The purpose of reviewing an application to modify or terminate an order
of prohibition is not to re-litigate the merits underlying a final
In the Matter of
RICHARD A. LAWSON,
individually and as an
institution-affiliated party of
FIRST MOUNTAIN BANK BIG BEAR LAKE, CALIFORNIA (Insured State Nonmember Bank)
DECISION AND ORDER
TO MODIFY OR TERMINATE
ORDER OF PROHIBITION
This application to terminate an existing order of prohibition
arises from the FDIC's issuance on December 8, 1999 of an order of
prohibition against Richard A. Lawson ("Applicant"), pursuant to
his consenting to the issuance of the order. At the time of the
underlying misconduct here, the Applicant was senior vice president and
loan department manager of First Mountain Bank, Big Bear Lake,
The order was based on the Applicant: (A) increasing the overdraft
protection line of credit for his personal checking account at the Bank
from $2,000 to $35,000 without approval or authorization by the Bank,
(B) misappropriating Bank funds to pay his personal expenses, and (C)
making false statements on his loan applications for additional credit
and overdraft protection at the Bank, by not accurately disclosing his
living expenses and other relevant facts.
Those actions occurred over an 11-month period from 1998 to 1999 and
caused the Bank to extend credit to the Applicant, which he knew or
should have known that he could not repay. He wrongfully increased his
overdraft protection at least 13 times and used the credit to cover
checks drawn on his account at the Bank, for personal expenses, and
without sufficient funds.
As a result of that misconduct, the Applicant realized an unlawful gain
totaling $51,708, and the Bank suffered a loss of $51,708. The
Applicant executed a promissory note, payable to the Bank, which was
secured by a third mortgage on a condominium, but has not yet made
payment on the note.
The Applicant served as senior vice president and loan department
manager of the Bank from April 13, 1998 until March 1, 1999, when he
left the bank, following discovery of his misconduct. Prior to working
in the Bank, the applicant served as a financial consultant for several
Approximately two-and-one-half years after the FDIC issued the order of
prohibition in December 1999, the Applicant filed an undated
application, which was forwarded to the FDIC San Francisco Regional
Office on August 15, 2002. The application requested the FDIC to
terminate the order of prohibition, under sections 8(e)(7)(B) and (j)
of the Federal Deposit Insurance Act ("Act"), 12 U.S.C.
§§1818(e)(7)(B) and (j).
The application stated that the Applicant wished to participate in an
unspecified capacity with an unnamed firm or company and that this
misconduct consisted mainly of documentation errors and
misunderstandings between the Applicant and other Bank employees.
On August 28, 2002, the FDIC San Francisco Regional Director wrote to
the Applicant, asking for additional information on certain items and
advising the Applicant that the application was incomplete since he had
presented no or inadequate evidence: (A) as to his fitness to
participate in the conduct of the affairs of an FDIC-insured
institution, (B) that his participation would not pose a risk to the
institution's safety and soundness, and (C) that his participation
would not erode public confidence in the institution or firm.
To assist the Applicant in meeting his burden of proof, the Regional
Director's August 2002 letter thus requested him to: (A)
provide information as to his activities since the issuance of the
order of prohibition that evidenced his rehabilitation, (B) identify
controls, audits and/or safeguards that would be in place at any firm
related to or part of an FDIC-insured depository institution that
employed him, (C) disclose whether he had made any prior request to
modify or terminate the order of prohibition, and (D) provide any other
information relevant to the FDIC's determining whether to terminate
the order of prohibition.
On January 10, 2003, the Regional Director received the Applicant's
reply, dated December 2002, which stated that the termination of the
order would allow him to "accept employment with a private sector
company that has made [him] an offer of employment pending [his]
release from [the] order." The Applicant, though, failed again to
identify the private firm and did not describe the nature of the duties
involved or the nature of the private firm's business. The
Applicant's December 2002 letter did note that he wanted to work in
the "private financial sector" but not in banking, without
addressing whether or not the private financial firm in question was
related to an FDIC-insured institution and whether his employment with
financial firm required that the order of prohibition be
modified or terminated.
In a letter to the Applicant dated March 31, 2003, the Regional
Director requested additional information, including evidence of
rehabilitation, and stated that the Applicant's December 2002 letter
failed to provide additional information on any of the items listed in
the Regional Director's August 2002 letter. The Regional Director also
advised the Applicant that his supplemental response was incomplete
since it failed to provide the information previously requested or
provide any of the information required under the Act that would
justify termination of the order of prohibition, and that the Regional
Office would recommend to the FDIC Director of the Division of
Supervision and Consumer Protection that the application be denied
unless the Applicant provided the requested information within 45 days,
which time-period expired on May 15, 2003. As of this date, the
Regional Office has not received any response from the Applicant.
[.1] In matters involving an application to modify or terminate orders of
prohibition, an applicant has the burden of establishing: (A) the
applicant's current fitness to participate in the banking industry,
(B) that the applicant's participation would not pose a risk to an
institution's safety and soundness, and (C) that the applicant's
participation would not erode public confidence in an institution.
In the Matter of Gerald P. Brickner, FDIC Enforcement
Decisions and Orders ¶ 16,172, pp. TC-371 at TC-373 (June 18, 1997). The
Applicant has failed to meet that burden and, as a result, the
application is denied for the following reasons.
[.2] As stated, the Applicant's written submissions to the Regional
Director failed to provide adequate information as to his
rehabilitation, the name of the financial firm that had offered him a
job, the nature of that position, the particular segment of the
financial industry in which the firm participated, and any internal
controls and limitations that the firm might place on his activities,
despite requests from the Regional Director that he provide that
information. See 12 C.F.R. §303.3(2003)("The FDIC may
require the applicant to submit additional information").
As a result, the FDIC is justified in denying this application. The
FDIC Board of Directors has made clear that the burden is on applicants
that seek modification or termination of orders of prohibition and that
applicants are to present a complete record. In the Matter of
Frederick M. Pfeiffer, FDIC Enforcement Decisions and Orders,
¶ 5163A, p. A-1656 at A-1656.2 (Feb. 28, 1991) ("the Board finds
that Mr. Pfeiffer has failed to present any sufficient evidence or
persuasive argument warranting FDIC approval of his return to
banking"). See also In the Matter of ***Bank***, FDIC
Enforcement Decisions and Orders, ¶ 5117, p. A-1303 at A-1304 (Aug.
9, 1988)("When an individual is making application to obtain Board
or Regional Office approval for a particular action, it is incumbent
upon that applicant to provide a complete record to the Board or the
Regional Office in order to obtain that approval" and rejecting
argument that "the Board [had a duty] to request additional
information from the applicant to help it in rendering its
An applicant seeking modification or termination of an order of
prohibition bears a "strong burden" of proof as to his or her
current fitness to serve in banking, since termination of an order
would allow an applicant to return to banking, despite any claim by an
applicant to the contrary when submitting an application to the FDIC.
That burden is consistent with the fact that "banking [involves]
the highest standards of fiduciary duty" involving the life savings
of others. In the Matter of Douglas A. Winter, FDIC
Enforcement Decisions & Orders ¶ 16,180, p. TC-379 at TC-381 & TC-382
(Aug. 20, 1997). See also In the Matter of Stephen F.
Redman, FDIC Enforcement Decisions & Orders ¶ 5257, p. A-3081 at
A-3085 & A-3086 (June 25, 1999) ("Respondent must demonstrate
complete rehabilitation so that the FDIC will not need to rely on
changed conditions of employment or changed location of employment as
the sole bulwark against a repetition of misconduct").
The focus in proceedings such as this is on an applicant's
rehabilitation or current fitness to participate in an FDIC-insured
institution and the effect that such participation would likely have on
an institution and the public confidence in the institution.
[.3] The purpose of reviewing an application to modify or terminate an order
of prohibition is not to re-litigate the merits underlying a
final litigated or consent order (as
the Applicant might have attempted
to in referring to his actions as a documentation error and as a
misunderstanding with other employees at the Bank). Once an order is
final and non-appealable, the matter is res judicata for
purposes of taking action on applications to modify or terminate the
order. See Greenberg v. Board of Governors of the Federal Reserve
System, 968 F.2d 164, 168 (2d Cir. 1992) ("res judicata applies
to judgments by courts and by administrative agencies acting in an
adjudicative capacity"). See also Henry v. OTS, 43 F.3d
507, 512-3 (10th Cir. 1994) (no distinction between litigated and
consent orders under 12 U.S.C. §1818(i)(1)); Amal. Sugar Co.,
LLC v. NL Inds., Inc., 825 F.2d 634, 639 (2nd Cir. 1987)
("The general rule is that a final consent decree is entitled to res
judicata effect. . . . This is so because the entry of a consent
judgment is an exercise of judicial power [Supreme Court cite
omitted] that is entitled to appropriate respect and because of the
policy favoring finality of judgments"), cert. den., 484
U.S. 992 (1987).
In sum, the Regional Director requested the Applicant on two separate
occasions to provide evidence of his rehabilitation. The Applicant
failed to do so. Thus, the application should be denied.
DECISION AND ORDER
Upon review of the entire record, the FDIC finds that the
Applicant has failed to meet his burden for obtaining consent from the
FDIC to modify or terminate the order of termination.
Accordingly, the Application submitted by Richard A. Lawson, and as
supplemented by letter received by the Regional Office on or about
January 10, 2003, is hereby DENIED.
Pursuant to delegated authority.
Dated at Washington. D.C. this 8th day of September, 2003.