Federal Deposit
Insurance Corporation

{{9-30-96 p.A-2774}}
   [¶5235] In the Matter of Stanley R. Hendrickson, Randolph County Bank, Winchester, Ind.; David J. Hendrickson, Peoples Loan & Trust Bank, Winchester, Ind.; Docket Nos. FDIC-94-28e and FDIC-94-29e (7-16-96)

   FDIC issues orders of prohibition against bank officials who failed to file Form 8300 in connection with large cash transactions at non-bank business where they worked.

   [.1] Prohibition, Removal, or Suspension—Losses
   In light of findings that respondent's non-bank business suffered loss and that his conduct contributed to that loss, the requirements of Section 1818(e)(1)(B) have been proved.

   [.2] Prohibition, Removal, or Suspension—Personal Gain or Benefit
   Respondent benefited from his violation of law—failure to file a Form 8300 with the Internal Revenue Service in connection with cash transactions at a non-bank business—by retaining his job and delaying IRS discovery of the transactions.

   [.3] Prohibition, Removal, or Suspension—Jurisdiction
   Jurisdiction is appropriate over respondent who was not an institution-affiliated party at the time of the conduct for which removal is sought. The plain language of Section 8(e) of the Federal Deposit Insurance Act states that a party is subject to the jurisdiction of Section 8(e) for actions occurring at a non-insured business {{9-30-96 p.A-2775}}institution. Nothing limits this jurisdiction to actions while the party is an institution-affiliated party.

   [.4] Prohibition, Removal, or Suspension—Discretion of FDIC
   The FDIC board may, in the exercise of its discretion, review all of the circumstances surrounding a case and fashion an appropriate remedy within the statutory parameters.

   [.5] Prohibition, Removal, or Suspension—Discretion of FDIC
   FIDC board declines to exercise its discretion to refrain from issuing an order of removal and prohibition where the statutory elements for removal are present. Although respondent is protected from obligatory removal because his illegal conduct did not occur at a financial institution, he was involved in money laundering, which Congress views seriously, he engaged in pre-meditated dishonesty, and his misconduct—falsification of records—has a direct correlation to the bank examination process.

In the Matter of
STANLEY R. HENDRICKSON,
DAVID J. HENDRICKSON,
individually and as institution-affiliated
parties of
THE RANDOLPH COUNTY BANK
WINCHESTER,INDIANA
PEOPLES LOAN & TRUST BANK,
WINCHESTER, INDIANA
(Insured State Nonmember Bank)
FDIC-94-28e
FDIC-94-29e
DECISION AND ORDER TO REMOVE AND TO PROHIBIT FROM FURTHER PARTICIPATION

   The Federal Deposit Insurance Corporation ("FDIC") issued a Notice of Intention to Remove From Office and To Prohibit From Further Participation, dated April 25, 1994, against Respondent Stanley R. Hendrickson, and a Notice of Intention to Prohibit From Further Participation, dated May 4, 1994, against Respondent David J. Hendrickson (the "Notices"). The Notices were issued pursuant to section 8(e)(1) of the Federal Deposit Insurance Act (the "Act").¹ By order of June 30, 1994, the two proceedings were consolidated for hearing and decision.
   This matter is before the Board of Directors (the "Board") of the FDIC following the submission of the Recommended Deci-

   (I) any law or regulation;
   (II) any cease-and-desist order which has become final;
   (III) any condition imposed in writing by the appropriate Federal banking agency in connection with the grant of any application or other request by such depository institution; or
   (IV) any written agreement between such depository institution and such agency;

   (i) such insured depository institution or business institution has suffered or will probably suffer financial loss or other damage;
   (ii) the interests of the insured depository institution's depositors have been or could be prejudiced; or
   (iii) such party has received financial gain or other benefit by reason of such violation, practice or breach; and

   (i) involves personal dishonesty on the part of such party; or
   (ii) demonstrates willful or continuing disregard by such party for the safety or soundness of such insured depository institution or business institution, the agency may serve upon such party a written notice of the agency's intention to remove such party from office or to prohibit any further participation by such party, in any manner, in the conduct of the affairs of any insured depository institution.

   Although there is some disagreement regarding preipheral or irrelevant facts in this case, the salient facts are agreed to by the parties. The actions against Respondents are based upon events which took place in 1990 at Silver Towne, a coin and precious metals business located in Winchester, Indiana. Silver Towne is a sole proprietorship owned by Leon Hendrickson, the brother of Stanley Hendrickson and the father of David Hendrickson. In 1990, David Hendrickson served as an emplouee and agent of Silver Towne and Stanley Hendrickson was the controller for the nusiness. At the time, David Hendrickson was a member of the board of directors of Peoples Loan & Trust Bank in Winchester, Indiana. Stanley Hendrickson was not and officer or director of any insured depository institution in February 1990, however, he is prese3ntly the president and a director of The Randolpj Country Bank, Winchester, Indiand (the "Bank").
   After meeting at a coin show in February 1990, David Hendrickson agreed to sell gold shot (gold in pellets used by jewelers) for $50,000 to Robert McGuinn, who purported to be a representative of Manhattan Coin. He also agreed to make additional sales of gold shot to Mr. McGuinn. Between February 27, 1990, and April 19, 1990, David Hendrickson made 11 additional sales of gold shot to Robert McGuinn for a total of approximately $1,094,745. Payment for all of these transactions was made by cash.
   Under the provision of 26 U.S.C. § 6050I, any person engaged in a trade or business who receives more than $10,000 cash in one transaction is required to file a report with the Internal Revenue Service ("IRS") on Form 8300. The Respondents were aware of this requirement in February 1990. David Hendrickson never filed a Form 8300 for any of the transactions with Robert McGuinn. Federal investigators later determined that the cash used to purchase the gold from Silver Towne was derived from the criminal distribution of cocaine.
   Stanley Hendrickson did not become aware of the transactions between Silver Towne and Robert McGuinn until mid-April, 1990. When he did learn of the transactions, however, he did not file a Form 8300 on behalf of Silver Towne, although he generally was responsible for such filings (Tr. at 35). On April 16, 1990, he entered a single entry onto the books of Silver Towne in the amount of $714,436.02, and on April 23, 1990, he made a second entry onto the books of Silver Towne in the amount of $440,295, which were intended to represent the transactions between Silver Towne and Robert McGuinn. Stanley Hendrickson never filed a Form 8300 for any of the transactions between Silver Towne and Robert McGuinn.
   Some eighteen months later, on November 13, 1991, Stanley Hendrickson was informed that the IRS was to conduct a compliance "sweep" audit of cash transactions at Silver Towne.³ In preparation for the audit, the three Hendricksons met to discuss their failure to file a Form 8300 for the McGuinn transactions. It was decided that a single Form 8300 would be prepared and a copy would be placed in the "retained copies" file of Silver Towne to make it appear that the form had been filed with the IRS. A false Form 8300 back-dated to April 25, 1990, in the amount of $1,074,953.50 was created by Stanley Hendrickson, placed in the "retained copies" file and turned over to the IRS investigators during the audit. Although the IRS records did not reflect the filing of this Form 8300, the IRS auditors believed that the discrepancy was likely to be the

   Respondent Stanley Hendrickson asserts that the FDIC does not have jurisdiction over him because he was not an institution-affiliated party at the time the events took place. Following an analysis of relevant decisions under a prior version of section 8(e)(2) of the Act and section 8(g) of the Act, the ALJ finds that the FDIC has jurisdiction because it "is not unreasonable to construe the statute as covering non-banking conduct for which a party is indicted or convicted, while he is a banker, though the conduct occurred before he became a banker." R.D. at 9. Anonymous v. Federal Deposit Insurance Corporation, 619 F. Supp. 866, 870 (D.D.C. 1995); Manges v. Camp, 474 F.2d 97 (5th Cir. 1973); In the Matter of William Grantmyre, 1 P-H FDIC Enf. Dec. ¶5122 at A-1391, n.2 (1988).
   The ALJ summarily finds that the factors necessary for the issuance of an order of prohibition against Respondent David Hendrickson have been proved by FDIC Enforcement Counsel. R.D. at 24. He finds that David Hendrickson was an active participant throughout the transactions, and although he did not physically place the unfiled Form 8300 in Silver Towne's records, he was a party to the tacit agreement to do so. David Hendrickson's violative conduct he finds to have contributed to Silver Towne's loss. Id.
   The remainder of the Recommended Decision focuses on Respondent Stanley Hendrickson. The ALJ analyzed each of the elements of proof necessary for the FDIC to sustain an action under section 8(e)(1) of the Act against Stanley Hendrickson. He found that

   "It is undisputed that Respondent Stanley Hendrickson has violated a law as set forth in section 1818(e)(1)(A)(i)(I). He has pled guilty to such under the circumstances described. FDIC contends that he also engaged or participated in unsafe or unsound practices in connection with a business institution as stated in section 1818(e)(1)(A)(ii). This contention is accepted, at least insofar as his preparation and placement of the unfiled Form 8300 in Silver Towne's records is concerned; it can hardly be denied that business records must be kept accurately, not only for purposes of conducting the business, but also for ensuring compliance with the law. This was not done here." R.D. at 10.

   These last findings by the ALJ and his conclusion are difficult to reconcile with the previous findings set forth above. The ALJ discounts the FDIC's contention that Stanley Hendrickson's failure to file any Form 8300 covered up the illegal transactions, and delayed their detection by the IRS. He finds the suggestions that Stanley Hendrickson was motivated by a desire to cover up the transactions to be "entirely speculative." R.D. at 16. Moreover, although he found that the forfeiture is a loss to Silver Towne, and found that David Hendrickson's "violative conduct contributed to that loss" (R.D. at 24), he declines to attribute the loss in any way to Stanley Hendrickson. The ALJ states "it can [not] be said that forfeitures based on activity prior to that of which [Stanley Hendrickson] had no current knowledge occasioned losses by reason of his failure to expose them." R.D. at 16. He finds the "loss was the result of the discovery by the IRS of the transactions which took place independently of any action or inaction of Stanley Hendrickson." Id. This is obviously incorrect. The loss was the result of illegal conduct and not the result of the discovery of the illegal conduct.
   The ALJ seems determined to separate Stanley Hendrickson from the actions at issue. The ALJ's reasoning is flawed, and his conclusions ignore obvious facts and conflict with his own findings. Stanley Hendrickson's conduct was a part of the illegal scheme and cannot be separated from it. While Stanley Hendrickson did not participate in the sales transactions with McGuinn and appears not to have learned about them until sometime after they were begun, by failing to file the required Form 8300 when he knew it had to be filed,⁶ Stanley Hendrickson participated in the coverup of the transactions.⁷ Of course, for almost two years the Hendricksons must have thought they got away without having to report the transactions, or to cover up their failure to do so. The motivation to cover-up became obvious, however, when they learned that the IRS would be auditing the Silver Towne records. The suspicious nature of the Manhattan Coin transactions is admitted by Respondent David Hendrickson (FDIC Ex. 2) and is supported by contrast with the failure to file Form 8300 with respect to sales to Valley View Department Store. When the absence of this Form 8300 was pointed out by the IRS auditors, Respondent Stanley Hendrickson readily had a check issued to pay the nominal $100.00 fine. Respondents didn't raise the Manhattan Coin transactions with the IRS because they knew that unlike the sales to Valley View Department Store, the Manhattan Coin transactions were suspicious, at the very least. The Board concurs with FDIC Enforcement Counsel that Respondent Stanley Hendrickson's claim that the Form 8300 was not filed because it "fell through the cracks" is not credible. Tr. at 502. Between February 1989, and November 1991, Silver Towne filed twenty-six (26) Form 8300s for cash transactions over $10,000. All but three of those forms contain the signature of Stanley Hendrickson as the filing party. FDIC Ex. 9. The money laundering transactions with Manhattan Coin were unusual in the total amount and volume from one source. FDIC Ex. 10. Stanley Hendrickson is a sophisticated businessman who is a president of a bank. There is nothing in this record which points to a conclusion other than that Stanley Hendrickson participated in the cover-up. He created a false Form 8300 and tried to pass it off as a properly filed Form 8300. Stanley Hendrickson actively chose to deceive the IRS, was an active participant in the cover-up, and thus in the facilitation of the money laundering

   [.1] In light of the ALJ's finding that Silver Towne suffered loss and the Board's finding that Stanley Hendrickson's conduct contributed to that loss, supra, the requirements of section 1818(e)(1)(B) have been proved. The three subsections of 1818(e)(1)(B) are alternative, not cumulative requirements. Only one must be proved to satisfy the requirements of section 1818(e)(1)(B). R.D. at 14.⁹

   [.2] Although not necessary to its determination that the elements of section 8(e) have been established, contrary to the ALJ, the Board additionally finds that Stanley Hendrickson "received financial gain or benefit by reason of his violation" within the meaning of section 8(e)(1)(B). His participation in the IRS cover-up enabled him to hide his illegal failure to file the Form 8300 for the Manhattan Coin transaction and the money laundering scheme from the IRS auditors, and he was able to keep his job at Silver Towne. The ALJ rejects these benefits for reasons the Board finds wholly unpersuasive. R.D. at 38–41. The facts establish that the concealment of the money laundering scheme and his failure to report it was Stanley Hendrickson's motivation for falsifying the Manhattan Coin Form 8300 and putting it in the retained copy file at Silver Towne. Furthermore, this concealment delayed the discovery of the true situation from the day of the audit until the day of the criminal investigation. This in itself was a benefit to the Respondent, albeit a short-lived benefit. Finally, the ALJ's contention (R.D. at 19) that retention of his job was not a benefit to Stanley Hendrickson because he could not have been fired under Indiana law for refusing to perform an illegal act, misses the point. Stanley Hendrickson admits the fear of losing his job motivated his decision to execute the plan to deceive the IRS auditors. Tr. at 510; FDIC Ex. No. 15. He engaged in the illegal act and retained his job as a result. Whether Respondent may have had legal recourse for the discharge that he feared is a separate issue. Because the Board concurs in the findings of fact made by the ALJ with respect to both Respondents' violations of law, personal dishonesty and willful and continuing disregard for the safety or soundness of Silver Towne, and because the Board finds that both Respondents' conduct contributed to the losses suffered by Silver Towne, it therefore concludes that the FDIC has established each of the elements necessary to sustain its action under section 8(e)(1) of the Act against David and Stanley Hendrickson.

   [.3] The Board concurs with the ALJ's conclusion of law that jurisdiction is appropriate in this case. The plain language of section 8(e) of the Act states that a party is subject to the jurisdiction of section 8(e) for actions occurring at a non-insured business institution. Nothing limits this jurisdiction to actions while he or she is an institution-affiliated party of an insured institution. There is no requirement in the statute that a respondent be an institution-affiliated party at the time of the conduct for which removal is sought.

   [.4,.5] The ALJ asserts that even if he had found the statutory elements for removal present in this case, he would recommend against the issuance of an order of removal and prohibition with respect to Stanley Hendrickson. According to the ALJ, a review of the entirety of the surrounding circumstances and the equities of the case require such an outcome. See R.D. at 20. The Board may, in the exercise of its discretion, review all of the circumstances surrounding a case and fashion an appropriate remedy within the statutory parameters. See In the Matter of Anonymous, 1 P-H FDIC Enf. Dec. ¶5110, A-1188. The Board declines to exercise such discretion in this case for several reasons.
   First, the Board recognizes that Congress has unequivocally directed the Federal banking agencies to initiate removal and prohibition actions against persons involved in

   For the reasons set forth above, and on the basis of the evidence in the record, the Board finds that each of the elements of section 8(e)(1) of the Act has been established with respect to both David Hendrickson and Stanley Hendrickson. Accordingly, an order of prohibition will be issued against David Hendrickson; an order of removal and prohibition will be issued against Stanley Hendrickson.

   For the reasons set forth above, and pursuant to section 8(e) of the Act, 12 U.S.C. § 1818(e), the Board of Directors of the Federal Deposit Insurance Corporation hereby Orders that:
   1. Stanley R. Hendrickson is hereby removed from office as a director and officer of The Randolph County Bank, Winchester, Indiana, and, without the prior written approval of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the Act, 12 U.S.C. § 1818(e)(7)(D), is prohibited from:
   (a) participating in any manner in the conduct of the affairs of any financial institution or organization enumerated in section 8(e)(7)(A) of the Act, 12 U.S.C. § 1818 (e)(7)(A);¹¹
   (b) soliciting, procuring, transferring, attempting to transfer, voting, or attempting to vote any proxy, consent or authorization with respect to any voting rights in any financial institution enumerated in section 8(e)(7)(A) of the Act, 12 U.S.C. § 1818 (e)(7)(A);
   (c) violating any voting agreement previously approved by the appropriate Federal banking agency; or
   (d) voting for a director, or serving or acting as an institution-affiliated party.2. Without the prior written approval of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the Act, 12 U.S.C. § 1818(e)(7)(D), David J. Hendrickson is hereby prohibited from:
   (a) participating in any manner in the conduct of the affairs of any financial institution or organization enumerated in section

In the Matter of
STANLEY R. HENDRICKSON,
DAVID J. HENDRICKSON,
individually and as institution-affiliated
parties of
THE RANDOLPH COUNTY BANK
WINCHESTER,INDIANA
PEOPLES LOAN & TRUST BANK WINCHESTER, INDIANA
(Insured State Nonmember Bank)
FDIC-94-28e
FDIC-94-29e
(3-22-96)

ARTHUR L. SHIPE, Administrative Law Judge
   These proceedings were instituted by a Notice of Intention To Remove From Office And To Prohibit From Further Participation, dated April 25, 1994, against Stanley R. Hendrickson, and by a Notice Of Intention To Prohibit From Further Participation, dated May 4, 1994, against Respondent David J. Hendrickson. By order of June 30, 1994, the two proceedings were consolidated for hearing and decision. The Notices were issued pursuant to the removal and prohibition from banking authority of the FDIC set forth in section § 1818(e)(1) of the Act, 12 U.S.C. § 1818(e)(1).
   Oral hearings in the consolidated proceedings were held on September 28 and 29, 1995, in Indianapolis, Indiana. Post hearing initial and reply briefs were filed.
   Based upon the entire record and witness testimony, including my observation of the demeanor of the witnesses, the following Discussion of Facts and Law, Findings of Fact, Conclusions of Law, and Proposed Order is entered.

Background
   The FDIC seeks the described removal and prohibition orders because of Respondents' activity during 1990 and 1991 at a non-bank business, operating under the name of Silver Towne.
   That business is a sole proprietorship owned by Leon Hendrickson, who is the father of Respondent David Hendrickson, and the brother of Respondent Stanley Hendrickson. Silver Towne buys and sells numismatic coins, precious metals, jewelry, novelties, and sport cards. It is located in Winchester, Indiana, a small rural community about 60 miles east of Indianapolis.
   The business started in the 1950s. Leon Hendrickson then owned a restaurant, and would select interesting coins received from customers, and place them for sale in a case beside the cash register. As the business grew, it was moved first to the back of the restaurant, and then to the basement of Leon Hendrickson's house. In 1982, a bank-like structure was built, from which Silver Towne now conducts business. (The building is described in Resp. SRH Ex. A. Attachment A). Silver Towne has a present gross revenue of $40 to $50 million, and a payroll of 45 to 50 employees. It owns a manufacturing facility in Winchester, Indiana, and a refinery in Jackson, Ohio.
   Respondent David Hendrickson is 46 years old. He graduated from college in 1971, and has worked for Silver Towne since that time. He manages the business, along with his father. At the time of the activity here in issue he served as a director of the Peoples Loan and Trust Bank in Winchester, Indiana.
   Respondent Stanley Hendrickson is 57 {{9-30-96 p.A-2782}}years old. He graduated from college in 1959, and in 1962, joined the Randolph County Bank, Winchester, Indiana (Bank). He was made cashier in 1976. In 1985, he left the Bank to become controller of Silver Towne. In 1992, he returned to the Bank as its president.
Conduct in Issue
   In the course of their Silver Towne business, David and Leon Hendrickson attend coin shows, where they, along with other dealers, display their wares. The attending dealers buy and sell among themselves, and with others.
   In February 1990, David and Leon Hendrickson attended a coin show in Long Beach, California, where an individual by the name Robert McGuinn (McGuinn) approached David Hendrickson seeking to purchase gold bullion. As a result of this overture David Hendrickson bought gold from other dealers, and sold it in several lots to McGuinn. The gold was bought as well as sold with cash. The total amount of these sales to McGuinn was between $30 and $50 thousand. If any documentation of these transactions was prepared it is not now extant.
   McGuinn purported to be an agent of Manhattan Coin of New York and stated that he was selling gold to the New York jewelry trade on 47th Street. He was, in fact, engaged in laundering money received from illegal drug sales.
   Under the provisions of 26 U.S.C. § 6050I any business or trade that receives more than $10,000 in cash from one transaction is required to file a report with the Internal Revenue Service on its Form 8300. No such reports were made on the Long Beach sales to McGuinn.
   McGuinn also offered to buy additional gold bullion from Silver Towne.
   As a result, between March 15 and April 19, 1990, Silver Towne made 11 additional shipments of gold to McGuinn, which were also paid for in cash. Each of these transactions exceeded $10,000, but no Form 8300 was submitted to the IRS on the transactions, individually or in the aggregate. The total amount of the transactions, excluding those that took place in California, was $1,094,745. Silver Towne's profit on the transactions was approximately $5,000.
   On October 22, 1991, the IRS sent Silver Towne a letter stating that an inspection of its records, including its copies of filed Forms 8300, would be conducted on November 13, 1991.
   Prior to that date the Hendrickson, Leon, David, and Stanley, met with the firm's certified public accountant. The missing Form 8300 was discussed, and a tacit consensus was reached that a Form 8300 covering the 11 transactions would be placed in the file containing 8300 forms that had been filed, but that no filing with the IRS would be made of this form.
   Stanley Hendrickson prepared a Form 8300 for the documented transactions in the amount of $1,074,953.50, and dated it April 25, 1990, the approximate date of the last McGuinn transaction, rather than the current date. He was not yet aware, even then, of the original sales in California.
   This form was found by the IRS inspection team on November 13, 1991. That team determined from a print-out of filed forms that there was no record of its having been submitted to the IRS.
   On November 26, 1991, IRS criminal investigators executed a search warrant of Silver Towne, and found the original Form 8300 in or about Stanley Hendrickson's desk.
   On March 24, 1993, David Hendrickson was indicted on 11 counts of willfully failing to file Forms 8300. Stanley Hendrickson was indicted on one count of willfully failing to file a Form 8300. Leon Hendrickson was indicted for knowingly engaging in a financial transaction in criminally derived property in the form of U.S. currency derived from the unlawful distribution of cocaine, and subject to forfeiture. On July 15, 1993, the Hendricksons pled guilty as charged.
   The pleas were obtained under threat of the U.S. Attorney's Office that the property of each Respondent, including Silver Towne, would be seized unless guilty pleas were forthcoming. They were informed one weekend that unless all three accepted the respective pleas assigned to them the government could reject all of the pleas. The agreements had to be tendered by 3:00 p.m. that Sunday or the seizures would be made on the following Monday morning.
As a result of the pleas, Respondent David Hendrickson was given a one year sentence in a half-way house that permitted him to go to work each day. Respondent Stanley Hendrickson was sentenced to six months unsupervised probation, and fined $4,070.08. {{9-30-96 p.A-2783}}Leon Hendrickson was originally sentenced to five months imprisonment, five months home detention, and two years probation, and forfeiture of $742,555. This sentence was vacated upon appeal by the U.S. Attorney, and the matter was remanded to the district court for resentencing. United States v. Leon E. Hendrickson, 22 F.3d 170 (7th Cir. 1994). FDIC Ex. 14. Upon remand he was given an additional 60 days of house arrest. Tr. 273.
   Respondent David Hendrickson, pursuant to the district court's order, was permitted to serve his time after his father's sentence was completed in order that one of them would be available to fully attend the business of Silver Towne.
Evaluation of Conduct—Stanley Hendrickson
   As stated, Stanley Hendrickson was not an "institution-affiliated party" in 1990 when the events here in question occurred. He was appointed President of the Bank in November 1992. His indictment and conviction were in 1993. He contends that the FDIC has no jurisdiction over the alleged conduct at a non-banking facility when he was not involved with a bank. He argues that section 1818(e)(1) covers only activity engaged in by an institution-affiliated party while that party is so affiliated, and asserts that there is no case directly on point deciding the issue.
   In Manges v. Camp, 474 F.2d 97 (5th Cir. 1973), the court construed similar language in section 1818(g) and found, "This language, on its face certainly appears to speak to the situation where a person is presently involved and participating in the affairs of a bank and is presently charged with a felony." The court rejected the argument that "this language was intended to go not only to the present, but also to any past felony charges or convictions." Id. at 100. The defendant in that case had pleaded guilty to a crime about five years before becoming involved with a bank.
   It will be noted that this opinion does not hold that the statute covers only crimes committed during a defendant's involvement with a bank; it only holds that association with a bank must be present when the charges or convictions are entered. Since Stanley Hendrickson was indicted after he became associated with the Bank, he would be subject to removal under section 1818(g), as interpreted in Manges, if the conditions required for removal were present.
   Under a prior enactment of section 1818(e), the removal of parties from banking for conduct at other business institutions was covered by former section 1818(e)(2). A court in construing that paragraph, stated that a bank officer may be removed "from Bank A because of misconduct ... engaged in at Bank B or C or even at Business D." Anonymous v. Federal Deposit Insurance Corporation, 619 F. Supp. 866, 870 (D.C.D.C. 1995). Paragraph (e)(2) has been incorporated into the present paragraph (1), but there is no basis to infer that its meaning on this issue has been changed. It does not appear that the court's dictum assumes that the culpable conduct engaged in at "Business D" would necessarily be while the individual is a banker.
   The Board has held that former conduct at a non-bank business in connection with a savings and loan institution, over which the FDIC had no jurisdiction, could be considered in a prohibition action against an institution-affiliated party subject to its jurisdiction. In the Matter of William Grantmyre, FDIC Enforcement Decision and Orders, Vol. 1, ¶ 5122 at A-1391, n.2 (1988).
   Respondent Stanley Hendrickson argues that to interpret the statute as covering conduct by a banker which occurred before he became a banker would be unreasonable. However, if a party may be removed from banking for non-banking conduct which takes place while he is a banker, it is not unreasonable to construe the statute as covering non-banking conduct for which a party is indicted or convicted, while he is a banker, though the conduct occurred before he became a banker.
   Section § 1818(e)(1)¹ sets forth various

(e) Removal and prohibition authority

(1) Authority to issue Order. Whenever the appropriate Federal banking agency determines that—

(A) any institution-affiliated party has, directly or indirectly—

(i) violated—

(I) any law or regulation;

(II) any cease-and-desist order which has become final;

{{9-30-96 p.A-2784}}requirements for removal of persons from banking. These are categorized as misconduct (sub-paragraph (A)), effects (sub-paragraph (B)), and culpability (sub-paragraph (C)).
   It is undisputed that Respondent Stanley Hendrickson has violated a law as set forth in section 1818(e)(1)(A)(i)(I). He has pled guilty to such under the circumstances described. FDIC contends that he also engaged or participated in unsafe and unsound practices in connection with a business institution as stated in section 1818(e)(1)(A)(ii). This contention is accepted, at least insofar as his preparation and placement of the unfiled Form 8300 in Silver Towne's records is concerned; it can hardly be denied that business records must be kept accurately, not only for purposes of conducting the business, but also for ensuring compliance with the law. This was not done here.
   FDIC argues that Respondent Stanley Hendrickson by his culpable activity breached a "fiduciary duty" within the terms of section 1818(e)(1)(A)(iii).
   The Board has stated that, "it is a per se breach of fiduciary duty and an unsafe or unsound banking practice" to falsify bank records. In the Matter of James E. Jameson, FDIC Enforcement Decision and Orders, ¶ 5154 at A-1542.5, n.8. However, the activity here in question was not related to a bank.
   The concept of fiduciary duty arises when one party undertakes to act on behalf of another; it is breached when that party fails to perform the duty promised or imposed by law. In the situation presented, Stanley Hendrickson owed a fiduciary duty to Leon Hendrickson. There is no claim here that he ever disobeyed the wishes of Leon Hendrickson; on the contrary, if anything, he was overly obliging to those wishes. Although it is not necessary for a decision in this matter, I am not persuaded that, legally, a breach of fiduciary duty occurred here.
   The requirements of sub-paragraph (C) will be reviewed before those in sub-paragraph (B). Sub-paragraph (C) requires a finding, as relevant here, that conduct described in sub-paragraph (A) "involves personal dishonesty" or "demonstrates willful or continuing disregard ... for the safety or soundness of such ... business institution."
   On July 12, 1993, the day before Respondent Stanley Hendrickson was sentenced, he filed a complaint in federal district court against the FDIC and the Federal Reserve Bank of Chicago seeking a Declaratory Judgment and a Restraining Order which would prevent these agencies from removing him from his office as president of The Randolph County Bank, Winchester, Indiana.
   The FDIC had indicated to his counsel that it considered section 1829 applicable to Stanley Hendrickson. That section provides heavy penalties for persons participating in the conduct of any bank after conviction of a crime involving "dishonesty or breach of trust" without the consent of the FDIC.
   This court proceeding was resolved by a Stipulation For Dismissal entered into by the parties. Included within the Stipulation were the following terms:

For purposes of this case only, the FDIC stipulates that 12 U.S.C. 1829, Section 19 of the Federal Deposit Insurance Act, is inapplicable to the conviction of Stanley R. Hendrickson entered on July 13, 1993. Based upon this Stipulation for Dismissal,

{{9-30-96 p.A-2785}}plaintiff will dismiss this action with prejudice only as it relates to Section 19.
Nothing contained in this Stipulation for Dismissal shall be construed to preclude the FDIC from invoking any other statutory or regulatory provision in determining whether or not Stanley R. Hendrickson should continue as an officer and director of the Randolph County Bank and its holding company, the Randolph County Bancorp, Winchester, Indiana. Likewise the plaintiff waives no rights or defenses with respect to any other action.
   FDIC concedes here that his guilty plea for failure to file a Form 8300 does not, alone, establish dishonesty. However, it contends that Stanley Hendrickson participated with David Hendrickson in an attempt to withhold information from the IRS. The respective roles and responsibilities of the Respondents in the matters in issue are considered more fully below. For purposes of determining whether the requisite intent stated in sub-paragraph (C) was present here, it is concluded that the preparation of a Form 8300, back-dated, and placed in the file with other such forms that had been submitted to the IRS, all for the purpose of misleading the IRS inspectors into the belief that the prepared form had been sent to the IRS, involved dishonesty. cf. Van Dyke V. Board of Governors of the Federal Reserve System, 876 F.2d 1377, 1379 (8th Cir. 1989). (Finding that the term "dishonesty" embraces, among other things, misrepresentation of the facts and deliberate deception by pretense and stealth, as well as want of straightforwardness.) It is further concluded that this conduct demonstrated a willful disregard for the safety and soundness of Silver Towne.
   There is extended argument in the pleadings over whether Stanley Hendrickson physically handed the Form 8300 file to the IRS inspectors on November 13, 1990, during their visit to Silver Towne. These arguments have been reviewed, along with the testimony on which they are based. There is credible testimony on both sides of the dispute. The matter cannot be resolved with certainty, and in view of the conclusion already stated, it will not be further considered.
   In addition to culpable conduct, section 1818(e)(1)(B) requires, for the issuance of a prohibition order, as pertinent, that "by reason of" such conduct the affected business has suffered financial loss or other damage, or that the violating party has received financial gain or other benefit.
   As previously indicated, Leon Hendrickson forfeited $742,555 in connection with the transactions here in question under 18 U.S.C. § 982(a)(1). He paid the forfeiture out of personal, rather than Silver Towne funds.
   According to the FDIC, this forfeiture was a loss to Silver Towne because the firm is a sole proprietorship, and Stanley Hendrickson's conduct contributed to this loss. It will be accepted for purposes of this decision that no legal distinction exists between Leon Hendrickson and Silver Towne, and the forfeiture was consequently a loss to the latter.
   The unrefuted, credible testimony of both Respondents is that Stanley Hendrickson did not become aware of the considered transactions until mid-April of 1990. At that time he discovered that the firm's cash in the bank exceeded the amount supported by invoices. He went to David Hendrickson and inquired if he could explain the discrepancy. At the same time David Hendrickson informed Stanley Hendrickson of the transactions that had occurred, and stated that there would be more. The invoices were on David Hendrickson's desk. He gave as the total sum of completed transactions, $714,436.02. On or about April 16, 1990, Stanley Hendrickson posted that amount to the records of Silver Towne reflective as of March 31, 1990. FDIC Ex. 7.
   The Respondents agreed that one Form 8300 would be filed when all of the transactions were completed. Tr. 452-453. The last transaction is listed as occurring on April 19, 1990, but it was not posted until on or about June 26, 1990. Stanley Hendrickson then partially filled out a Form 8300 for the transactions, and requested the remainder of the necessary information, including identifying numbers, from David Hendrickson.
   The practice at Silver Towne was for the required information to be obtained from the customer by the salesperson and the form was ordinarily reviewed, signed, and filed by Stanley Hendrickson. It is conceded that this information was never obtained from the customer, McGuinn, nor supplied to Stanley Hendrickson, and the form was never filed with IRS.
   McGuinn, who became a cooperating witness for the government, denied to investi- {{9-30-96 p.A-2786}}gators that he was ever asked for the information. Respondents claim he was repeatedly asked. It cannot, in any event, be found that the failure to obtain the information justified the failure to file the form.
   The count of the indictment for which Stanley Hendrickson pleaded guilty states, in part, that, "Between, on or about February 27, 1990 and April 19, 1990" ... [he] willfully failed to make a return ... in the amount of $1,094,745." No such form could have been filed before April 19, 1990, since the transaction of that date is part of the stated amount of the transaction. Thus, any laundering of money with respect to these transactions took place before Stanley Hendrickson could have filed a Form 8300 with the IRS.
   FDIC contends that his failure to file any Form 8300 covered up the transactions, and delayed their detection by the IRS. The claim that Stanley Hendrickson's failure to file the Form 8300 was motivated by a desire to cover up the transactions is entirely speculative. Since the transactions with McGuinn ceased on April 19, 1990, any previous motive to cover up the transactions should have disappeared at the same time. But even if Stanley Hendrickson were motivated to cover up the transactions it is not perceived how it can be said that forfeitures based on activity prior to that of which he had no current knowledge occasioned losses by reason of his failure to expose them. Under these dubious suppositions his dereliction was a perverse and unsuccessful effort to avoid detection and loss. The loss was the result of the discovery by the IRS of the transactions which took place independently of any action or inaction of Stanley Hendrickson.
   FDIC further argues that Respondent received financial gain or other benefit from his violations within the terms of section 1818(e)(1)(B)(iii). It is claimed, for instance, that his placement of the unsubmitted Form 8300 in the file was an effort to hide his failure to timely submit the form, and that to the extent that this effort was successful, it was a benefit to him.
   It should be noted that there is not proof that Stanley Hendrickson was aware of his personal exposure to criminal prosecution or sanction before the unfiled form was placed in Silver Towne's records. In any event, as FDIC concedes, it has been held that the mere attempt to obtain a benefit, for example, to avoid a sanction, is not a benefit within the terms of the subject provision. In the Matter of Seidman, 37 F.3d 911 (3rd Cir., 1994), holding that, "[a]n unsuccessful attempt to secure a benefit is not one of the effects that can support removal and prohibition under section 1818(e)(1)." Id. at 938.
   However, FDIC contends that Stanley Hendrickson received a momentary benefit because discovery of his failure to properly file the form was delayed 13 days by the placement of an unfiled form in the Silver Towne records. The IRS inspection took place on November 13, 1990; the search warrant was executed on November 26, 1990, when the form was discovered.
   The investigators determined on November 13 that there was no record of the forms having been submitted to the IRS. Before the November 26 search the investigators discussed the apparent filing discrepancy with criminal investigators. Although the investigators considered the possibility that the IRS records were inaccurate, and for that reason did not confront Silver Towne officials on November 13, and accuse them of failing to file the form, it would be overly presumptuous to state, as FDIC does on brief, that "no one looked into the suspicious nature of the transactions because they believed the proper form had been filed." FDIC Brief at 33.
   I find it inconceivable that these investigators would have dropped the matter on the supposition that their own records were incomplete, especially given the amount of the transaction(s). As stated, they discussed the matter with the criminal investigators within days after their inspection. Resp. SRH Ex. A, Affidavit at 7. The contention that Stanley Hendrickson derived a benefit in terms of the statute from his conduct because he successfully misled the investigators even for a few days is not accepted.
   FDIC also contends that Stanley Hendrickson received an additional benefit by retention of his job. The basis for this contention is a statement that Stanley Hendrickson made to the sentencing court in his criminal case. "Rather than risking my job at Silver Towne, I prepared the partial Form 8300."
   For purposes of reviewing FDIC's argument, it will be accepted, as the FDIC assumes, that he retained his job by the performance of a wrongful act.
   It is, however, a rather strained use of the concept of "benefit" to apply it to the retention of one's job in the face of at least {{9-30-96 p.A-2787}}implicit threats of discharge for failing to engage in unlawful conduct. It has been held, for example, that where a statute prohibited the conferring of a benefit on any public official in order to receive favorable treatment, that no benefit had been offered where a defendant allegedly threatened an official with harm (embarrassing disclosures) and simultaneously agreed to withhold the harm if the requested action was forthcoming. State v. Scirrotto, 115 N.J. 115, 556 A. 2d 1195, 1200 (1989).
   Here it is claimed that Stanley Hendrickson received a benefit from a similar (perhaps tacit) proposition; the threat to his job would be removed if he acceded to the pressures to place the unfiled Form 8300 in the records of Silver Towne. According to the FDIC, his job thereby became a benefit of the performed conduct. However, it has been recognized that the receipt of a benefit entails the acquisition of something that the recipient would not otherwise be legally entitled to receive. Graphic Arts Finishers, Inc. v. Boston Redevelopment Authority, 357 Mass. 40; 255 N.E. 2d 293, 795. (Defining benefits as the receipt in exchange for a promise of some performance or forbearance which the promisor was not previously entitled to receive.)
   Even if Stanley Hendrickson were an employee at the will of his employer, he had a legal right, under Indiana law, not be discharged for refusing to perform an unlawful act. See John H. McClanahan v. Remington Freight Lines, Inc., 517 N.E. 2d 390 (Ind. 1988). Hence, the performance of the act did not confer upon him a benefit in the form of a job to which he was not otherwise legally entitled.
   It is concluded that the FDIC has not shown that Silver Towne suffered loss or other damage because of the conduct of Respondent Stanley Hendrickson, or that he received financial gain or other benefit by reason of any violation, practice, or breach under section 1818(e)(1)(B), and that the order sought requiring his removal from banking cannot be granted.

Discretionary Matters

   Even if the statutory elements for removal were present here, some considerations should be given toward exercising leniency in weighing those factors. The FDIC argues that matters outside of those necessary to determine whether a statutory basis exists for the issuance of a prohibition order are irrelevant.
   However, it is established that the removal of a party from banking entails the exercise of discretion. See In the Matter of Anonymous, FDIC Enforcement Decision and Orders, Vol. 1, ¶5110 at A-1188. Although the statutory basis for removal was present there, the Board in its discretion, upon a review of the entirety of the surrounding circumstances and the equities of the case, declined to issue the prohibition order sought.
   Among the circumstances considered by the Board were: Respondent's young age, inexperience, lack of knowledge of a fraudulent scheme surrounding the disputed loans, absence of personal benefit or dishonesty with respect to the involved transactions, Respondent's relatively low level in the managerial hierarchy, tacit approval of his supervisor of his questioned lending activity, and the service of Respondent as bank president for almost three years without repetition of the problems under review.
   Manifestly, the circumstances surrounding the statutory issues here are different from those described in the cited case. Most disturbing here, of course, is the statutory finding of personal dishonesty by Stanley Hendrickson in placing a misleading form in the company file. However, even that should be viewed in light of the following circumstances reflected in the record.
   Stanley Hendrickson's record as a banker is unblemished. He worked at the Bank for more than 20 years before going to Silver Towne with no hint of improper conduct having been raised against him during that tenure. He returned to the Bank as its president in 1992, and remains there today, again serving without any claim of misconduct having been leveled against him. That he has, apart from the matters here in consideration, lived a life of uncommon decency in service to the Bank and its community is clearly reflected in the record. Resp. SRH Ex. L.
   Each interest served by the Bank, directors, officers, employees, shareholders, depositors, as well as the Bank's community representatives, support his continued service as the Bank's president despite his conviction and related matters. In fact, he was selected for that position after the events in issue occurred. Statements in the record that he is irreplaceable as the Bank's president {{9-30-96 p.A-2788}}need not be totally accepted, but it is clear that every interest connected with the Bank views his continued service there to be crucially important to its well-being.
   FDIC suggests that Stanley Hendrickson's removal is necessary to avoid any risk that his misconduct will be repeated at the Bank. In my opinion this is a very remote risk, indeed. He has been so thoroughly chastised, humiliated, and disgraced by the events at Silver Towne. Any risk that he would repeat that conduct at the Bank can be safely discounted.
   It should be noted that section 1818(e)(3) grants the FDIC authority to suspend institution-affiliated parties from the institution pending proceedings brought under section 1818(e)(1) where necessary for the protection of the institution and its depositors. No such action has been taken here. In fact, no proceeding was instituted for over a year after the indictment, and over three years after the discovery of his misconduct.
   Stanley Hendrickson has cautioned bank employees to be especially careful in preparing and filing forms, reminding them of what happened to him for failing to accord such matters the importance they require.
   The Court that imposed sentence on Respondent stated, apparently in response to suggestions from his counsel that the FDIC would be interested in the Court's view of Stanley Hendrickson's continued service as President of the Bank, "this Court is absolutely clear in its conviction that the offense had nothing to do with your job responsibilities as President of the bank. That was a completely separate matter." Resp. SRH Ex. K. The Court further stated, "In addition, I accept Assistant U.S. Attorney Warden's characterization as well as Mr. Pylitt, that your involvement is clearly most minimal. In fact, I would say almost de minimis." Id.
   It is undisputed that Stanley Hendrickson was not involved in the tainted transactions as they occurred and was in fact unaware of them until their virtual completion. It was his assigned responsibility to file Forms 8300 upon information given to him by the salesperson who made the transactions. This was not a statutory responsibility. That rested with Silver Towne. His assigned responsibility was derived from his superiors, Leon and David Hendrickson, and therefore could be removed or qualified by their explicit or implicit instructions. For the reasons explained, the responsibility of Stanley Hendrickson in the matter in issue was, as the Court seemed to recognize, attenuated by the action of his superiors, who happened to be his older brother, and that brother's son.
   FDIC has somewhat overstated the responsibility of Stanley Hendrickson for filing 8300 forms at Silver Towne. David Hendrickson, as stated, pled guilty to 11 counts of failing to file these forms. This establishes his responsibility in the matter. If he had discharged that responsibility, there would have been no need for Stanley Hendrickson to file the forms with respect to the same transactions. Manifestly, they both did not have sole responsibility for filing the 8300 forms. The responsibility of Stanley Hendrickson was determined by his superiors. His responsibility in the matter here in issue cannot be deducted entirely from the general practice in which he filed the forms.
   It is recognized that agencies must avoid undermining public confidence in the regulatory process by excessive leniency in hard cases. However, leniency in the matter presented here would not, in light of all the facts and circumstances, in my opinion, have that result. The individual proposed to be removed is by all accounts essentially an honest person who made some grievous mistakes for which he has heavily paid. Those whose interests are most directly affected by his presence in the Bank desire that he be allowed to remain there. Removal in this situation would hardly instill public confidence in the belief that a fair balance of the affected interests has been achieved.
   Thus, even if it were found that a statutory predicate exists here for the prohibition of Stanley Hendrickson, I recommend that no such order be issued.
Evaluation of Conduct—David J. Hendrickson
   The role of David Hendrickson in the subject transactions has been discussed above. The transactions were almost entirely handled by him. Despite his inability, or unwillingness, to obtain the information from McGuinn, the money launderer, David Hendrickson completed 11 transactions with McGuinn. The government stipulates that he did not know the money received was related to illegal drug sales, but David Hendrickson acknowledged that he had suspicions that this money was criminally derived, and that he "chose to look the other way." FDIC Ex. 16, Addendum. David Hendrick- {{9-30-96 p.A-2789}}son did not physically place the unfiled Form 8300 in Silver Towne's records, but he was party to the tacit agreement to do so. He pled guilty to 11 counts of failing to file Forms 8300.
   It is apparent that David Hendrickson's conduct is covered by the requirements set forth in section 1818(e). Unlike Stanley Hendrickson, he was an active participant in the transactions throughout their execution. Plainly, if the forfeiture made by Leon Hendrickson is deemed a loss to Silver Towne, and it is so considered, David Hendrickson's violative conduct contributed to that loss. It is my conclusion that factors necessary for prohibition from banking have been shown, and the requested order to that effect should be granted as to David Hendrickson.

   1. Insufficient grounds exist under section 1818(e)(1)(B) to issue an order removing and prohibiting Respondent Stanley R. Hendrickson from participating in the conduct of the affairs of any insured depository institution.
   2. Grounds exist for an order under the provisions of section 1818(e)(1)(A),(B) and (C) for issuance of an order prohibiting David J. Hendrickson from participating in the conduct of the affairs of any insured depository institution, and such an order should be issued.

   1. At all time pertinent to this proceedings, Peoples Loan and Trust Bank was a corporation existing and doing business under the laws of the State of Indiana, having its place of business at Winchester, Indiana. Peoples Loan and Trust Bank is and has been, at all times pertinent to this proceeding, an insured State nonmember bank, subject to Federal Deposit Insurance Act ("Act"), 12 U.S.C. §§ 1811–1831u, the Rules and Regulations of the FDIC, 12 C.F.R. Chapter III, and the laws of the State of Indiana. (FDIC Exs. 17 & 18).
   2. At all times pertinent to this proceeding, and until April 19, 1993, when he resigned, David Hendrickson was a member of the board of directors of Peoples Loan and Trust Bank, Winchester, Indiana. (Tr. 244) (FDIC Exs. 17 & 18).
   3. At all times pertinent to this proceeding, The Randolph County Bank was a corporation existing and doing business under the laws of the State of Indiana, having its place of business at Winchester, Indiana. The Randolph County Bank is and has been, at all times pertinent to this proceeding, an insured State nonmember bank, subject to the Act, 12 U.S.C. §§ 1811–1831u, the Rules and Regulations of the FDIC, 12 C.F.R. Chapter III, and the laws of the State of Indiana. (FDIC Exs. 17 & 18).
   4. From 1962 until his resignation in 1985, Stanley Hendrickson was an employee or officer of The Randolph County Bank. On or about October 31, 1992, Stanley Hendrickson was appointed President and a director of The Randolph County Bank, Winchester, Indiana, and continues to serve in those capacities. Stanley Hendrickson was neither an officer nor a director of any insured depository institution in 1990. (Tr. 230) (FDIC Exs. 17 & 18).
   5. The Respondent, David Hendrickson, is 46 years of age. (Tr. 242).
   6. David Hendrickson is the nephew of Stanley Hendrickson, the other Respondent in this matter. (Tr. 242).
   7. The Respondent, Stanley Hendrickson, is 57 years of age, married, and has two adult children. (Tr. 420–423).
   8. Winchester, Indiana is a small rural community (Tr. 426) with a population of approximately 5,500 and Randolph County has a population of approximately 28,000. (Tr. 312) The unemployment rate in Randolph County during the past several years has been the highest in the State of Indiana. (Tr. 249).
   9. Silver Towne has been one of the largest employers in Randolph County, Indiana, employing more than 45 to 50 people at the present time. (Tr. 439) Silver Towne is one of the top five coin dealers in the nation. (Tr. 439) It has approximately $45 million dollars worth of sales each year, and is one of the top five coin businesses in America (Tr. 246 and 238), and sells gold bullion (Tr. 50 and 240), as well as numerous other items. Silver Towne is a wholly-owned by Leon Hendrickson, father of David Hendrickson, and brother of Stanley Hendrickson. (FDIC Exs. 11 and 18).
   10. The Randolph County Bank is one of two banks in Winchester, Indiana, and the last community owned bank in that county. (Tr. 497) It is a small town bank which emphasizes local people servicing local people.
{{9-30-96 p.A-2790}}(Tr. 348) It is very important in a small community for customers to have confidence in the people they are dealing with at the bank. (Tr. 492).
   11. Since his appointment as President of the bank, Stanley Hendrickson has been elected to the Board of Directors by the shareholders for a one year term each April. (Tr. 441).
   12. During the months of February, March and April, 1990, David Hendrickson sold Bob McGuinn just over One Million Dollars worth of gold shot. (Tr. 259).
   13. During February of 1990, David and Leon Hendrickson attended the Long Beach, California coin show where they met with Robert McGuinn who represented himself to be a representative of Manhattan Coin in New York. (Tr. 254–256).
   14. McGuinn indicated to David Hendrickson that he was interested in buying gold bullion for sale to the jewelry trade on 47th Street in New York. (Tr. 256).
   15. David and Leon Hendrickson asked other people at the Long Beach show for references on McGuinn and these people indicated that as far as they knew he was okay. (Tr. 256).
   16. At the Long Beach show, McGuinn also inquired as to whether Silver Towne would have gold bullion for sale at times in the future. David Hendrickson responded to McGuinn that Silver Towne handles thousands of ounces of gold a month. (Tr. 257).
   17. Upon his return to Winchester, Indiana, David Hendrickson called McGuinn and offered to sell him more gold. (FDIC Ex. 16).
   18. Between February 27, 1990, and April 17, 1990, David Hendrickson, acting as employee and agent for Silver Towne, sold gold for cash to Robert McGuinn acting as agent for Manhattan Coin Company or Trend Precious Metals of New York, New York, on or about the following dates:

(FDIC Exs. 1 & 6).
   19. From early 1985 until around October 1, 1992, when Stanley Hendrickson left the Bank, he was employed by his brother at Silver Towne. (Tr. 433) Stanley Hendrickson was responsible for accounts payable and payroll. (Tr. 444).
   20. At no time did Stanley Hendrickson ever have any ownership, hold any office, or possess any management responsibilities at Silver Towne and never met customers or made sales, or made any business decisions. (Tr. 436, 442 and 443).
   21. At all relevant times, Stanley Hendrickson's bosses were Leon Hendrickson, the owner of the business, and David Hendrickson, his nephew, and second in charge of the business. (Tr. 249) (Tr. 443).
   22. At all times pertinent to this proceeding, 26 U.S.C. § 6050I required any person engaged in a trade or business who, in the course of the trade or business, received more than $10,000 in cash in one transaction to file a report with the Internal Revenue Service ("IRS"). The report is required to be filed with the IRS on Form 8300. (FDIC Exs. 17 & 18).
   23. Silver Towne is a sole proprietorship and a business entity engaged in the sale and purchase of coins and precious metals, as well as jewelry, sports memorabilia, and baseball cards. As such, Silver Towne was, at all relevant times engaged in a trade or business within the meaning of 26 U.S.C. § 60501. (FDIC Exs. 17 & 18).
{{9-30-96 p.A-2791}}
   24. At the Long Beach show, David Hendrickson told McGuinn that payment for future shipments of gold must be in "good funds" i.e., bank wire, certified check or cash. (Tr. 258–259).
   25. David Hendrickson was not told at Long Beach by McGuinn that future payments from McGuinn would be in cash. David Hendrickson first learned of the cash payments when the first shipment occurred after the Long Beach show. (Tr. 258–259).
   26. Some time around April 19, 1990, Stanley Hendrickson was reconciling the books and records of Silver Towne, and determined that the cash account was out of balance in an amount in excess of $700,000.00. (Tr. 446–449) Stanley Hendrickson immediately contacted his nephew David, and learned for the first time that David Hendrickson had entered into the transactions with McGuinn. (Tr. 43) (Tr. 450–452) David advised Stanley that he and his father, Leon, met McGuinn earlier, and had recently seen him at a large national coin show held in Long Beach, California. Neither David nor Leon provided Stanley with any description of any transaction with McGuinn at Long Beach. (Tr. 21–22 and 256–260).
   27. In June of 1990, Stanley Hendrickson was informed by David Hendrickson of the remaining transactions between Silver Towne and Robert McGuinn. (Tr. p. 456).
   28. Stanley Hendrickson filled out a Form 8300 for this transaction with the information from David Hendrickson and asked David Hendrickson to obtain the remaining information and Federal I.D. number. (Tr. 462).
   29. No Form 8300 was filed by anyone for any of the transactions between Silver Towne and McGuinn acting on behalf of Manhattan Coin or Trend Precious Metals. (Tr.29).
   30. Stanley Hendrickson entered two transactions on the books of Silver Towne to reflect the transactions from February 27, 1990, through April 27, 1990, between Silver Towne and Robert McGuinn. The first, made on or about April 16, 1990, was dated as of March 31, 1990, was in the amount of $714,436.02, and the second, made on or about June 26, 1990, was dated as of April 30, 1990, and was in the amount of $440,295.00. (Tr. 85) These entries were made based on information Stanley Hendrickson received from David Hendrickson. (FDIC Ex. 7); Stipulation 2.
   31. David Hendrickson knew or believed that the funds used by Robert McGuinn to purchase gold from Silver Towne were derived from criminal activity. (FDIC Ex. 2).
   32. Stanley Hendrickson was the person generally responsible for filing Forms 8300 at Silver Towne for all cash transactions over $10,000. (Trans. pp. 35, 178).
   33. At no time did Stanley Hendrickson meet or talk to McGuinn, or anyone on behalf of Manhattan Coin. (Tr. 276 and 253).
   34. David Hendrickson was in charge of all gold bullion sales at Silver Towne. (Tr. 262).
   35. At no point did Stanley Hendrickson make any effort to disguise or hide, or fail to report the McGuinn/Manhattan Coin transactions on the books and records of Silver Towne. (Tr. 451).
   36. During 1990, David Hendrickson and other salespersons, not Stanley Hendrickson, were reponsible for gathering information for Form 8300 at Silver Towne. (Tr. 250) At the time, Stanley Hendrickson was responsible for mailing these Forms 8300s. Typically, a salesperson obtained information from the customer, and Stanley Hendrickson made sure it was complete. (Tr. 499).
   37. Silver Towne reported the transactions with Manhattan Coin exceeding $1,000,000.00 to its outside Certified Public Accountant, Jeann Drumm, President of the Indiana CPA Society (Tr. 437), who then included these transactions in the amounts reported on the tax return that was filed on behalf of Silver Towne. Silver Towne paid taxes on these transactions with McGuinn. (Tr. 463).
   38. Silver Towne made approximately $5,000.00 in profit on this entire McGuinn transaction. (Tr. 50 and 259).
   39. Both Stanley Hendrickson and David Hendrickson were aware that the law required that cash transactions exceeding $10,000 be reported to the IRS by filing a Form 8300. (FDIC Exs. 15 and 16).
   40. The cash used by Robert McGuinn to purchase gold from Silver Towne was the proceeds of illegal cocaine sales. (Tr. 25–26).
   41. In October of 1991, Silver Towne was {{9-30-96 p.A-2792}}informed by letter that it was to be audited by the IRS for compliance with the filing requirements for cash transactions over $10,000. (FDIC Ex. 19; Tr. 506).
   42. The letter included a statement that Silver Towne was to have retained copies of Form 8300 available for inspection. (FDIC Ex. 19).
   43. After receiving the letter from the IRS, Stanley Hendrickson, David Hendrickson, and Leon Hendrickson met with Jean Drumm, Silver Towne's accountant. At that time, it was decided that it was necessary to have a Form 8300 in the retained copies file for the transactions between Silver Towne and Robert McGuinn before the IRS reviewed the file. (FDIC Ex. 17; Tr. 463–469).
   44. Stanley Hendrickson then prepared and signed a single Form 8300 in the amount of $1,074,953.50, back-dated to April 25, 1990. A copy of the Form 8300 was then placed by Stanley Hendrickson in the Silver Towne file in which copies of Form 8300 filings with the IRS were customarily kept. Stanley Hendrickson retained an original of the Form 8300 in his desk. (FDIC Ex. 17) Stanley Hendrickson felt pressure from David Hendrickson, his boss, to prepare a Form 8300 for the McGuinn transactions. (Tr. 493) Had any other employee failed to provide the necessary information, Stanley Hendrickson would have simply mailed in an incomplete form. (Tr. 443 and 461).
   45. On November 13, 1991, IRS Agent Jodi Lewis, together with two other IRS agents, arrived at Silver Towne to inspect the records for compliance with the filing requirements for cash transactions over $10,000.00. (Tr. 148–156).
   46. As part of the Form 8300 compliance sweep, Lewis asked Stanley Hendrickson who was responsible for filing Form 8300s at Silver Towne. Stanley Hendrickson informed Lewis that he was the person responsible. (Tr. 178).
   47. Between December 1, 1989, through November of 1991, 26 Forms 8300 were filed by Silver Towne for cash transactions exceeding $10,000. All but three of the Form 8300s submitted by Silver Towne to the IRS bore the signature of Stanley Hendrickson. Some may have been stamped or signed by others. (FDIC Ex. 9).
   48. At the conclusion of the compliance audit, the IRS auditors advised Jeann Drumm that there was a pattern of compliance at Silver Towne. However, one Form 8300 for Valley View Department Store (Tr. 474) was determined not to have been filed based upon the review of the invoices and Silver Towne was fined $100.00. (Tr. 474–475).
   49. At the time of the Form 8300 sweep by the IRS, unknown to the agents conducting the sweep, there was in progress an investigation conducted by IRS Criminal Investigation Division Agent Daniel Neukam and other IRS agents into suspected money laundering activity at Silver Towne with Manhattan Coin. (Tr. 156).
   50. On November 26, 1991, thirteen days after the civil audit, criminal agents of the IRS served a search warrant on Silver Towne and spent the entire day reviewing records at Silver Towne. (Tr. 30 and Tr. 476–477) Approximately 20 agents of the Internal Revenue Service and the Indiana State Police were present during that search. David Hendrickson and Stanley Hendrickson were not present during most of the search, and were not interviewed. (Tr. 77).
   51. IRS Agent Neukam was unaware of the Form 8300 compliance sweep at Silver Towne until after it was completed. (Tr. 37).
   52. During the search of the premises, an original of the Form 8300 in the amount of $1,074,953.50 was found in the desk of Stanley Hendrickson, thereby demonstrating that it had not been filed with the IRS. (FDIC Ex. 17; 31).
   53. From the time of the search warrant on November 26, 1991 until some time around early March, 1993, over one and a half years, Stanley Hendrickson and his counsel heard nothing from the Government about any possible criminal charge. (Tr. 268).
   54. As the statute of limitations on the criminal charges was about to expire, Respondents signed agreements to extend the statute of limitations for two weeks. (Tr. 116 and Respondent Stanley R. Hendrickson's Exhibit B).
   55. Late one weekend, after the original statute of limitations expired, representatives of the United States Attorney's office in Indianapolis advised counsel for the three Hendricksons that unless all three Hendricksons agreed by 3 o'clock that Sunday afternoon, to plead guilty to certain offenses, Grand Jury Indictments would be sought against all three, and their personal property, as well as the property of Silver Towne would {{9-30-96 p.A-2793}}be seized and subject to forfeiture. (Tr. 108, 116, 117, 269, 286 and 496).
   56. Based upon the representative of the U.S. Attorney's office and the threat that they would seek an indictment the next day, and the forfeiture of personal assets and Silver Towne assets, all three Hendricksons decided to plead guilty. (Tr. 269).
   57. On March 24, 1993, David Hendrickson was indicted by a Grand Jury sitting in the Southern District of Indiana on counts 9 through 19 for willful failure to file a return to the Internal Revenue Service regarding receipt of cash as required by 12 U.S.C. § 6050I, in violation of 26 U.S.C. § 7203. Counts 9 through 19 of the indictment identified the transactions with McGuinn totaling $1,094,745. (FDIC Exs. 1, 17 & 18).
   58. In the March 24, 1993 indictment, Stanley Hendrickson was indicted by a Grand Jury sitting in the Southern District of Indiana on count 20 for willful failure to file a Form 8300 in violation of 26 U.S.C. § 7203. (FDIC Exs. 1 & 17).
   59. In the indictment of March 24, 1993, Leon Hendrickson was indicted on counts 1 through 8 for knowingly engaging in a financial transaction in criminally derived property in excess of $10,000 in violation of 18 U.S.C. § 1957. Counts 1 through 8 of the indictment identified transactions with McGuinn which totaled $742,555. Counts 21 through 28 alleged that the property involved in the violations of 18 U.S.C. § 1957 was subject to forfeiture pursuant to 18 U.S.C. § 982(a)(1). (FDIC Ex. 1).
   60. On July 15, 1993, in the United States District Court for the Southern District of Indiana, David Hendrickson pled guilty to counts 9 through 19 of the March 24, 1993, indictment and was found guilty of knowingly failing to make a return to the Internal Revenue Service regarding receipt of cash in amounts in excess of $10,000 in violation of 26 U.S.C. § 7203. (FDIC Exs. 2, 4 & 18).
   61. On July 15, 1993, in the United States District Court for the Southern District of Indiana, Stanley Hendrickson pled guilty to count 20 of the March 24, 1993, indictment and was found guilty of knowingly failing to make a return to the Internal Revenue Service regarding receipt of cash in amounts in excess of $10,000 in violation of 21 U.S.C. § 7203. (FDIC Exs. 3, 5 & 17).
   62. On July 15, 1993, in the United States District Court for the Southern District of Indiana, Leon Hendrickson pled guilty to counts 1 through 8 and 21 through 28 of the March 24, 1993, indictment and was found guilty of knowingly engaging in a financial transaction in criminally derived property in excess of $10,000 in violation of 18 U.S.C. § 1957. (FDIC Ex. 12).
   63. As a result of the actions of Leon Hendrickson, Stanley Hendrickson and David Hendrickson, Leon Hendrickson forfeited $742,555 to the United States which represented the funds illegally derived by Silver Towne, identified in counts 1 through 8 of the March 24, 1993, indictment. (FDIC Ex. 12).
   64. During the pending federal criminal investigation, Stanley Hendrickson was asked to return to the Randolph County Bank as the President, since its President, Richard Peterson, was retiring. (Tr. 438).
   65. During his interview process, Stanley Hendrickson fully disclosed to the Board of Directors facts surrounding the search warrant and the ongoing federal investigation, along with the possibility that he, his brother and his nephew may be indicted. Stanley Hendrickson answered all questions from the Board about this situation (Tr. 350), and advised the Board that he did not want to do anything to hurt the bank. (Tr. 350 and 478).
   66. The Randolph County Bank Board of Directors spent several months interviewing numerous candidates for the position, and ultimately decided upon Stanley Hendrickson as its next President. (Tr. 314 and 348).
   67. Numerous bank customers and residents of Randolph County, Winchester, Indiana, submitted letters in support of Stanley Hendrickson prior to his sentencing to Chief United States Judge Sarah Evans Barker (Respondent Stanley Hendrickson's Exhibit L and Tr. 482–483).
   68. On July 13, 1993, Stanley Hendrickson was sentenced following his guilty plea. Chief Judge Barker, a former United States Attorney made numerous statements on the record in open court, including the following:

A. This Court is absolutely clear in its conviction that the offense had nothing to do with your job responsibilities as President of the bank. This was a completely separate matter. (Page 2 of Respondent {{9-30-96 p.A-2794}}Stanley Hendrickson's Exhibit K) (Tr. 480).
B. There are too many governmental regulations out there for you to have been in the business of banking as long as you have been, not to have caught you if your practices were slipshod or devious or even criminal as has been the case here with this failure to file the form with the bank. (Tr. 481).
C. In addition, I accept Mr. Warden (Assistant United States Attorney's) characterization, as well as Mr. Pylitt, that your involvement is clearly most minimal. In fact, I would say almost de minimis.
D. But does seem to me that because this crime has not been—this particular statute has not been regarded as a crime of dishonesty—I guess that is the word instead of deceit—(Tr. 482).
E. I have reason to believe that you have learned from this hard experience one of life's hard lessons. But you don't need to keep punishing yourself forever, and I think you should stay there where your family is in the community that supports you and obviously loves you, and turn this page in the sad chapter of not only the life of the Hendrickson family, but in that community. (pg. 6—Exhibit K).

   1. David J. Hendrickson is hereby, without prior written approval of the FDIC and the appropriate Federal financial institutions regulatory agency, as that term is defined in section 8(e)(7)(D) of the Act, 12 U.S.C. § 1818(e)(7)(D), prohibited from:

(a) participating in any manner in the conduct of the affairs of any financial institution or organization enumerated in section 8(e)(7)(A) of the Act, 12 U.S.C. § 1818(e)(7)(A);
(b) soliciting, procuring, transferring, attempting to transfer, voting, or attempting to vote any proxy, consent or authorization with respect to any voting rights in any financial institution enumerated in section 8(e)(7)(A) of the Act, 12 U.S.C. § 1818(e)(7)(A);
(c) violating any voting agreement previously approved by the appropriate Federal banking agency; or
(d) voting for a director, or serving or acting as an institution-affiliated party.