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FDIC Enforcement Decisions and Orders |
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A bank director consented to removal from office and prohibition from further participation as a director and participant in the conduct of the bank's affairs. The director was responsible for extensions of credit representing 74.15% of total adversely classified loans, which is an unsafe or unsound banking practice.
[.1] Bank ExaminationPurpose
[.2] LoansClassificationLoss
[.3] LoansClassificationSubstandard
[.4] LoansClassificationDoubtful
[.5] AssetsTransfer of
[.6] Lending and Collection Policy and ProceduresBorrower Ability to Repay
[.7] DirectorsDuties and ResponsibilitiesCorrection of Known Problems
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[.9] Prohibition, Removal, or SuspensionDisregard for Safety and Soundness
[.10] DirectorsDuties and ResponsibilitiesInforming Directors of Risks Disclosure
[.11] FDICAuthority to Examine Banks
[.12] Prohibition, Removal, or SuspensionFDIC Authority to Order
[.13] Administrative ProceedingsPurpose
[.14] Unsafe or Unsound Banking PracticeStatutory Standard
[.15] Prohibition, Removal, or SuspensionDisregard for Safety and Soundness
[.16] CAMEL Rating"5"
[.17] DirectorsDuties and ResponsibilitiesGenerally
[.18] Cease and Desist OrdersCessation of Violation
Subject to the acceptance of this STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER OF PROHIBITION FROM FURTHER PARTICIPATION ("CONSENT AGREEMENT") by the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC"), it is hereby stipulated and agreed by and between a representative of the Legal Division of the FDIC and * * * ("Respondent") as follows:
FEDERAL DEPOSIT INSURANCE
ORDER OF PROHIBITION FROM
FDIC-85-215e
On September 9, 1985, the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") issued to * * * ("Respondent") an AMENDED NOTICE OF INTENTION TO REMOVE FROM OFFICE AND TO PROHIBIT FROM FURTHER PARTICIPATION ("NOTICE") pursuant to the provisions of Section 8(e) (1) and (2) of the Federal Deposit Insurance Act ("Act") (12 U.S.C. 1818(e) (1) and (2)).
ORDER OF PROHIBITION FROM FURTHER PARTICIPATION
IT IS ORDERED that:
RECOMMENDED DECISION AND
FDIC-85-215e
Decided March 19, 1986
I. SUMMARY OF PROCEEDINGS
On August 5, 1985, the Board of Directors of the Federal Deposit Insurance Corporation ("FDIC" or "Proponent") issued a Notice of Intention to Remove From Office and to Prohibit From Further Participation ("Notice") against * * * ("Respondent"), individually and as a director and participant in the conduct of the affairs of * * * Bank, * * * ("* * * Bank").
II. FINDINGS OF FACT
A. General Findings
1. * * * Bank, a corporation existing and doing business under the laws of the State
[.1] 10. The general purpose of a bank examination is to evaluate and rate a bank's capital adequacy, asset quality, management, earnings, and liquidity ("CAMEL"). The Uniform Financial Institutions Rating System reflects, in a comprehensive and uniform fashion, an institution's financial condition, compliance with laws and regulations and overall operating soundness. The CAMEL rating is based upon a scale of one through five in ascending order of supervisory concern. A rating of one (1) represents the highest rating and the lowest level of supervisory concern, whereas a five (5) rating represents the lowest, most critically deficient level of performance and therefore the highest degree of supervisory concern. (Tr. at 34; FDIC Ex. 10).
[.2.4] 11. In the course of an examination of a bank, examiners review and classify loans or other assets of the bank and assign loan classifications of "loss," "substandard," and "doubtful." Loans classified
[.5] 29. The shifting of assets usually involves selling loans from one bank to another or refinancing loans from one bank to another to keep these monies moving to avoid having to take losses or to avoid the detection of those assets by examiners or simply to enhance the financial statement or condition of the bank. The practice, although not illegal, is deemed an unsafe and unsound banking practice. (Tr. 298299).
B. Findings Concerning The * * * Loans
30. * * * is a corporation in the nursing home, motel/hotel, and insurance business and is owned and controlled by * * *. (Tr. at 43, 559).
[.6] 54. Respondent engaged or participated in unsafe or unsound banking practices by ratifying * * * Bank's extension of credit to * * * , a credit that was not adequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged. In fact, the pledged collateral was deemed "worthless". (FDIC Ex. 2; Tr. at 4547).
C. Findings Concerning The * * * Loan
56. On May 3, 1983, Respondent engaged or participated in unsafe or unsound banking practices by causing and/or allowing * * * Bank to extend unsecured credit to * * * Corporation in the amount of $100,000. (FDIC Ex. 15).
D. Findings Concerning The * * * Loan
63. At all times pertinent to these loan transactions * * * served as a * * * Bank attorney and as an attorney for * * * He also had an office at * * * headquarters. (Tr. at 55, 157, 221, 444, 626, 632, 708709, 778,815).
E. Findings Concerning The * * * Loan
69. At all times relevant to the instant transaction, Mr. * * * was a vice president of * * *. (Tr. at 764).
F. Findings Concerning The * * * Loan
72. This debt originated on December 14, 1982 at $200,000 and as of the March 22, 1985 examination the debt had not been reduced. (FDIC Ex. 2; Tr. at 57).
G. Findings Concerning The * * * Loan
78. This is a participation purchased from * * * Bank * * * , a * * * institution, and the debt was restructured on February 12, 1985 under the name of * * * , a company formed to assume the debt of * * * , a bankrupt company. (FDIC Ex. 2; Tr. at 7172; 522523).
H. Findings Concerning The * * * Loan
85. Mr. * * * , at all times relevant to these proceedings, was an * * * officer. The loan proceeds were used to purchase * * * stock. (Tr. at 6061, 466, 712, 759).
I. Findings Concerning The * * * Loan
89. On November 15, 1984 the Bank purchased a note from * * * acting as a trustee for himself, * * * , and * * * for $375,000. Approximately $1,000 in attorney's fees was added later, bringing the loan total to $376,000. (FDIC Ex. 2).
J. Findings Concerning The * * * Loan
95. On July 11, 1983 * * * Bank purchased a $215,000 interest in a $519,421 loan participation at * * * Bank * * * , a * * *-related interest. (FDIC Ex. 2). (* * * Ex. 42).
K. Findings Concerning The * * * Loan
100. On September 13, 1983, * * * Bank purchased a $400,000 note of * * * from * * * Bank in * * * (FDIC Ex. 2).
L. Findings Concerning The * * * Loan
104. On March 24, 1983, * * * Bank purchased a loan participation from * * * Bank, * * * for $125,000. (FDIC Ex. 2).
M. Findings Concerning The * * * Loan
107. This loan originated as a $120,000 loan but had been reduced to $60,000. The original note was secured by a mortgage on a house, but that collateral was released and the $60,000 remaining at the time of examination was unsecured. (FDIC Ex. 2; Tr. at 66).
N. Findings Concerning The * * *
112. $106,562 represented the remaining balance of a $400,000 participation purchased from the * * * Bank * * * on December 29, 1983. (FDIC Ex. 2). The purchase was taken because of * * * faith in * * * Bank. (Tr. 484). As of December 1984 that faith may have been reinforced by financial statements of * * * and * * * the guarantor of the loan. (* * * Ex. 15).
O. Findings Concerning The * * * Loan
117. This loan is a $400,000 participation purchased from the lead Bank in * * * chain, * * * Bank * * *. (FDIC Ex. 2).
P. Findings Concerning The * * * Loan
125. This loan for $120,000 was made by * * * Bank on October 11, 1983. (FDIC Ex. 2).
Q. Findings Concerning The * * * Loan
128. * * * is a colleague of Respondent and his uncle was * * * partner in * * * (Tr. at 495, 670).
Findings Re the * * * Payoffs
133. Subsequent to the March 22, 1985 examination * * * Bank * * * accepted 100 percent of * * * Bank's outstanding stock in full satisfaction of a $2.5 million stock loan to former * * * Bank chairman * * *. * * * a long time associate of * * * , defaulted on his stock loan and * * * Bank took the * * * stock in lieu of foreclosure proceedings. (RPF 245).
III. CONCLUSIONS OF LAW
1. The FDIC has jurisdiction over the Bank, the Respondent and the subject matter of this proceeding and has authority to issue a Removal Order against Respondent pursuant to sections 8(e) (1) (2) and (5) of the Act.
[.7] 2. A director who approves loans which individually or in the aggregate exceed a bank's legal lending limit and are in violation of state law, and who fails upon acquiring knowledge of such violation, to impose controls to assure that such practice is halted, has aided and abetted and/or participated in the violation and committed an unsafe and unsound banking practice.
[.8] 3. A director, who has knowledge of the occurrence of a violation of law and unsafe and unsound banking practices, commits a breach of his/her fiduciary duty by failing to impose controls to assure that the violation is corrected and the practices are halted.
[.9] 4. A director, who fails to impose controls to assure that a known violation of law and unsafe and unsound practices are halted has evidenced a continuing disregard for the safety and soundness of the bank and has further evidenced his/her unfitness to participate in the conduct of the affairs of any FDIC insured bank.
[.10] 5. A director, who is privy to information which shows the lack of creditworthiness of a potential borrower, owes a fiduciary duty to disclose that information to the bank.
Discussion and Conclusions
A. Statutory Authority of FDIC
[.11] The statutory scheme established by the Congress in the Federal Deposit Insurance Act, as amended, is a key part of a comprehensive system of federal insurance regulation of banks. 12 U.S.C. § 1811-1831d. Congress established the FDIC in 1933 in order to restore confidence in the banking system by establishing a system for the banks "under Government supervision and regulation * * * mutually [to] guarantee the deposits of each other." H.R. Rep. No. 150, 73d Cong., 1st Sess. 5, 6 (1933). FDIC is authorized to examine any insured bank and regulate almost every aspect of its dealings. Among its other regulatory powers. FDIC is authorized to issue, pursuant to administrative proceedings, cease-and-desist orders, orders suspending or removing directors or officers, and orders prohibiting persons from participation in the conduct of the affairs of an insured bank when FDIC concludes such orders are necessary to prevent and remedy violations of law and unsafe or unsound banking practice. 12 U.S.C. § 1818; First National Bank of Scotia v. United States, 530 F.Supp. 162, 166 (D.D.C. 1982).
B. Removal Under Section 8(e) Of The Federal Deposit Insurance Act
[.12] In the case of a federally insured state nonmember bank, section 8(e) (1) of the FDI Act imparts to the FDIC the discretion to formulate a decision as to whether the circumstances warrant the initiation of a removal proceeding of a director or officer. (12 U.S.C. § 1818(e) (1)). This section of the statute sets forth three (3) acts, any one of which presents the requisite threshold for the commencement of an 8(e) (1) action. They are as follows:
[.13] Under the Act, administrative proceedings are initiated to "prevent irresponsible...individuals from looting or otherwise wrecking insured banks and savings and loan associations through improper activities." S. Rep. No. 1482, 89th Cong., 2d Sess. 3 (1966).
C. Respondent Engaged Or Participated In Unsafe Or Unsound Banking Practices
The acts or practices which are deemed to be unsafe or unsound practices within the meaning of section 8(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1818(e)) are not specified or otherwise identified in the Act; nor is the phrase "unsafe or unsound practice" defined in the statute.16 The phrase has, however, been in legislation applicable to FDIC for over fifty years. The precursor of the present section 8(a) of the Act (12 U.S.C. § 1818(a)), relating to the termination of insurance of an insured bank, referred to unsafe or unsound practices when enacted as part of the Banking Act of 1935 (Ch. 614, § 101(I), 49 Stat. 684, 690).
[.14] Like many other generic terms widely used in the law, such as "fraud," "negligence," "probable cause," or "good faith," the term "unsafe or unsound practices" has a central meaning which can and must be applied to constantly changing factual circumstances. Generally speaking, an "unsafe or unsound practice" embraces any action, or lack of action, which is contrary to generally accepted standards of prudent operation, the possible consequences of which, if continued, would be abnormal risk or loss of damage to an institution, its shareholders, or the agencies administering the insurance funds." (Emphasis added.)
[.15] Respondent's responsibility for 74.15 percent of * * * Bank's adversely classified loans vividly demonstrates his participation in unsafe and unsound banking practices. (Tr. at 78, 259, 320).
D. Respondent's Conduct Evidences A Continuing Disregard For the Safety And Soundness Of The Bank
[.16] The record indicates that the condition of * * * Bank deteriorated significantly during Respondent's tenure at the institution. As discussed previously, supra at 8, deterioration has occurred most noticeably in the Bank's loan portfolio. Furthermore, under the Uniform Financial Institutions Rating System the Bank went from a two (2) rating in 1982 to a three (3) rating in 1984 and in 1985 was assigned an overall five (5) rating and individual five (5) ratings for its capital, asset quality, management, earnings and liquidity (CAMEL). Banks in this lowest category have an extremely high, probability of failure.
E. Respondent's Conduct Seriously Prejudiced The Interests Of The Bank's Depositors And Has Resulted In Substantial Financial Loss To The Bank
The legislative history of section 8(e) does not define the term "seriously prejudice the interests of the depositors." Clearly, however, any action which, if continued, may ultimately cause loss to the Bank would fall within the meaning of that term. This interpretation is supported by the definition of unsafe or unsound banking practice as it is found in the legislative history of section 8(e). The Horne Memorandum, previously cited, defined unsafe or unsound banking practice as "...any action, or lack of action, which is contrary to generally accepted standards of prudent operation, the possible consequences of which, if continued, would be abnormal risk or loss or damage to an institution, its shareholders, or the agencies administering the insurance funds." FINANCIAL INSTITUTIONS SUPERVISORY AND INSURANCE ACT OF 1966: HEARINGS ON S. 3158 and S. 3695 Before the House Committee on Banking and Currency, 89th Cong. 2d Sess. 4950 (1966). Since the continuation of risk of loss flowing from any of these acts or failures to act may ultimately cause a bank to fail, a depositor's interest in such an institution would also be at risk.
F. Respondent Breached His Fiduciary Duty By Reason Of His Participation In Unsafe
{{4-1-90 p.A-952}}Or Unsound Banking Practices And Violation Of Law And Regulation
As a * * * Bank director, member of the board of directors, and member of its loan committee, Respondent owed a fiduciary duty to the Bank's depositors and shareholders not unlike that owed by officers and directors of a corporation to the company and its shareholders. Lane v. Chowning, 610 F.2d 1385, 1388 (8th Cir. 1980); State Banking Board v. Valley National Bank, 604 S.W.2d 415, 417 (Tex. Cir. App. 1980).
[.17] Fulfillment of Respondent's obligations to the Bank and its depositors and shareholders has been recognized as demanding particular scrutiny on the part of the Bank director to see that the public trust is kept intact. Gadd v. Pearson, 351 F. Supp. 895 (M.D. Fla. 1972). "Officers and directors of banking corporations generally owe a greater duty than other corporate officers and directors." Id. at 903. This duty imposes several obligations17 upon a bank director and requires a bank director to disclose conflicts of interest, to avoid intentional misconduct and seizure of corporate opportunity, to act primarily for the benefit of the corporation, to be fair in all dealings that involve the corporation, and to refrain from competing with the corporation. KAPLAN, Fiduciary Responsibility in the Management of the Corporation 31 BUS. LAW. 883 (1976). A bank director acting in his fiduciary capacity overseeing the funds of others may be said to be acting as a trustee, and said position necessitates "scrupulous good faith and candor". Black's Law Dictionary 753 (rev. 4th ed. 1972). A duty of loyalty pervades these responsibilities, and demands the absence of self-serving practices. Robert E. Barnett, RESPONSIBILITIES AND LIABILITIES OF BANK DIRECTORS § 112 (Federal Banking Law Reports No. 805, 1980).
G. The Authority Of FDIC To Issue An Order Of Removal Is Not Affected By A Showing That The Practices, Violations, Conditions, Or Other Statutory Grounds Upon Which The Action Was Initiated Have Been Discontinued Or Corrected
Plaintiff's repeated allegations with respect to alleged subsequent improvements are factually and legally irrelevant to this administrative proceeding. The charges advanced in the FDIC Amended Notice are predicated upon Respondent's activities and conduct as of the March 22, 1985 Report of Examination.
[.18] It is thus clear that sections 8(e)(1) and (2) encompass practices and violations which have previously occurred; the agency need not establish that there is an unsafe or unsound practice or violation occurring at the moment of issuance of a Notice of Charges, or at the Hearing or when the final Cease and Desist Order is issued by the FDIC. Furthermore, since the record made at the hearing must establish the unsafe or unsound practices and violations specified in the Notice of Charges, ipso facto the scope of the hearing is determined by the Notice, and evidence of subsequent events or occurrences or conditions is not at issue.
H. The Burden of Proof For The Issuance Of An Order Of Removal Requires Establishment Of The Elements Of Such Action By A Preponderance Of The Evidence.
Section 8(h) of the Act (12 U.S.C. § 1818(h)) requires that any hearing provided for under section 8 of the Act (except for hearings under section 8(g)(3)) "shall be conducted in accordance with the provisions of chapter 5 of title 5 of the United States Code." The applicable standard of proof is contained in Section 7(c) of the Administrative Procedure Act (5 U.S.C. § 556(d)), which provides:
I. The Testimony And Conclusions Of FDIC Witnesses Are Entitled To Weight
The following individuals were called as FDIC witnesses during the hearing: * * *, Examiner-in-Charge of the 1985 * * * State Bank examination, has sixteen years experience with the FDIC. (Tr. at 3233). He testified that during his tenure as an examiner he has participated in over 400 bank examinations and that he has served as EIC in approximately 125. (Tr. at 33). Mr. * * * was recognized as an expert. (Tr. at 81).
J. Respondent's Removal Is The Appropriate Remedy In This Case
Once it is found that a bank or an individual has engaged or is engaging in unsafe and unsound practices, or is violating or have violated a statute, rule or regulation, there must be an exercise of reasonable discretion in fashioning appropriate relief to halt the practices or violations, to prevent future abuses and to correct the effects of the practices or violations. First National Bank of Bellaire v. Comptroller of the Currency, 697 F.2d 674, 680 (5th Cir. 1983); del Junco v. Conover, 682 F.2d 1338, 1340 (9th Cir. 1982), cert. denied, 459 U.S. 1146 (1983); Groos, supra at 897. Given Respondent's conduct in the instant case his removal from * * * Bank and * * * is warranted. Also prior regulatory approval is warranted for any resumption of his banking activities.
V. CONCLUSION
For the reasons set forth above, and on the basis of the record in this proceeding, the FDIC has met its burden of proving the allegations contained in the Amended Notice by a preponderance of the evidence.22 The Administrative Law Judge recommends that the FDIC Board of Directors issue the proposed Order of Removal From Office and Prohibition From Further Participation attached as Appendix A.
APPENDIX A
ORDER OF PERMANENT REMOVAL
FDIC-85-215e
Having found and concluded that Respondent, * * * ("Respondent"), individually and in his capacity as director and participant in the conduct of the affairs of * * * Bank, * * *, ("* * * Bank"), has committed, engaged in, or participated in violations of law, unsafe or unsound practices, and/or breaches of his fiduciary duty with respect to * * * Bank; and that by such conduct or practice, Respondent has
APPENDIX B
FINDINGS RELATIVE TO
Respondent proposes 365 findings of fact and 11) findings of law. I reject all of them in favor of the findings set forth in the body of this decision. The vast majority of the proposed findings of respondent need not be discussed since the text of this decision is complete in itself. However, some redundance of discussion is warranted in the light of sheer volume of respondent's contentions. Accordingly, the following supplemental findings are drawn.
1. Findings Re Bank's Profitability
Based on the loans that were made during the time frame of 1983 and 1984, the Bank showed a loss of approximately $526,000 from January to September 1985. (FDIC Ex. 25). Furthermore, the Bank misstated its earnings on the Uniform Bank Performance Report ("Call Report") which it submitted to the FDIC. The Bank was told to amend its Call Report to accurately reflect its earnings. Furthermore, Respondent's Exhibit 49, including the Washington Office Addendum to the May 3, 1985 Rating Changes also indicated that the Bank's Report of Income appeared "grossly overstated." (Tr. at 507509, 598, 10/25/85 Tr. at 93; Re. Ex. 34, FDIC Ex. 26). The Bank's losses and incorrect submissions of information make Respondents claims of profit highly suspect.
2. Findings Re State and FDIC Examinations
Respondent was primarily responsible for the Bank's declining CAMEL rating. Contrary to his claim that he "took an ailing bank and turned it into a highly profitable operation: (Rs. Memo at 47), Respondent took a fundamentally sound 2-rated institution in 1982 and transformed it into a 5-rated institution in 1985. (FDIC Ex. 10)
3. Findings Re Personal Dishonesty
Under section 8(e) of the FDI Act it is not necessary that FDIC prove personal dishonesty as an element of the removal charges. Congress recognized that the standard allows "agencies the opportunity to move against individuals who may not be acting in a fraudulent manner but who are nonetheless acting in a manner which threatens
{{4-1-90 p.A-958}}the soundness of their institutions." H. Rep. No. 951383, 95th Cong. 2d Sess. (1978). The record in this case establishes that * * *, while not acting fraudulently or dishonestly, did act in a manner which threatened the soundness of * * * Bank.
4. Findings Re Procedure For Making Loans
Respondent's observation that "the loan committee periodically turned down loans referred to the bank by * * *" states too much. The testimony cited in support of that finding recounts only one occasion where Mr. * * * did not know a particular borrower and Mr. * * * did, and the Bank denied the loan.
5. Findings Re * * * Loan Portfolio
Respondent contends that economic conditions were the primary cause of the distressed condition of the Bank's loan portfolio, but Respondent was responsible for almost three-fourths of the adversely classified credits in the Bank and engaged in hazardous lending practices at the time the loans were made. (Tr. at 78; FDIC Exs. 2, 13). FDIC witnesses identified specific unsafe or unsound lending practices that were criticized for reasons unrelated to economic conditions, e.g. making loans to individuals known not to be creditworthy (Tr. at 79, 318320, 347348, 495, 525, 640, 670, 676, 695, 707, 759, 764, FDIC Exs. 22, 27, 3439), extending loans in the absence of necessary financial information on borrowers (Tr. at 464, 760, 761, 787788, FDIC Ex. 2) concentration of credit (Tr. at 48) and extensions of credits not adequately protected by current sound worth and paying capacity of borrowers (Tr. at 4547).
6. Findings Re FDIC Examination
Respondent overstates the significance of the Regional Director's recommendation regarding Respondent's removal. The FDIC Board of Directors considers a Regional Director's recommendation along with those of the Division of Bank Supervision ("DBS") and the Board of Review. In this case, the Board also was privy to the actual Report of the Examination prepared on March 22, 1985. Furthermore, as a matter of general practice, regional recommendations are not always followed in Washington. (10-25-85 Tr. at 91).
7. Findings Re State Visitation
Respondent acknowledged a 5 rating (which * * * Bank was accorded by FDIC at the March 1985 examination) indicates that the bank has "an extremely high immediate or near term probability of failure" (FDIC Ex. 10). As of the March 22, 1985 date of examination * * * Bank was on the brink of insolvency; its adjusted capital and reserves represented only 0.64% of the Bank's adjusted gross assets. (FDIC Ex. 2, 23, 28; Tr. at 80589; 10/25/85 Tr. at 26).
As a result of those findings there was a state visitation of * * * on September 10, 1985. That examination produced little additional information.
* * * Chief Examiner * * *'s testimony that between March 1985 and July 1985 the Bank's asset condition had improved was based exclusively on unverified bank generated information. (Tr. at 583, 597). The record also establishes that * * * did not disagree with FDIC's conclusion that * * * was on the "brink of insolvency" as of April 29, 1985.
Even if there had been subsequent improvements in the Bank's asset condition between March 1985 and July 1985 (RPF 48), those improvements are legally irrelevant to these removal proceedings. (FDIC's Brief at 4753). Moreover, although the Bank's adjusted capital ratio as of September 10, 1985 was 7.32%, the state still classified $2,418,000 or 246.73% of the Bank's total capital and reserves as substandard. (FDIC Ex. 25; Tr. at 599600). Assuming that 20% of the $2.4 million in substandard loans wound up as loss, * * * Bank's adjusted capital ratio would be 3.18% rather than 7.32% and that type of capital reduction would be unacceptable even in the eyes of the state of * * *. (Tr. at 600).
State examiner * * * who conducted the September 10, 1985 visitation of * * * Bank concluded that the Bank showed a net loss, year to date, of $526,000 and indicated that earnings for the near future appeared to be nonexistent. * * * Bank, as of September 10, 1985, was still considered to have major problems and was deemed to be a problem institution by the state. (FDIC Ex. 25).
8. Findings Concerning "Origination"
Except for the * * * direct loan, Respondent is designated in the FDIC's Report of Examination as the originating officer on all loan transactions at issue in these proceedings. (FDIC Exs. 2, 3). At the time of the
{{4-1-90 p.A-959}}examination Bank President * * * told EIC * * * that * * * had recommended these loans or had put the borrowers in contact with the Bank. (Tr. at 56, 106107, 391392, 544). Although at the hearing and again in his brief, Respondent has attempted to obfuscate this issue, he cannot absolve himself of his responsibility for the transactions at issue.
10. Findings Re Sufficiency of the Complaint
Although not statutorily required, the FDIC has established Respondent's participation in all three of the constituent parts of level one of section 8(e)(1). In the instant case FDIC has established that Respondent participated in a singular violation of state legal lending limit law, and that Respondent engaged in numerous unsafe and unsound banking practices, and that Respondent breached his fiduciary duty to * * * Bank.
11. Findings Re Improvement of the Bank's Loan Portfolio Subsequent to the Date of Examination.
The FDIC has established a prima facie case for Respondent's removal. Respondent's primary defense has been the alleged "paid in full" status of several of the loans at issue. (RPF 105, 113, 114, 116, 139, 167, 172, 174, 178, 194, 234, 240, 273; Rs. Memo at 28, 36, 46). The actual risk of loss to the Bank emanating from Respondent's actions, and the appropriateness of preventing Respondent from repeating his selfserving practices at this or another bank, should not turn on such sleight of hand.
12. Findings Re Failure to be Actively Involved in the Day to Day Affairs of the Bank
Respondent also made an elaborate attempt to absolve himself of blame for the hazardous lending practices charged in the FDIC Notice by claiming that he did not have an active role in the day to day management of * * * (RPF 1216), and that all of the loans at issue were approved by the * * * loan committee and/or board of directors (RPF 61, 63, 101, 125, 138, 149, 166, 186, 195, 200, 210, 222, 228, 238).
13. Findings Re Future Effect of Removal
The Respondent asserts that the relief sought is overbroad. However, the action taken does not foreclose Respondent from working in banking. The proposed order removes Respondent from two banks and requires an application for him to connect with other banks. It is incorrect to speculate that all such applications would be denied, especially given his relative youth and otherwise unblemished record in banking.
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