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[¶5207] In the Matter of Billy Gene Humphrey Jr., Bay City Bank & Trust Co., Bay City, Texas, Docket No. FDIC-93-55e (11-23-93).
FDIC Board adopts ALJ's recommended decision to issue a default order of prohibition, finding respondent's failure to enter an appearance, file an answer, or file any papers, despite actual notice, constitutes waiver of his right to contest allegations contained in FDIC's notice of intent to prohibit him from further participation in the affairs of insured institutions.
[.1] Practice and Procedure—Failure to Answer—Default Order
Failure to answer, upon actual notice, constitutes waiver of right to contest allegations in notice and supports entry of default order of prohibition.
In the Matter of
BILLY GENE HUMPHREY, JR.
individually, and as a director,
and/or person participating in the
conduct of the affairs of, and as an
institution-affiliated party of
BAY CITY BANK & TRUST CO.
BAY CITY, TEXAS
(Insured State Nonmember Bank—In Receivership)
DECISION AND ORDER TO
PROHIBIT FROM FURTHER
PARTICIPATION
FDIC-93-55e
INTRODUCTION
This matter is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") following the issuance of a Recommended Decision by Administrative Law Judge Arthur L. Shipe ("ALJ") in an uncontested Prohibition from Further Participation proceeding.1 The Recommended Decision granted the FDIC's Motion for Order of Default against Respondent and recommended that the Board issue a prohibition order.
Following a thorough review of the Recommended Decision and the entire record in this proceeding, the Board adopts the ALJ's Recommended Decision.
BACKGROUND
This matter was instituted by a Notice of Intention to Prohibit from Further Participation ("Notice"), issued on April 28, 1993, against Billy Gene Humphrey, Jr. ("Respondent"), individually, and as a director, and/or person participating in the conduct of the affairs of, and as an institution-affiliated party of Bay City Bank & Trust Co., Bay City, Texas, pursuant to section 8(e) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1818(e). The Notice was served on Respondent by certified mail, with return receipt signed by Respondent on May 3, 1993. Exhibit A. The Notice and the transmittal letter directed Respondent to file his answer within twenty days from the date of service. Notice at 29; Exhibit B. Respondent neither noted his appearance as required by section 308.6 of the FDIC's Rules of Practice and Procedure, 12 C.F.R. § 308.6, nor filed an answer. R.D. at 1.
On July 20, 1993, counsel for FDIC filed a Motion for Entry of an Order of Default ("Motion") and served Respondent by first class mail.
On August 9, 1993, the ALJ issued an
1 References to the record shall be as follows:
Recommended Decision -- -- "R.D. at ____."
ALJ's Show Cause Order to Respondent — "Order at ____."
Notice of Intention to Prohibit from Further
Participation — "Notice at ____."
{{2-28-94 p.A-2347}}order directing the Respondent to show cause, within twenty days, why the FDIC's Motion for Default should not be granted. Order at 2. Respondent was served by certified mail, and the return receipt was dated August 16, 1993. Exhibit C. Respondent failed to reply to the order. On September 3, 1993, the ALJ entered his Recommended Decision on Motion for Default.
The Recommended Decision states that the ALJ was satisfied that Respondent had received actual notice of the proceeding; was afforded reasonable opportunity in which to assert his rights and contest the allegations; and therefore, his failure to answer the Notice or the show cause order constitutes a waiver of his right to appear and challenge the allegations in the Notice. R.D. at 2–3.
DISCUSSION
[.1] The instant case is an uncontested proceeding on a record which establishes that Respondent received actual notice and had several opportunities to appear and contest the allegations in the Notice. The Respondent's failure to enter his appearance, file an answer, or file any papers in this proceeding in light of his actual notice can be viewed as nothing other than an intentional disregard or willful failure to follow procedural requirements. Hence, this case is patently distinguishable from recent cases which have come before the Board and have been appealed to U.S. Courts of Appeal, where Respondents have attempted to demonstrate excusable neglect or inadvertence for their untimeliness in filing an answer. Cf. Oberstar v. FDIC, 987 F.2d 494 (8th Cir. 1993) and Amberg et. al. v. FDIC, 934 F.2d 681 (5th Cir. 1991).
CONCLUSION
For the reasons set forth above, the Board adopts the ALJ's Recommended Decision and enters the following Prohibition Order ("Order").
PROHIBITION ORDER
The Board of the FDIC has considered the entire record in this proceeding, including the ALJ's Recommended Decision. The Board hereby adopts the recommendation of the ALJ that based upon Respondent's failure to note his appearance, to file his answer in this proceeding, and to respond to the Order to Show Cause, a default order prohibiting Respondent from further participation in the conduct of the affairs of any insured depository institution should be issued.
ACCORDINGLY, IT IS HEREBY ORDERED, that by reason of the violations set forth in the Notice, Respondent is prohibited from further participation in the conduct of the affairs of any insured depository institution pursuant to section 8(e)(7) of the FDI Act, 12 U.S.C. § 1818(e)(7) (1982), without the prior written consent of the appropriate Federal financial institution regulatory agency.
IT IS FURTHER ORDERED, that this Order shall be final and become effective at the expiration of thirty days after service upon Respondent; and until such time as, it is stayed, modified, terminated, or set aside by the FDIC.
By direction of the Board of Directors.
Dated at Washington, D.C., this 23rd day of November, 1993.
/s/ Robert E. Feldman
Deputy Executive Secretary
___________________________________________
RECOMMENDED DECISION
In the Matter of
Billy Gene Humphrey, Jr.
individually and as a director,
and/or person participating
in the conduct of the affairs
of, and as an institution-
affiliated party of
Bay City Bank and Trust Co.
Bay City, Texas
FDIC 93-54e
Arthur L. Shipe, Administrative Law Judge
This matter was instituted by the Board of Directors of the Federal Deposit Insurance Corporation on April 28, 1993, by a Notice of Intention to Prohibit from Further Participation ("Notice"), issued pursuant to former Section 8(e) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(e) (1982), and current Section 8(e) of the Act, 12 U.S.C. § 1818(e) (1989).
Since issuance and service of the Notice, Respondent Billy Gene Humphrey, Jr. has failed to note his appearance in this proceeding, and has likewise failed to file an answer in response thereto. Accordingly, on July
{{2-28-94 p.A-2348}}20, 1993, counsel for the FDIC filed a motion requesting entry of an order of default, to which the Respondent has not replied.
On August 9, 1993, I issued an Order directing the Respondent to show cause within 20 days, why the FDIC motion for default should not be granted. To date, the Respondent has failed to reply in any manner to the Show Cause Order.
Considering the facts of record, and for the reasons discussed more thoroughly below, the FDIC Motion for Order of Default is GRANTED.
Uniform Practice Rule 308.19 provides in pertinent part as follows:
(c) Default - (1) Effect of Failure to answer. Failure of a respondent to file an answer required by this section within the time provided constitutes a waiver of his or her right to appear and contest the allegations in the notice. If no timely answer is filed, Enforcement counsel may file a motion for entry of an order of default. Upon a finding that no good cause has been shown for the failure to file a timely answer, the administrative law judge shall file with the Board of Directors a recommended decision containing the findings and the relief sought in the notice. Any final notice issued by the Board of Directors based upon a respondent's failure to answer is deemed to be an order issued upon consent.
Respondent Humphrey has failed to answer any of the matters alleged in this proceeding, and has failed to show any cause why the motion for Default should not be granted. Additionally, I am satisfactorily convinced that Respondent has actual notice of this proceeding, and has been afforded reasonable opportunity in which to assert his rights and contest this matter. His failure, therefore, constitutes a waiver of his right to appear and challenge the allegations set forth herein.
The Notice evidences a pattern of violations, practices, and breaches of fiduciary duty on the part of Respondent. As a result of these violations, practices, and breaches, Bay City Bank & Trust Co., Bay City, Texas ("Bank"), has suffered substantial financial loss or other damage, and the Respondent has received financial gain. These violations, practices and breaches of fiduciary duty demonstrated a wilful or continuing disregard for the safety or soundness of the Bank.
Accordingly, I recommend that the Board of Directors of the Federal Deposit Insurance Corporation issue an Order prohibiting Respondent from further participation in the conduct of the affairs of any insured depository institution enumerated in Section 8(e)(7) of the Act, 12 U.S.C. § 1818(e)(7), without the prior written consent of the appropriate Federal financial institution regulatory agency.
So Ordered, this 3rd day of September, 1993.
/s/ Arthur L. Shipe
Administrative Law Judge
Date: September 3, 1993
