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[¶5238] In the Matter of Stanley R. Hendrickson, The Randolph County Bank, Winchester, Ind., Docket Nos. FDIC-94-283 and FDIC-94-293 (9-6-96)
FDIC denies request for stay of removal order pending review of the order by federal appellate court. (This decision was affirmed by the United States Court of Appeals for the Seventh Circuit, 113 F.3d 98.)
[.1] Stay—Appeal—Stay Pending
Grant of a stay is an extraordinary action committed to the discretion of the FDIC.
[.2] Stay—Requirements
Petitions for a stay pending judicial review must satisfy four criteria to be granted: (1) a likelihood that the petitioner will prevail on the merits, (2) that the petitioner will suffer irreparable injury in the absence of a stay, (3) that other interested persons will suffer no harm if a stay is granted, and (4) that a stay will not harm the public interest.
In the Matter of
STANLEY R. HENDRICKSON, individually, and as an
institution-affiliated party of
THE RANDOLPH COUNTY BANK
WINCHESTER, INDIANA
(Insured State Nonmember Bank)
DECISION AND ORDER DENYING
REQUEST FOR STAY
FDIC-94-28e
FDIC-94-29e
BACKGROUND
On July 16, 1996, the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC"), pursuant to 12 U.S.C. § 1818(e), issued a Decision and Order to Remove and to Prohibit From Further Participation (the "Order") removing Stanley R. Hendrickson ("Respondent") from his position as president of the Randolph County Bank, Winchester, Indiana (the "Bank"), and prohibiting his further participation in the affairs of federally insured financial institutions.1The Board's decision arose out of
1 The Order was also directed against David J. Hendrickson, Respondent's nephew, who was an
(Continued)
{{10-31-99 p.A-2798}}Respondent's 1993 criminal conviction based on a guilty plea, for violation of 26 U.S.C. § 7203 and his participation in the cover-up of an illegal money-laundering scheme. Respondent violated the law by willfully failing to file a return (Form 8300 for reporting cash transaction of greater than $10,000) with the Internal Revenue Service as required by 26 U.S.C. § 6050I on behalf of a coin and precious metals business, Silver Towne, of which he was controller. He knowingly falsified documents submitted to the Internal Revenue Service and contributed to the loss suffered by Silver Towne.
On August 9, 1996, Respondent sent the Board an Emergency Request for Stay Pending Final Decision on Petition for Review (the "Stay Request"), asking the Board to stay the Order as it applies to Respondent pending a final decision on a petition for review of the Order to the U.S. Court of Appeals for the Seventh Circuit.2
[.1] Section 8(e)(4) of the Federal Deposit Insurance Act (the "FDI Act") provides that a removal and prohibition order issued by the Board "shall become effective at the expiration of thirty days after service upon ... such party" and "shall remain effective and enforceable except to such extent as it is stayed, modified, terminated, or set aside by action of the agency or a reviewing court." 12 U.S.C. § 1818(e)(4). Section 8(h)(3) of the FDI Act, 12 U.S.C. § 1818(h)(3), specifically provides that the commencement of proceedings for judicial review shall not, unless specifically ordered by the court, operate as a stay of any order issued by the appropriate federal banking agency. Thus, the grant of a stay is an extraordinary action committed to the discretion of the FDIC. See 12 C.F.R. § 308.41.
[.2] The Board had previously held that petitions for a stay pending judicial review must satisfy four criteria to be granted: (1) a likelihood that the petitioner will prevail on the merits of the appeal; (2) that the petitioner will suffer irreparable injury in the absence of a stay; (3) that other interested persons will suffer no harm if a stay is granted; and (4) that a stay will not harm the public interest. See, e.g., In the Matter of Ronald J. Grubb, Bank of Hydro, Hydro, Oklahoma, FDIC-88-282k, FDIC-89-111e, 1992 FDIC Enf. Dec. LEXIS 354 *3(1992).
Respondent's Stay Request fails to make any showing that the Board's Order is wrong on the merits, and, that, therefore, Respondent is likely to prevail. This is not surprising since the elements of 12 U.S.C. § 1818 (e)(1) are easily satisfied by the undisputed facts in the record. For purposes of this case, the standard for section 8(e)(1), set forth in footnote 1 of the Board's Order, contains three elements of proof: (1) the violation of "any law or regulation," (2) probable loss or damage to the business institution, and (3) the violation involved "personal dishonesty" or demonstrated a willful or continuing disregard for the safety and soundness" of the institution that is a victim of the violation. 12 U.S.C. § 1818(e)(1).
Both the Administrative Law Judge ("ALJ") and the Board concluded that the evidence satisfied the first and third prongs of the test. Order at 7 (quoting ALJ), 13 (finding Respondent "engaged in premeditated dishonesty"). The Board also noted the ALJ's finding that the forfeiture paid by the sole proprietor of the coin dealership caused a loss to that entity. Order at 7. In the Board's view, since Respondent's "participation in the [cover-up of the money laundering scheme] directly contributed to [the loss]", the second prong was also satisfied. In short, there is no likelihood of reversal of the Board's conclusion that the evidence met the test of section 8(e)(1).
Respondent has also failed to address the issue of irreparable harm. However, there are only two arguable sources of harm to Respondent, nether of which justifies a stay. First, although there is some potential harm to his reputation from the removal, no such harm could possibly exceed the harm from his criminal conviction. Second, the other possible harm, economic loss to him from loss of his position, is not a sufficient basis for granting a stay. See, e.g., In the Matter of Ronald J. Grubb, Bank of Hydro, Hydro, Oklahoma, FDIC-88-282k, FDIC-89-111e, 1992 FDIC Enf. Dec. LEXIS 354 *9, and cases cited therein. Therefore, Respondent's request also fails to satisfy this prong of the test.
1 Continued institution-affiliated party of Peoples Loan & Trust Bank, Winchester, Indiana. David Hendrickson has not, however, requested a stay of the Order as it applies to him, and is accordingly not discussed herein.
2 The Stay Request does not specifically allege that a petition for review of the Order has been filed, and it is therefore unclear whether a petition is pending at this time. Respondent may file a petition for review within 30 days after service of the Order. 12 U.S.C. § 1818(h)(2).
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Respondent has addressed the third and fourth prongs: harm to other parties and the public interest. However, in the absence of any showing on the first two prongs, Respondent cannot prevail on the request for a stay no matter how significant the other equities.
Nonetheless, Respondent does not satisfy these prongs either. His argument relies in large part on the ALJ's comments that there was little risk that he would repeat his misconduct, that he has the support of the Bank's directors, officers, shareholders, and depositors and the fact that he was not subject to removal proceedings by the FDIC until four years after the conduct at issue and was not subject to an emergency suspension under 12 U.S.C. § 1818(g). Stay Request at 2. In Respondent's view, his immediate removal serves no interest. Id.
The Board's Order already responds at least in part to these contentions. The Board addressed the issued of whether, as a discretionary matter, it should fashion a remedy other than complete removal and prohibition. The Board rejected this course of action, finding that Respondent engaged in "pre-meditated dishonesty." Order at 13. Moreover, it observed that
the misconduct at issue — falsification of the records of Silver Towne to hide illegal actions and misrepresentation to the IRS agents conducting the compliance sweep — has a direct correlation to the bank examination process and a bank examiner's ability to rely upon the records of The Randolph County Bank or [Respondent's] statements.
Respondent...actively participated in the cover-up of criminal activity. Notwithstanding his community support, such conduct relates directly to his character and integrity and thus, has direct implications for his service as president of an insured financial institution.
Id. The Board's finding that he represented a continuing risk is supported by the uncontested evidence in the record that he engaged in dishonest conduct that, if repeated, could impede the agency's ability to supervise the Bank in the most fundamental way. Such a risk cannot be tolerated.
In addition, the FDIC's decision to bring removal proceedings occurred less than a year after the Respondent's conviction and only slightly more than a year after his indictment. The ALJ made no finding that the FDIC had notice of the misconduct prior to the indictment. Thus, the timing of the removal proceedings does not indicate any lack of urgency.
Finally, the fact that the FDIC did not suspend or remove Respondent pursuant to 12 U.S.C. § 1818(e)(3) or (g) is not probative of urgency. Following Respondent's argument to its logical conclusion, no one would deserve removal under 12 U.S.C. § 1818(e)(1) unless the FDIC first imposed a temporary removal order under 12 U.S.C. § 1818(e)(3). This obviously is not the statutory scheme and would generally be considered oppressive agency action. It is certainly not what Respondent would have preferred to have happen. The ALJ made no finding concerning the reason behind the FDIC's decision not to seek an immediate suspension, but it was certainly fair to Respondent whose conviction resulted from a plea of guilty rather than a full-blown trial and resulted in a light sentence. Order at 5–6. The Board will not penalize the public interest and the FDIC for such prudence and fairness.
In sum, a thorough review of Respondent's submission reveals no factual or legal basis for granting a stay pending appeal. Accordingly, it is hereby ORDERED and DECREED that the Stay Request is DENIED.
Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.
Dated at Washington, D.C. this 6th day of September, 1996.
