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FDIC Enforcement Decisions and Orders |
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Citing circumstances particular to this case and specifically stating that the decision has no precedential value, the FDIC Board adopts ALJ's recommendation and finds in favor of the respondents. It dismisses action seeking restitution of executives' severance benefits, paid pursuant to valid employment contracts predating bank's insolvency, when the bank closed.
[.1] OfficersCompensation"Golden Parachute"
In the Matter of
This matter is before the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") following the issuance on September 17, 1991, of a Notice of Charges and of Hearing ("Notice") pursuant to section 8(b) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b). The Notice charged that Respondents Ernest P. Pettinari and James R. Kearnan ("Respondents")1individually, and as trustees and/or officers, and institution-affiliated parties, engaged in unsafe and unsound banking practices in conducting the business of the Bank and breached their fiduciary duties to the Bank which resulted in Respondents being unjustly enriched. The Notice sought restitution of $620,000 allegedly improperly obtained by Respondents.
The following facts are agreed upon by the parties and are adopted by the Board:
[.1] Two previous cases, In the Matter of Harold A. Hoffman, 2 FDIC Enforcement Decisions, ¶5140 (1989),4and In the Matter of Richard A. Palmer, et al., 2 FDIC Enforcement Decisions, ¶5169 (1991), make it clear that, once management is on notice that the regulators consider an institution to be insolvent, "they must act to preserve assets for the protection of the depositor and other creditors, rather than expend assets for their own benefit, . . ." In the Matter of Harold A. Hoffman, at A - 1494; Palmer at A - 1810. The Board reaffirms its holdings in these cases and they ordinarily should be recognized as controlling. Nonetheless, the instant case involves a number of unique facts and circumstances which, with respect to these Respondents in these specific circumstances, cause the Board to exercise its discretion to dismiss the Notice.
Based upon its thorough review of the record in this proceeding, the Board con-
The Board of the FDIC has considered the entire record in this proceeding, including the ALJ's Recommended Decision and Order and Exceptions to the Recommended Decision filed by FDIC Enforcement Counsel, and has concluded that in the exercise of its discretion Respondents shall not be held liable for restitution.
/s/ Hoyle L. Robinson
In the Matter of
III. Discussion of Law
12 U.S.C. §1818(b)(6) provides in pertinent part that the authority to issue a cease and desist order requiring affirmative action to correct conditions resulting from violations or practices, includes the authority to require an institution or its affiliated party to "make restitution or provide indemnification, or guarantee against loss, ifsuch depository institution or such party was unjustly enriched in connection with such violation [of law] or [unsafe or unsound] practice."
Id. at A-1494.
/s/ Arthur L. Shipe
PROPOSED ORDER
1. The establishment of the Escrow Agreements by the bank's Board of Trustees on April 11, 1990, was neither a violation of applicable law, nor an unsafe or unsound banking practice within the meaning of the Federal Deposit Insurance Act, 12 U.S.C. §1811 et. seq.
/s/ Board of Directors |
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Last Updated 6/6/2003 | legal@fdic.gov |
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