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FDIC Enforcement Decisions and Orders |
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Bank directors assessed civil money penalties for extending credit in the form of a loan participation in an amount exceeding the lending limit, without adequate documentation, and without proper collateral.
[.1] DirectorsDuties and ResponsibilitiesInquiry into Credit Terms
[.2] Civil Money PenaltiesFDIC Authority
[.3] Civil Money PenaltiesAmountStatutory Standard
[.4] DirectorsDuties and ResponsibilitiesStandard of Care
In the Matter of * * * , individually and
[.1] As directors, Respondents had a duty to inquire as to the terms of the loan participation and the contents of the loan agreement. They were also remiss for failing to take steps to correct the violations until six months after being advised thereof by FDIC examiners.
FINDINGS OF FACT AND
Accordingly, the Board of Directors adopts all the findings of fact and conclusions of law of the Administrative Law Judge, and the bases therefor, as set forth in his Recommended Decision, which are hereby incorporated by reference as part of this decision.
ORDER
The Board also adopts in full the proposed order of the Administrative Law Judge as contained in his Recommended Decision, which is incorporated herein by reference, as its Final Order. This Order shall become effective at the expiration of 30 days after the service of the Order upon the Respondents.
/s/ Hoyle L. Robinson
FDIC-83-21k-C
Burroughs, Judge: The Federal Deposit Insurance Corporation ("FDIC") seeks monetary penalties against certain directors of the * * *, * * * ("* * *"), * * * , pursuant to section 18(j)(3)(A) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1828(j)(3)(A). The action results from a Report of Examination of Citizens at the close of business on May 24, 1982, wherein it was determined that * * * participation in a loan of $2,100,000 made by the * * * , was in violation of sections 22(h) and 23A of the Federal Reserve Act, as amended (12 U.S.C. §§ 375b and 371c), and Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 215), promulgated pursuant to section 22(h) of the Federal Reserve Act. The loan was made by the * * * to * * * for the benefit of * * * ("* * *"), an affiliate of * * *.
[.2,.3] Section 18(j)(3)(A) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(j)(3)(A)) empowers the FDIC to impose civil penalties against any person participating in the conduct of the affairs of an insured nonmember bank who violates any provision of section 23A or 22(h) of the Federal Reserve Act or any lawful regulation, such as Regulation O, promulgated
{{4-1-90 p.A-149}}pursuant to such authority.2 Certain factors must be considered in determining an appropriate penalty. These factors specifically include the size of the financial resources, good faith of the insured bank or person charged, the gravity of the violation and the history of previous violations.3
[.4] Directors of a bank have a fiduciary relationship to the bank and its stockholders. They should exercise the utmost good faith in the discharge of their duties and give the bank the benefit of their best judgment. They must exercise ordinary care and prudence in the administration of the bank's affairs and will not be absolved from their responsibility because of want of knowledge of wrongdoing resulting from gross inattention to their duties. Briggs v. Spaulding, 141 U.S. 132, 165166 (1891); Lane v. Chouning, 610 F.2d 1385 (8th Cir. 1979).
FINDINGS OF FACT
1. * * * , is a corporation existing and doing business under the laws of * * * . Its principal place of business is located in * * * . At all times relevant to this proceeding, * * * was an insured State nonmember bank (Admitted, Notice and Answer).
CONCLUSIONS OF LAW
1. The $500,000 extension of credit to * * * Company was made in violation of section 23A of the Federal Reserve Act, prior to amendment, 12 U.S.C. § 371c (1976), in that it was not secured by the kind and amount of collateral required to be provided.
PROPOSED ORDER
Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the following Order be entered by the Board: |
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Last Updated 6/6/2003 | legal@fdic.gov |
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