, the Director upheld the disapproval. Pursuant to FDIC regulations at 12 C.F.R. §§ 308.97 and 308.98, Mr. Huycke requested a hearing. On June 3, 1991, the Bank joined in Mr. Huycke's request for a hearing. A hearing was held on June 13, 1991, in Medford, Oregon. Following receipt of the transcript, both sides submitted written arguments to the Presiding Officer, Daniel H. Hanscom, on June 30, 1991. The Presiding Officer's recommendation that the denial of the appeal of the Notice of Disapproval of Patrick G. Huycke as a director of the Bank be affirmed was submitted to the Board of the FDIC on July 22, 1991.

   In disapproving service by Mr. Huycke as a director of the Bank, the San Francisco Regional Director ("Regional Director") relied primarily on two incidents in which Mr. Huycke rendered opinions as counsel to Citizens Savings and Loan, Medford, Oregon ("Citizens"), a failed federally insured institution. One opinion was rendered in connection with a loan by Citizens to Charles Maestri. The other opinions at issue were provided during 1982 and 1983 regarding Citizens' purchase of real estate companies in which certain of its directors had interests. Based on these incidents, the Regional Director and the Director determined that Huycke's service as a director of the Bank "would not be in the best interests of either the depositors of the Bank or of the public." (FDIC Ex. No. 18.)
   The Recommended Decision contains a thorough and complete presentation and analysis of the evidence presented at the hearing regarding each of these incidents with which the Board concurs and which the Board adopts. The Board, therefore, does not repeat that statement of facts here. See R.D. at 1–8.

   [.1] It appears to be the position of Mr. Huycke that his failures to independently investigate before providing legal opinions to his client, Citizens, and the state regulatory authority "would at most constitute nothing more than negligence," which "would have no reflection whatsoever upon Mr. Huycke's integrity or character." Huycke Br. at 3. While the issue of Mr. Huycke's negligence or malpractice is left to another tribunal, the Board is of the view that Mr. Huycke's handling of one depository institution's relationship to its regulators is specifically relevant to his handling of another institution's relationship to its regulators. This is particularly true for the types of institutions which are the focus of Section 32— newly chartered institutions, institutions where control has recently changed, or troubled institutions.
   For purposes of this proceeding, whether Mr. Huycke's actions constitute negligence in the technical sense, or whether his advice was correct as a matter of law, is not the primary focus. Rather, we are concerned with his failure as counsel to exercise the care and independent judgment required in his fiduciary capacity with Citizens, and which would be required of him as a bank director.
   Officers and directors occupy a position of trust and must safeguard the interest of their depositors and shareholders. They have the duty to act diligently, prudently, hon-

Directors must exercise ordinary care and prudence in the administration of the affairs of a bank, and this includes something more than officiating as figureheads. They are entitled under the law to commit banking business, as defined to their duly authorized officers, but this does not absolve them from the duty of reasonable supervision, nor ought they be permitted to be shielded from liability because of want of knowledge of wrongdoing, if that ignorance is the result of gross inattention, ...

   [.2] Mr. Huycke presented a series of witnesses, including the Administrator of the Division of Finance and Securities for the State of Oregon, who testified to his good character and reputation. None of these witnesses addressed the two incidents which are the focus of this proceeding and, indeed, none of them possessed any knowledge of Huycke's activity while rendering opinions as outside counsel to Citizens. The Board finds their testimony to be non-responsive and therefore unpersuasive as to the evidence upon which denial by the Director was based.

   For the reasons discussed above, the Board finds substantial evidence in this record to support the findings of the Presiding Officer. The Board, therefore, adopts the decision of the Presiding Officer and incorporates it herein by reference, and finds that Mr. Huycke's service as a director of the Bank of Southern Oregon would not be in the best
{{4-30-92 p.A-1808.2}}interest of the Bank, its depositors, or the public. The Board affirms the issuance of the Notice of Disapproval.

   The Board of the FDIC, having considered the entire record in this proceeding, hereby adopts the recommendation of the Presiding Officer to continue the Notice of Disapproval of Patrick G. Huycke.
   ACCORDINGLY, IT IS HEREBY ORDERED THAT, the Notification of Addition of a Director or Employment of a Senior Executive Officer, submitted by Patrick G. Huycke on February 19, 1991, be and is hereby disapproved.
   IT IS FURTHER ORDERED, that the Executive Secretary, or his designee, is instructed to execute and serve copies of this Decision and Order on all parties, on the Presiding Officer, and on the Administrator, Division of Finance and Corporate Securities for the State of Oregon.
   By direction of the Board of Directors.
   Dated at Washington, D.C. this 26th day of August, 1991.
   /s/ Hoyle L. Robinson
   Executive Secretary

In the Matter of
Patrick G. Huycke Bank of Southern Oregon
Medford, Oregon
(Insured State Nonmember Bank)
Daniel H. Hanscom, Presiding Officer:

   This is a proceeding under Section 32 of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. Section 1831i.
   On February 19, 1991, Patrick G. Huycke notified the Federal Deposit Insurance Corporation ("FDIC") that he was being added to the Board of Directors of the Bank of Southern Oregon, and submitted the requisite financial report, biographical information and other supporting documentation (FDIC Ex. 12). Notification was given pursuant to the requirements of Section 32 in as much as the Bank of Southern Oregon was newly organized and recently insured (FDIC Ex. 14; Tr. 97–98).
   The San Francisco Regional Office disapproved service of Mr. Huycke as a Director of the Bank of Southern Oregon on the ground that it could not find favorably for him with respect to the statutory factors enumerated in Section 32 (e) of the Act (FDIC Ex. 15). Mr. Huycke appealed (FDIC Ex. 16) but the Director of Supervision on May 2, 1991, denied the appeal (FDIC Ex. 18).
   Mr. Huycke then asked for a hearing (FDIC Ex. 19) as provided by FDIC regulations (FDIC Ex. 17, Section 308.97 and 308.98). On June 3, 1991, the Bank of Southern Oregon joined in Mr. Huycke's request and a hearing was scheduled to commence June 13, 1991, in Medford, Oregon.
   The hearing was held as scheduled and documentary evidence and testimony were received. The transcript was completed on June 21 and on June 30 concise written arguments from both sides were filed.

   In disapproving service by Mr. Huycke as a Director of the Bank of Southern Oregon, the Regional Director cited, among other matters, actions of Mr. Huycke in rendering certain opinions as counsel to Citizens Savings and Loan ("Citizens"), now defunct (FDIC Ex. 15; Tr. 25).
   The Director, Division of Supervision, denied Mr. Huycke's appeal citing particularly (1) an opinion provided by Mr. Huycke to Citizens regarding a loan to one Charles Maestri, and (2) various opinions provided in 1982 and 1983 regarding Citizens purchase of real estate companies in which certain directors of Citizens had interests. In view of these, the Director, Division of Supervision, determined that service by Mr. Huycke as a Director of the Bank of Southern Oregon would not be in the best interests of either the depositors of the Bank or of the public.
   Two transactions in which Mr. Huycke took action as counsel to Citizens are in issue, the Maestri loan and advice through the president of Citizens to Oregon regulators as to compliance by Citizens with Oregon law in buying real estate firms in which directors of Citizens had interests.
Maestri loan
   On February 18, 1981, Citizens made a commitment of a $1,147,000 loan to one Charles Maestri. The advice Mr. Huycke provided as counsel to Citizens in connection with this loan constituted part of the basis for the objection of the San Francisco
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Regional Director and the Director, Division of Supervision, to service by him as a Director of the Bank of Southern Oregon. The background of this loan and the role of Mr. Huycke follow.
   Charles Maestri owned a number of motion picture theatres in Northern California and Southern Oregon, including the Medford area (Tr. 135). Mr. Maestri and Bob Robertson, a law partner of Mr. Huycke and a Director and General Counsel of Citizens, together owned a piece of real estate in Medford (Tr. 30, 75–76) on which Mr. Maestri wanted to construct a theatre (Tr. 133). In late 1980, Bob Robertson personally brought Mr. Maestri to the office of the President of Citizens, Paul Williams, and introduced him (Tr.133). It is clear that Mr. Maestri was seeking financing for his proposed new theatre.
   On January 16, 1981, after some telephone discussions with Mr. Williams, Charles Maestri sent a letter to him in the care of Mr. Robertson, providing detailed financial information for several of Mr. Maestri's theatre projects, and a pro forma profit and loss statement on his proposed new theatre in Medford (FDIC Ex. 1; Tr. 27–28).
   About one week later on January 23, 1981, Bob Robertson sold his interest in the property on which Mr. Maestri's theatre was to be built, and on which he was seeking a loan from Citizens, to Mr. Maestri receiving in payment a promissory for $300,000 (FDIC Ex.2; Tr. 31).
   On the same date, January 23, 1981, Mr. Huycke wrote to the president of Citizens reviewing the applicable conflict of interest regulations bearing on a loan by Citizens to Mr. Maestri with the property on which the theatre was to be built being used as security (FDIC Ex. 3; Tr.32–34).
   Mr. Huycke wrote that Federal regulations provided that an insured association was not to lend money to a third party on the security of real property purchased from an affiliated person or in which an affiliated person had a security interest.
   In this context, it is obvious that Mr. Maestri was a third party, Citizens was a possible lending association, and Bob Robertson, as a Director of Citizens, was an affiliated person.
   Mr. Huycke, however, cited opinions of the General Counsel, Federal Home Loan Bank Board, that the foregoing limitation did not apply if a long period had elapsed between the sale by the affiliated person and the loan to the third party. If a short period had elapsed, there was a presumption of violation, according to Mr. Huycke's letter.
   Mr. Huycke then advised Citizens that since the sale by Mr. Robertson to Charles Maestri had already taken place, since it was not conditioned on a loan by Citizens to Mr. Maestri, and since no commitment to grant the loan had been made by Citizens, he believed that Citizens would be free to consider a loan to Mr. Maestri for his theatre project on the same basis as any other comparable loan (FDIC Ex. 3).
   About four weeks later on February 18, 1981, Citizens made a commitment to lend Mr. Maestri $1,147,000, the theatre property to be used as security (FDIC Ex. 4; Tr. 37–38). Based on this commitment Mr. Maestri obtained a construction loan on March 10, 1981, from the United States National Bank of Oregon. The construction loan agreement, in the amount of $1,140,000, noted that Citizens in accordance with its commitment of February 18, 1981, was to provide long term financing.
   On May 18, 1981, the United States National Bank of Oregon disbursed $300,000 of the preceeding loan to Mr. Maestri to Bob Robertson (FDIC Ex.5; Tr. 38–39, 161).
   The $1,147,000 loan by Citizens to Charles Maestri was ultimately defaulted and the Federal Savings and Loan Insurance Corporation ended up foreclosing on the property or accepting a deed in lieu of foreclosure (Tr. 43, 74, 137). A deficiency or loss of $400,000 on the loan occurred (Tr.75). In the meantime, however, Citizens had sold a participation of 90 per cent of the loan to the Oregon Public Employee Retirement System (Tr. 137).
Import of Mr. Huycke's Letter of Opinion
   It seems clear from the foregoing described circumstances that the import of Mr. Huycke's letter was to advise Citizens that it could properly make a loan to Charles Maestri without violating the regulations prohibiting loans to third parties where the security is real property purchased from an affiliated person. In view of the sale by Bob Robertson of his interest in the property on January 13, 1981, only four weeks before Citizens made a loan commitment to Mr. Maestri, it
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is clear that Mr. Huycke's advice was erroneous.
   The sale obviously was neither a "long time" before the loan by Citizens nor by any reasonable standard a "short time". Bob Robertson, at that time a partner of Mr. Huycke, and a Director of Citizens, appears to have benefitted in that he received $300,000 from the proceeds of the loan, and Citizens and loan participants suffered a detriment in that the loan was defaulted and a deficiency of $400,000 incurred.
   Mr. Huycke's justification for advising Citizens that it could make the loan to Mr. Maestri without violating regulations is discussed in the following paragraphs.
Mr. Huycke's Justification for his advice to Citizens on the Maestri loan
   Mr. Huycke maintains that he wrote his letter of advice to Citizens regarding the propriety of the Maestri loan based on what he believed to be truthful and accurate information from his law partner Bob Robertson and from Paul Williams, president of Citizens. Mr. Huycke contends, therefore, that criticisms by the FDIC of his action in writing the letter and the use of it as a factor for disapproving him as a Director of the Bank of Southern Oregon is unjustified and unfair.
   My Huycke's justification of his action in writing the letter of January 23, 1981, to his client Citizens, in my opinion, should be rejected. At the time he wrote his advice Citizens was considering or about to consider a loan of substantial proportions, $1,147,000, where one of its Directors had sold an interest in the property to be used as security, and where the loan very likely violated conflict of interest or like regulations.
   Yet, Mr. Huycke relied on his "understanding", or at most an oral assurance from an interested party, his law partner, and a similar oral understanding of Paul Williams, also derived from Mr. Robertson, or possibly Mr. Maestri (Tr.73–74, 162–163), that Mr. Robertson's interest had been conveyed several months earlier to Mr. Maestri (See Tr.200, 218-20. 223-27).
   In fact, by his own testimony Mr. Huycke's understanding did not include the time the divesture by Bob Robertson took place, only that it had occurred a "short time ago", by which Mr. Huycke understood "six months to one year" (Tr. 200, 225). He also "understood" that Bob Robertson had not retained a security interest but did not actually know, one way or the other, whether this was the case, but had only been so informed (Tr. 200-01).
   Reliance on "understandings" or oral assurances without any further inquiry, or even a request for documentary evidence, is unacceptable in this situation. A matter of substantial importance was involved presenting potential regulatory violations and potential risk to a client savings and loan association, its depositors and stockholders. More was required from Mr. Huycke as counsel to Citizens than such vague understandings or oral assurances.
   Even on the basis of Mr. Huycke's understanding and what he testified he had been told, the loan by Citizens to Charles Maestri still involved a potential violation of regulations (see Tr.76). Mr. Huycke testified that his understanding was that divestiture by his law partner of his interest in the loan property had taken place a "short time ago" (Tr.225). Under the regulations transfer by Bob Robertson of his interest a "short time" ago, as Mr. Huycke's own letter pointed out, raised a presumption of violation (see FDIC Ex. 3).
   Yet his letter of advice to Citizens made no mention of this, but assured Citizens that "since the transaction has already taken place", and it was not conditioned on any loan to Mr. Maestri, and no commitment had been made by Citizens to grant the loan, it was proper.
   The San Francisco Regional Director and the Director of Supervision had a valid basis, in my opinion, for criticizing Mr. Huycke for his advice regarding the Maestri loan.
Real Estate Company Acquistions by Citizens
   In 1981 or 1982 Citizens decided to develope a real estate company (Tr.44, 138-39). A number of directors of Citizens, including Bob Robertson, owned or had interests in various real estate firms and Citizens was considering the acquisition of some or all of these (Tr.44–45, 69–70, 140-41, 144-45, 209-10, 212, 237).
   Citizens asked Mr. Huycke for an opinion on whether regulations permitted Citizens to own real estate firms, and whether it could properly acquire the interests of directors in such firms (Tr. 140-41; FDIC Ex.7, 9).
   On August, 30, 1982, Mr. Huycke provided Citizens with an opinion on these is-
{{4-30-92 p.A-1808.5}}sues (Tr.155-56, FDIC Ex.7). Conflict of interest rules were reviewed and Citizens was advised in substance that nothing prevented it from owning subsidiary real estate companies, but that if such were acquired from directors full disclosure of the directors interests had to be made to the entire board, the transaction had to be fair and reasonable, two-thirds of the board had to approve, and interested directors had to abstain from voting.
   During the balance of 1982 and until the fall of 1983 Citizens proceeded to take actions leading to the acquisition of a number of firms in which its directors had interests, so as to develope its own real estate company. The Citizens board met periodically to direct or vote on these actions, and to make funding available. About six firms were involved (Tr. 237). The procedure followed was to merge the six firms into a single firm as Citizens advanced funding, with Citizens acquiring the survivor (Tr. 44–45, 69–70, 145-47, 236-37).
   Sometime in late 1983 Oregon authorities examined Citizens and questioned whether Citizens had complied with the Oregon conflict of interest law when it had acquired the real estate firms of directors or in which they had interests (FDIC Ex.9; Tr.46–47, 53, 157). As a consequence, Citizens provided Mr. Huycke with the minutes of its Board and Executive committee meetings in late 1982 and 1983, an eight or nine month period (FDIC Ex.9; see also Tr. 81, 155-57).
   On November 9, 1983, Mr. Huycke wrote to Citizens reviewing compliance with the Oregon conflict of interest law, ORS 722.108, as shown by Citizens' minutes (FDIC Ex.9).
   Mr. Huycke commented particularly on meetings held November 9, 1982, January 13 and 28, 1983, and March 9, 1983.
   With respect to the November 9, 1982, meeting, where a $100,000 line of credit was extended to one of the real estate firms acquiring others, Mr. Huycke wrote that it would have been best if the conflicts of interested directors had been reiterated and the line of credit approved by a two-thirds vote with the interested directors abstaining. At this time there were 12 directors of Citizens (Tr.151) and four had interest (Tr.144).
   An additional line of credit was voted by the Citizens Board on January 13, 1983. At this meeting it appears that Mr. Robertson made a motion that Citizens provide financing for the real estate acquisition (Tr.83, 235–238). As already made clear, Mr. Robertson was an interested party. With respect to this meeting of January 13, 1983, Mr. Huycke advised Citizens that he would have preferred that conflicts of interested directors had been reviewed before the full Board, and that such directors had abstained from voting concerning the extension of the line of credit.
   The same comment was made respecting the Executive Committee meeting of January 28, 1983, where the line of credit was increased to $500,000.
   At the Executive Committee meeting of March 9, 1983, where the line of credit was again increased and a $50,000 letter of guarantee to the acquiring real estate firm was approved, Mr. Huycke advised that he would have preferred that interested directors abstain from voting on either transaction.
   On receiving Mr. Huycke's letter of November 9, 1983, Citizens revised its minutes to cause them to read in accordance with Mr. Huycke's comments (see FDIC Ex. 10).
   Citizens then asked Mr. Huycke for a new letter of opinion so that Oregon auditors would be satisfied that Citizens had not violated Oregon law in the course of the transactions relating to its acquisition of a real estate company (Tr. 53–54, 157-59).
   Mr. Huycke complied with this request and wrote a second letter of opinion to Citizens dated December 6, 1983 (FDIC Ex. 11), which he authorized Citizens to forward to the "State Auditors".
   Mr. Huycke wrote to the President of Citizens that "based upon information that you have provided me and our discussions", I am able to inform you that I believe Citizens complied with the requirements of ORS 722.108 in connection with its purchase of Citizens Realty Investment Group.
   More specifically, Mr. Huycke wrote that Citizens directors with an interest in the real estate company acquisition transaction, had disclosed their conflicts, abstained from voting on all matters relating to the transaction, and that approval was by a two-thirds vote.
   In short, Mr. Huycke reversed his advice contained in his letter of November 9, 1983, which had pointed out violations of ORS
{{4-30-92 p.A-1808.6}}722.108 by Citizens, and gave Citizens a letter to forward to the Oregon auditors that no violations of ORS 722.108 had taken place.
Mr. Huycke's justification for his second letter finding no violations of Oregon law
   Mr. Huycke testified that after writing his letter pointing out violations by Citizens of ORS 722.108 shown by its minutes, Mr. Williams, President of Citizens, told him that the minutes showing violations of ORS 722.108 were incorrect and in error. According to Mr. Huycke's testimony, he was told that the requirements of the Oregon conflict of interest law had been complied with at the various meetings where Mr. Huycke had found violations, and that Citizens was proceeding to correct the minutes to show what actually had taken place (see FDIC Ex. 20; Tr. 215-17, 231-32; see also Tr. 47, 55–57, 59–60, 164-65).
   Mr. Huycke's letter of December 6, 1983, in effect a letter to the Oregon State auditors, in my opinion, was inappropriate and ill-advised. The San Francisco Regional Director and the FDIC Director of Supervision were fully justified in being critical of Mr. Huycke for writing it.
   Notwithstanding Mr. Huycke's testimony that the information he received from the officers and employees of Citizens had always been correct and accurate (Tr.218-19), the circumstances surrounding Citizens' minutes and the revisions in them had to raise serious questions as to whether the Oregon conflict of interest regulation had in fact been followed. This is true regardless of what Mr. Huycke was told by officials of Citizens.
   It is standard practice to circulate minutes after a meeting and to make corrections at the next meeting (Tr.64–65). This routine practice was followed at Citizens (Tr.149-52).
   Yet the minutes which Mr. Huycke found to show violations of Oregon law had lain unquestioned and uncorrected for as long as six or eight months. Only after Oregon auditors had raised questions, and after Mr. Huycke had reviewed the minutes and advised Citizens that they showed violations, were the minutes changed (see FDIC Ex.10). A single set of minutes was not involved but a series, and the changes were not minor but fundamental and important. After this history, Mr. Huycke nevertheless accepted the assurance of the President of Citizens without further inquiry that the original minutes did not show what actually had happened (Tr. 51–56, 231-39).
   In my opinion the circumstances surrounding the changes in the Citizens minutes were sufficiently unusual that Mr. Huycke should not have written a letter to be used as an assurance to the Oregon auditors that Citizens had in fact observed the conflict of interest regulation in acquiring the real estate firms. Oral statements should not have been accepted uncritically without further inquiry.
   Mr. Huycke was not compelled to write his letter finding compliance with the law. If he felt uncomfortable demanding to see documentation or to interview Citizens personnel, or if he thought such inquiry would be unproductive, he could have refused to write the letter of December 6, 1983 (FDIC Ex.11).
   Alternatively, Mr. Huycke could have written the facts, i.e., that the original minutes of Citizens showed violations, but that he had been assured by the President of Citizens that the original minutes were in error, and that ORS 722.108 had been complied with.
Mr. Huycke's Character Endorsements
   Eight character witnesses testified for Mr. Huycke including the Administrator of Oregon's Division of Finance and Securities (Tr.11–17). That agency is the primary regulator for state-chartered financial institutes, banks, savings and loans, credit unions, trust companies and finance companies. The Administrator testified that Mr. Huycke's reputation for character and integrity in the community was one of respect, and that his Division had approved of Mr. Huycke as a Director of the bank after a thorough check (Tr.15). The President of the Valley of the Rogue Bank testified that he had business dealings with Mr. Huycke and had no reason to believe he would not make a positive contribution to a bank as a Director.
   The President and Chief Executive Officer of the Bank of Southern Oregon, who had been Chief Executive Officer of the Jefferson State Bank when Mr. Huycke had been a Director of the bank, believed Mr. Huycke's character and integrity were beyond reproach (Tr.183).
   Other prominent citizens in the Medford area also found Mr. Huycke's integrity and character to be of the best, including two
{{4-30-92 p.A-1808.7}}certified public accountants who had worked with him, a fellow member of the bar, a businessman, and a former Director of the Southern Oregon State Bank for whom Mr. Huycke had done work for many years (see Tr. 168-71, 172-75, 175-79, 180-84, 185-59, 190-93).
   None of these witnesses, however, had any personal knowledge of Mr. Huycke's actions as counsel to Citizens.
Arguments of Mr. Huycke
   Mr. Huycke states in his post-hearing brief that he was entitled to accept as true factual information provided by the President of Citizens in writing his opinion letters regarding the Maestri loan and for use by Oregon State auditors. This contention is unfounded under the circumstances surrounding these matters, and has been dealt with earlier in this recommendation. It is further suggested that even if he was not entitled to rely on Mr. Williams' statements, such reliance is not a reflection on his character or integrity. However, the issue here is whether Mr. Huycke could fulfill his fiduciary responsibilities to Citizens properly and his responsibility to Oregon regulators under all the circumstances by uncritically accepting the assurances of his law partner and Mr. Williams. This issue has essentially been addressed earlier in this recommendation.
   The argument is made that the FDIC did not make any meaningful investigation before disapproving Mr. Huycke as a Director, but based such disapproval only on the opinion letters he wrote relative to the Maestri loan and compliance with ORS 722.108. In my opinion, the FDIC was not required to conduct a broad investigation of Mr. Huycke but could properly rely on two specific actions reflecting unfavorably, in the agency's view, on his possession of the requisite qualities enumerated in Section 32 of the Act.
   All other issues raised by Mr. Huycke in his post-hearing brief have been addressed directly or implicitly earlier herein.
Recommendation
   Notwithstanding the excellent character endorsements of Mr. Huycke provided by many prominent citizens and business leaders in the Medford area, in deciding the issue in this case one must look as well at the specific actions of Mr. Huycke in matters of considerable importance to a financial institution which was his client and to Oregon regulators.
   Based upon his action in writing in this factual setting that the Maestri loan was a proper loan for Citizens to make, and his action in assuring the Oregon State auditors that Citizens had complied with the Oregon conflict of interest law in acquiring certain real estate companies in which its directors had interests, the FDIC San Francisco Regional Director was justified in disapproving Mr. Huycke as a Director of the Bank of Southern Oregon.
   The preponderance of the evidence received at the hearing supports the decision of the Director of Supervision denying Mr. Huycke's appeal from the disapproval of the Regional Director. The preponderance of the evidence supports the decision of the Director of Supervision that the FDIC was unable to find favorably for Mr. Huycke with respect to the statutory factors enumerated in Section 32 of the Act, and that service by him as a Director of the Bank of Southern Oregon would not be in the best interests of the depositors of the Bank or of the public.
   It is recommended, therefore, that the order issued May 2, 1991, denying the Appeal of the Notice of Disapproval of Patrick G. Huycke as a Director of the Bank of Southern Oregon be affirmed.
   Dated: July 10, 1991