Banking Criminal
Practices in
Federal & State Actions
against
BANCO
POPULAR DE PUERTO RICO
First BanCorp, Santurce, Puerto Rico
Doral Financial Corporation,
San Juan, Puerto Rico
http://newyork.fbi.gov/dojpressrel/pressrel08/securitiesfraud030608.pdf
http://www.justice.gov/usao/nys/pressreleases/March08/levisindictmentpr.pdf
http://www.justice.gov/usao/nys/pressreleases/April10/levismarioverdictpr.pdf
R&G Financial
Corporation, Hato Rey, San Juan, Puerto Rico
U.S. Department of Justice
FOR IMMEDIATE RELEASE
WWW.USDOJ.GOV
CRM
(202) 514-2008
TDD (202) 514-1888
BANCO
POPULAR DE PUERTO RICO ENTERS INTO
DEFERRED
PROSECUTION AGREEMENT WITH U.S. DEPARTMENT OF JUSTICE
WASHINGTON,
D.C. – Assistant Attorney General Michael Chertoff of the Justice
Department's Criminal Division, U.S. Customs Commissioner Robert C. Bonner,
David Palmer, Chief, Criminal Investigation, Internal Revenue Service, James
Sloan, director of the Financial Crimes Enforcement Network (FinCEN), and
Jennifer J. Johnson, secretary for the Board of Governors of the Federal
Reserve System, announced today that Banco Popular de Puerto Rico will forfeit
$21.6 million to the United States as part of a deferred prosecution agreement
on charges of failing to report suspicious financial activity.
A
criminal information filed today at U.S. District Court in the District of
Puerto Rico charges Banco Popular with one count of failing to file Suspicious
Activity Reports (SARs) in violation of Title 31 USC 5318(g)(1) and 5322(a).
Banco Popular waived indictment, agreed to the filing of the information, and
accepted and acknowledged responsibility for its behavior in a factual
statement accompanying the information. The company will forfeit $21.6 million
to the United States to settle any and all civil claims held by the government.
In light of the bank's remedial actions to date and its willingness to
acknowledge responsibility for its actions, the government will recommend to
the court that any prosecution of the bank on the criminal charge be deferred
for 12 months, and eventually dismissed with prejudice if the bank fully
complies with its obligations. Concurrently, FinCEN has assessed a $20 million
civil money penalty for violations of the Bank Secrecy Act against Banco
Popular for its conduct, which will be deemed satisfied by the payment of the
$21.6 million forfeiture.
"Banks
are our first line of defense against money launderers, drug dealers and even
terrorists who would attempt to abuse our financial institutions," said
Assistant Attorney General Chertoff. "Banks that disregard their duty to
conduct adequate due diligence and report suspicious financial activities allow
themselves to be exploited for criminal purposes. Today's agreement recognizes
that Banco Popular has been forthright in accepting its responsibility."
The
charges and the deferred prosecution agreement filed today arose out of
transactions conducted by and through Banco Popular between June 1995 and June
2000. During this time, several unusual or suspicious transactions were
conducted in connection with certain accounts at Banco Popular. Although the
bank filed Suspicious Activity Reports (SARs) on these accounts, they were
untimely or, in some cases, inaccurate.
In one
series of transactions, Roberto Ferrario Pozzi deposited approximately $20
million in cash into a Banco Popular account from June 1995 to March 1998.
Deposits were made to the account by Ferrario and employees of Phone Home – a
phone card, long distance and money transmission service – often in paper bags
or gym bags filled with small-denomination bills. Despite the suspicious nature
of the deposits, the bank did not investigate and file timely and complete SARs
reporting the activity. These untimely filings, the absence of supplementary
SARs and the errors in the SARs that the bank did file hindered law
enforcement's ability to initiate investigations on these accounts in a timely
manner, resulting in the laundering of millions of dollars of drug proceeds
through these accounts. Ferrario was indicted in December 1998 for money
laundering in connection with certain deposits to Banco Popular and was
sentenced to 97 months imprisonment in 2002.
Under
the Bank Secrecy Act, banks are required to have comprehensive anti-money
laundering programs that enable them to identify and report suspicious
financial transactions to the U.S. Treasury Department's Financial Crimes
Enforcement Network. As part of their anti-money laundering programs, banks
must report suspicious activities through the filing of SARs. Since April 1,
1996, banks have been required to submit SARs to FinCEN in all instances in
which one or more transactions aggregate $5,000 or more, and the bank knows or
suspects the transaction involves, or is conducted to conceal, funds derived
from illegal activities or may be used to evade a law or a reporting
requirement. The SARs are a critical tool in law enforcement's efforts to
investigate and prosecute cases.
"The
lengthy U.S. Customs/IRS investigation into Banco Popular de Puerto Rico established
that millions of dollars worth of drug proceeds were laundered through this
bank over a period of several years," Customs Commissioner Bonner said.
"In some cases, gym bags full of cash were literally brought into the bank
for deposit by money launderers. Despite its legal obligation to report these
suspicious transactions to the government in a timely manner, Banco Popular, in
some cases, chose not to report these transactions until years after the fact –
and did so only after learning about the U.S. Customs/IRS investigation into
the bank."
David
Palmer, Chief, Criminial Investigation, IRS, stated: "The information
filed today should send a clear message that financial institutions who serve
as a conduit for criminal activity will be pursued. Money laundering is a
serious crime that affects not only those persons directly involved, but the
economy as a whole."
James
Sloan, director of FinCEN, noted that the BSA is designed to help prevent
criminals from using the financial system to perpetrate criminal activity and
to alert law enforcement when attempts are made to abuse the system.
"Most
banks and other financial institutions throughout the United States have
excellent programs in place to help ensure that they are not vulnerable to
illegal exploitation and their record of BSA compliance is extremely
good," Sloan said. "However, the American people have a right to
expect that when an institution violated the trust of its account holders and
its responsibility to preserve the integrity of its operations, it will face
public scrutiny and severe penalties."
Chertoff,
the head of the Criminal Division, praised the investigative efforts of the
Internal Revenue Service and the U.S. Customs Service, which spanned more than
four years. He also thanked the Board of Governors of the Federal Reserve
System for their support and assistance. The case was prosecuted by the
Criminal Division's Asset Forfeiture and Money Laundering Section – Chief John
Roth, Deputy Chief Michael Davitt, and trial attorneys Stephen May, Cynthia
Stone and Robert Boyer.
Approximately
two years ago, the city of San Juan, Puerto Rico, was designated as one of four
"High Intensity Financial Crimes Areas" nationwide. This designation resulted
in the formation of a multi-agency task force that investigates financial
crimes, mainly those dealing with SARs that are filed by financial institutions
in Puerto Rico and the U.S. Virgin Islands.
http://www.usdoj.gov/opa/pr/2003/January/03_crm_024.htm
Former Doral Senior Executive Convicted for Securities Fraud Scheme
That Caused $4 Billion Decline in Shareholder Value
NEW YORK, April 29 /PRNewswire-USNewswire/ -- Mario S. Levis, aka "Sammy Levis," was found guilty on securities and
wire fraud charges after a five-week jury trial before U.S. District Judge Thomas P. Griesa for
his role in a scheme to defraud investors and potential investors in the stock
of Puerto
Rico-based Doral Financial Corporation (Doral) that took place while he
was the Treasurer and Senior Executive Vice President of Doral, Preet Bharara,
the U.S. Attorney for the Southern District ofNew York,
announced today. The scheme, occurring between 2001 and 2005, involved misrepresentations that
According to the
superseding indictment and the evidence at trial:
Doral, with mortgage
banking operations in
During the same
time, Doral's stock price steadily increased from approximately $10 per share in early 2000 to almost $50 at the end of 2004. Also during this
time frame,
In its public
filings with the U.S. Securities and Exchange Commission (SEC), Doral
represented that the value of its IOs was based, in
part, on two "outside" and "independent" expert valuations
provided to Doral on a quarterly basis. According to Doral's filings with the
SEC and representations by
In fact, however,
In March 2005,
when an executive at Popular directly asked
Beginning in mid-January 2005,
when Doral announced an approximate $97.5 million write-down
of the stated value of its IOs attributed to rising
interest rates, and
U.S. Attorney Preet Bharara stated: "Senior
executives of publicly traded companies have to tell the investing public the
truth, even when it hurts. It's that simple. Today, a
U.S. Attorney Bharara praised the work of the FBI and thanked the SEC for
its assistance in the case.
This case was
brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which
Mr. Bharara serves as a Co-Chair of the Securities
and Commodities Fraud Working Group. President Obama
established the interagency Financial Fraud Enforcement Task Force to wage an
aggressive, coordinated, and proactive effort to investigate and prosecute
financial crimes. The task force includes representatives from a broad range of
federal agencies, regulatory authorities, inspectors general, and state and
local law enforcement who, working together, bring to bear a powerful array of
criminal and civil enforcement resources. The task force is working to improve
efforts across the federal executive branch, and with state and local partners,
to investigate and prosecute significant financial crimes, ensure just and
effective punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover proceeds for
victims of financial crimes.
The case is being
prosecuted by the Securities and Commodities Fraud Task Force of the U.S.
Attorney's Office. Assistant U.S. Attorneys William J. Stellmach and Daniel A. Braun and
Special Assistant U.S. Attorney Jason M. Anthony, are in charge of the prosecution.
SOURCE
RELATED LINKS
http://www.justice.gov
First Bancorp Settles SEC Financial Fraud
Charges Involving "Non-Conforming" Mortgages
Bank Holding Company to Pay $8.5 Million Civil
Penalty
FOR IMMEDIATE RELEASE
2007-161
Washington
D.C., Aug. 7, 2007 — The Securities and Exchange Commission today filed financial
fraud charges against First BanCorp, alleging that
former senior management of the NYSE-listed, Puerto Rico-based bank holding
company concealed the true nature of more than $4 billion worth of transactions
involving "non-conforming" residential mortgages. Non-conforming
mortgages have income verification and credit history standards that are
generally more flexible than those required for sale or exchange under Fannie
Mae and Freddie Mac programs and can constitute "subprime"
mortgages.
Without
admitting or denying the Commission's charges, First BanCorp
consented to being permanently enjoined from violating the antifraud,
reporting, books and records and internal control provisions of the federal
securities laws and paying an $8.5 million civil penalty.
Linda Chatman Thomsen,
Director of the Division of Enforcement, said, "Today's action against
First BanCorp demonstrates that when misconduct in
the mortgage industry impacts our securities markets and harms investors, the
SEC will be there to take action. Investors deserve accurate disclosure and
responsible accounting in all sectors of the marketplace."
Cheryl J. Scarboro, an Associate Director in the Division of
Enforcement, stated, "The SEC's Division of Enforcement has focused
significant resources on disclosure and accounting issues relating to the
mortgage industry, and we encourage market participants who believe they have
securities-related issues in this area to contact us as soon as possible."
The
Commission's complaint charges First BanCorp with
aiding and abetting violations of the federal securities laws by Doral
Financial Corporation, another NYSE-listed, Puerto Rico-based bank holding
company. Doral Financial previously consented to the entry of a court order
enjoining it from violating the antifraud, reporting, books and records and
internal control provisions of the federal securities laws and ordering that it
pay a $25 million civil penalty [LR-19837,
According to today's
complaint, First BanCorp, which purportedly purchased
the non-conforming mortgages from Doral Financial, profited from the
transactions by earning more than $100 million in net interest income. Doral
Financial, which purportedly sold the mortgages to First BanCorp,
improperly recognized income on the transactions. According to the Commission,
the mortgage-related transactions were not true sales under generally accepted
accounting principles because senior management of Doral Financial agreed
orally and in emails to extend the recourse provision from the 24-month period
included in the written agreements to full recourse for the duration of the
mortgages.
The
Commission's complaint filed in the U.S. District Court for the Southern
District of New York charges First BanCorp with
aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20
13a-1 and 13a-13.
The Commission
acknowledges the assistance of the U.S. Attorney's Office for the Southern
District of New York, the Federal Bureau of Investigation, the Board of
Governors of the Federal Reserve System, and the Federal Deposit Insurance
Company.
The
Commission's investigation is continuing.
For further
information, contact:
Cheryl J. Scarboro
Associate Director, SEC Division of Enforcement
202-551-4403
http://www.sec.gov/news/press/2007/2007-161.htm
Litigation
Release No. 20227 / August 7, 2007
Accounting and Auditing Enforcement Release No.
2664 / August 7, 2007
Securities and Exchange
Commission v. First BanCorp, 07-CV-7039
(Crotty, J.) (S.D.N.Y. filed August 7, 2007 )
First BanCorp Settles
Financial Fraud Charges With SEC and Agrees to Pay $8.5 Million Penalty
The Securities
and Exchange Commission today filed financial fraud charges against First BanCorp, alleging that former senior management of the
NYSE-listed, Puerto Rico-based bank holding company concealed the true nature
of more than $4 billion worth of transactions involving “non-conforming”
mortgages from 2000 until 2005. Non-conforming mortgages have income
verification and credit history standards that are generally more flexible than
those required for sale or exchange under Fannie Mae and Freddie Mac programs
and can constitute “subprime” mortgages.
The Commission’s
complaint charges First BanCorp with aiding and
abetting violations of the federal securities laws by Doral Financial
Corporation, another NYSE-listed, Puerto Rico-based bank holding company. Doral
Financial previously consented to the entry of a court order enjoining it from
violating the antifraud, reporting, books and records and internal control
provisions of the federal securities laws and ordering that it pay a $25
million civil penalty [LR-19837 (Sept. 19, 2006)].
According to
today’s complaint, First BanCorp, which purportedly
purchased the non-conforming mortgages from Doral Financial, profited from the
transactions by earning more than $100 million in net interest income at little
or no risk. Doral Financial, which purportedly sold the mortgages to First BanCorp, improperly recognized income on the transactions.
According to the Commission, the mortgage-related transactions were not true
sales under generally accepted accounting principles because senior management
of Doral Financial agreed orally and in emails to extend the recourse provision
beyond the 24-month period included in the written agreements to recourse for
the duration of the mortgages.
The
Commission’s complaint, which was filed in the United States District Court for
the Southern District of New York, charges First BanCorp
with aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20
13a-1 and 13a-13. Without admitting or denying the Commission’s charges, First BanCorp consented to being permanently enjoined from
violating those antifraud, reporting, books and records and internal control
provisions of the federal securities laws and to paying an $8.5 million civil
penalty.
The Commission
acknowledges the assistance of the United States Attorney's Office for the
Southern District of New York, the Federal Bureau of Investigation, the Board
of Governors of the Federal Reserve System and the Federal Deposit Insurance
Company.
The Commission’s
investigation is continuing.
http://www.sec.gov/litigation/litreleases/2007/lr20227.htm
Litigation
Release No. 19837 / September 19, 2006
Securities and Exchange Commission v. Doral
Financial Corporation,
Case
No. 06-CIV- 07158 (JES)(S.D.N.Y. filed September 19, 2006 )
Doral Financial Settles Financial Fraud Charges
with SEC and Agrees to Pay $25 Million Penalty
The Securities
and Exchange Commission today filed financial fraud charges against Doral
Financial Corporation, a NYSE-listed Puerto Rican bank holding company. The
Commission alleges that Doral Financial overstated income by approximately $921
million or 100 percent on a pre-tax, cumulative basis between 2000 and 2004.
The Commission further alleges that accounting irregularities enabled the
company to report an apparent 28-quarter streak of "record earnings"
and facilitated the placement of over $1 billion of debt and equity. Since
Doral Financial's accounting and disclosure problems
began to surface in early 2005, the market price of the company's common stock
plummeted from almost $50 to under $10, thereby reducing equity market value by
over $4 billion.
According to
the Commission's complaint, Doral Financial improperly accounted for the
purported sale of non-conforming mortgage loans to other Puerto Rican financial
institutions in two respects. First, Doral Financial improperly recognized gain
on sales of approximately $3.9 billion in mortgages to FirstBank
Puerto Rico, a wholly owned banking subsidiary of First BanCorp.
These transactions were not true sales under generally accepted accounting
standards because of oral agreements or understandings between Doral Financial's former treasurer and former director emeritus
and FirstBank senior management providing recourse
beyond the limited recourse established in the written contracts. Second, Doral
Financial senior management significantly overvalued interest-only strips
retained by the company in its mortgage loan sale transactions. The Commission
further alleges that Doral Financial managed earnings through a series of
contemporaneous purchase and sale transactions with other Puerto Rican
financial institutions totaling approximately $847 million.
The
Commission's complaint, which was filed in the United States District Court for
the Southern District of New York, charges Doral Financial with violating
Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of
1934 and Rules 10b-5, 12b-20 13a-1 and 13a-13. Without admitting or denying the
Commission's allegations, Doral Financial has consented to the entry of a court
order enjoining it from violating those antifraud,
reporting, books and records and internal control provisions of the federal
securities laws and ordering that it pay a $25 million civil penalty.
The Commission
acknowledges the assistance of the United States Attorney's Office for the
Southern District of New York, the Federal Bureau of Investigation, the Board
of Governors of the Federal Reserve System and the Federal Deposit Insurance
Company.
The
Commission's investigation is continuing.
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2008 CEASE AND DESIST
ORDER
In the Matter of Doral
Bank, Catano,
http://www.fdic.gov/bank/individual/enforcement/2008-02-08.pdf
http://newyork.fbi.gov/dojpressrel/pressrel08/securitiesfraud030608.pdf
______________________________________________________________________________
2006 CEASE AND DESIST ORDER
[¶12,544] In the Matter of Doral Bank, Catano,
A cease and desist order was issued, based
on findings by the FDIC that it had reason to believe that respondent was
engaged in unsafe and unsound practices.
[.1]
Mortgage—Independent Consultant to Review Mortgage Loans
[.2]
Mortgage—Written Plan Required
[.3]
Mortgage—Identify Reclassified Loans
{{
[.4]
Bank Operations—Written Progress Report Required
[.5]
Capital Plan—Minimum Requirements Specified
[.6]
Funds Management and Liquidity—Preparation or Revision of Funds Management
Policy Required
[.7]
Bank Operations—Advance Notice of Change in Capital Debt
[.8]
Dividends—Dividends Restricted
[.9]
Transactions—Restricted
[.10]
Regulatory Reporting—Required
[.11]
Regulatory Reporting—Review Procedure for Preparation of Reports
[.12]
Progress Report—Written Report Required
In the Matter of
DORAL BANK
CATANO,
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-06-043b
DORAL
BANK, CATANO. PUERTO RICO ("Insured
Institution"), having been advised of its right to a Notice of Charges and
of Hearing detailing the unsafe or unsound banking practices alleged to have
been committed by the Insured Institution and of its right to a hearing on the
alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act
("Act"), 12 U.S.C. §1818(b)(1), and having waived those rights,
entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND
DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit
Insurance Corporation ("FDIC"), dated March 16, 2006, whereby solely
for the purpose of this proceeding and without admitting or denying the alleged
charges of unsafe or unsound banking practices the Insured Institution
consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by
the FDIC.
The FDIC considered the matter and
determined that it had reason to believe that the Insured Institution failed to
properly account for and document certain mortgage loan transactions and
thereby had engaged in unsafe or unsound banking practices. The FDIC,
therefore, accepted the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED that the Insured
Institution, its directors, officers, employees, agents, and other institution-affiliated
parties (as that term is defined in Section 3(u) of the Act, 12 U.S.C.
§1813(u)), and its successors and assigns cease and desist from operating in
contravention of certain provisions of the Interagency Guidelines Establishing
Standards for Safety and Soundness set forth at Appendix A to Part 364 of the
FDIC's Rules and Regulations, 12 C.F.R. Part 364, Appendix A.
IT IS FURTHER ORDERED that the Insured
Institution, its institution-affiliated parties, and its successors and assigns
take affirmative action as follows:
Mortgage Portfolios
[.1] 1. Within 30 days of this ORDER, the Insured
Institution's board of directors shall engage an independent consultant
acceptable to the Regional Director of the FDIC's New York Regional Office
("Regional Director") to conduct a review of the (i)
mortgage loans on the balance sheet of the Insured Institution as of the
effective date of this ORDER; (ii) mortgage loans sold by the Insured
Institution with recourse, if any, as of the effective date of this ORDER,
except for conforming loans sold to FNMA, FHLMC, and GNMA; and (iii) any
mortgage loans that, as a result of a change in the accounting treatment of the
Insured Institution's mortgage sale transactions with other financial
institutions or entities, are subsequently included as assets on the balance
sheet of the Insured Institution (collectively, the "Mortgage
Portfolio"); and to prepare a written report that includes findings and
recommendations (the "Mortgage Portfolio Review"). Prior to the commencement
of the Mortgage Portfolio Review, the Insured Institution shall submit an
engagement letter with the independent consultant to the Regional Director for
approval. The terms of the engagement letter shall provide that the independent
consultant will submit its written
{{
report within 60 days of its engagement and will provide a
copy of its report to the Regional Director at the same time that it is
provided to the Insured Institution.
[.2] 2. Within 30 days after the Insured Institution's
receipt of the Mortgage Portfolio Review report, the Insured Institution shall
submit an acceptable written plan to the Regional Director describing specific
actions that the board of directors proposes to take, with timeframes for
completion, to fully address the findings and recommendations of the Mortgage
Portfolio Review report.
[.3] 3. The Insured Institution shall identify any
mortgage portfolio transaction with another financial institution or entity
that was originally accounted for as a purchase of the mortgage portfolio by
the Insured Institution and was subsequently reclassified as a commercial loan
to the other financial institution or entity (for which the mortgage portfolio
serves as collateral). With respect to each such mortgage portfolio
transaction, the Insured Institution shall submit to the Regional Director a
report that:
(a) Demonstrates
that the Insured Institution possesses complete, accurate and legally
enforceable documentation that describes in detail the true nature of the
underlying transactions (including the Insured Institution's or entity's legal claim to the underlying collateral;
(b) Includes an
assessment of the overall asset quality of the underlying collateral; and
(c) Explains the
expected cash flows associated with the reclassified transactions (including
servicing fees and repayments of principal on the mortgages in the mortgage
portfolio).
The Insured Institution shall submit a
report for each reclassified mortgage portfolio to the Regional Director within
15 days of this ORDER or within 15 days after the reclassification of such
mortgage portfolio, whichever occurs later. With respect to the information
called for in subparagraph (b) the report shall be supplemented within 30 days
after submission of the initial report with any additional information received
from the owner or servicer of the mortgage portfolio,
which the Insured Institution has promptly and diligently requested.
Policies and Procedures Report
[.4] 4. Within 30 days of this ORDER, the Insured
Institution shall submit to the Regional Director a report summarizing
recommendations made by independent consultants or counsel or by internal audit
since June 2004 to revise the Insured Institution's policies, procedures,
plans, and programs. The report shall, at a minimum, indicate the status of
recommended policies, procedures, plans, and programs, including but not
limited to, approval by the Insured Institution's board of directors, plans for
approval by the Insured Institution's board of directors, implementation,
schedule for implementation, and, if applicable, the basis for rejecting any
recommendations by management or the board of directors.
Capital Plan
[.5] 5. Within 45 days of this ORDER, the Insured
Institution shall submit to the Regional Director an acceptable written capital
plan. The plan shall be designed to ensure that an adequate capital position is
maintained by the Insured Institution in light of the reclassification of any
mortgage portfolio. The plan shall, at a minimum, address, consider, and
include:
(a) The Insured
Institution's current and future capital requirements, including compliance
with the Capital Maintenance Requirement set forth in Part 325 of the FDIC's
Rules and Regulations, 12 C.F.R. Part 325, and the Statement of Policy on
Risk-Based Capital as set forth in Appendix A to Part 325 of the FDIC's Rules
and Regulations, 12 C.F.R. Part 325, Appendix A;
(b) The adequacy of
capital at the Insured Institution, taking into account the volume of adversely
classified credits, concentrations of credit, adequacy of loan loss reserves,
current and projected growth of assets, and projected retained earnings;
(c) The volume of
problem or volatile assets held by the Insured Institution that could require
the maintenance of higher capital levels;
d) The source and
timing of additional funds to fulfill the Insured Institution's future capital
requirements;
(e) Procedures for
the Insured Institution to notify the Regional Director, in writing, within ten
(10) days of the end of any calendar quarter that the Insured Institution's
capital ratios
(Tier 1 leverage, Tier 1 risk-based, or total risk based) fall below the plan's
minimum capital requirements and to submit to the Regional Director an acceptable
written plan that details the steps the Insured Institution will take to
increase its capital ratios above the plan's minimum capital requirements
within thirty (30) days of such calendar quarter-end date.
(f) The Insured
Institution may comply with the requirements of this Paragraph 5 by submitting
a copy of a capital plan prepared by its parent holding company for the
consolidated enterprise provided that the plan includes a separate and distinct
plan for the Insured Institution.
Liquidity Contingency Plan
[.6] 6. Within 45 days of this ORDER, the Insured
Institution shall submit to the Regional Director an acceptable, updated
written plan to provide for the maintenance of an adequate liquidity position.
The plan shall, at a minimum, address, consider, and include:
(a) Maintenance of
sufficient liquidity to meet current contractual liability maturities without
incurring any additional unsecured debt and to meet unanticipated demands;
(b) Appropriate
measures for monitoring the Insured Institution's liquidity position, including
quantitative guidelines to establish adequate coverage of volatile liabilities
by liquid assets; and
(c) Submission to
the board of directors of periodic written reports documenting the Insured Institution's
progress in complying with the plan; such reports shall include, but not be
limited to, (i) a complete review of the Insured
Institution's then-current position in meeting targeted liquidity thresholds;
(ii) a schedule of anticipated sources and uses of funds projected for the
future; (iii) an analysis of strategies or steps taken during the reporting
period to address deviations from the plan; and (iv) a discussion of
contingency plans if actual sources or uses of funds vary materially from projections.
Debt and Stock Redemption
[.7] 7. (a) The Insured
Institution shall provide advance informational notice to the Regional Director
before the Insured Institution directly or indirectly increases, restructures,
or repurchases its unsecured capital debt, if any, including but not limited to
its senior notes or bonds, if any. All notices shall contain, but not be
limited to, a written statement regarding the purpose of the debt or other
transaction, the terms of the transaction, the planned source(s) for repayment,
and an analysis of the cash flow resources available to meet repayment
obligations. Notices shall be provided as soon as practicable, but not less
than 10 days prior to the transaction.
(b) The Insured
Institution shall not, directly or indirectly, purchase or redeem any shares of
its stock without the prior written approval of the Regional Director pursuant
to Section 18(i) of the Act, 12 U.S.C. §1828(i).
Dividend Payment
[.8] 8. (a) While this ORDER is
in effect, the Insured Institution shall not declare or pay dividends or any
other form of payment representing a reduction in capital without the prior
written approval of the Regional Director. All requests for prior approval
shall be received at least 30 days prior to the proposed dividend declaration
date (at least 5 days with respect to any request filed within the first 30
days after the date of this Order) and shall contain, but not be limited to, an
analysis of the impact such dividend or other payment would have on the Insured
Institution's capital position, cash flow, concentrations of credit, asset
quality and allowance for loan and lease loss needs. The Regional Director will
approve a dividend or any other form of payment representing a reduction in
capital provided that the Regional Director determines that such dividend or
payment will not have an unacceptable impact on the Insured Institution's
capital position, cash flow, concentrations of credit, asset quality and
allowance for loan and lease loss needs.
(b) During the term
of this ORDER, the Insured Institution shall not make any distributions of
interest, principal or other sums on subordinated debentures, if any, without
the prior written approval of the Regional Director.
Restricted Transactions
[.9] 9. (a) The Insured Institution shall not, directly
or indirectly, enter into, participate, or in any other manner engage in any of
the following transactions with any affiliate without the prior written
approval of the Regional Director: (i) a loan or
extension of
{{05-31-06 p.12544.5}}
credit to the affiliate; (ii) a purchase of
or an investment in securities issued by the affiliate; (iii) a purchase of
assets, including assets subject to an agreement to repurchase, from the
affiliate; (iv) the acceptance of securities issued by the affiliate as
collateral security for a loan or extension of credit to any person or company;
(v) the issuance of a guarantee, acceptance, or letter of credit, including an
endorsement or standby letter of credit, on behalf of an affiliate; (vi) the
sale of securities or other assets to an affiliate, including assets subject to
an agreement to repurchase; (vii) the payment of money or furnishing of
services to an affiliate under contract, lease or otherwise; (viii) any
transaction in which an affiliate acts as agent or broker or receives a fee for
its services to the Insured Institution; and (ix) any transaction or series of
transactions with a third party (a) if an affiliate has a financial interest in
the third party, or (b) an affiliate is a participant in such transaction or
series of transactions. For purposes of this paragraph 9(a), any transaction by
the Insured Institution with any person or entity shall be deemed to be a
transaction with an affiliate of the Insured Institution if any of the proceeds
of the transaction are used for the benefit of, or transferred to, such
affiliate.
(b) Within ten (10)
days following the end of each month, the Insured Institution shall submit a
report to the Regional Director summarizing all transactions of the type
described in subparagraph (a)(i)–(ix) above between
and among the Insured Institution, its holding company, and any of its
affiliates within the month.
(c) The Insured
Institution shall not, directly or indirectly, enter into, participate, or in
any other manner engage in any transaction with any Insider without the prior
written approval of the Regional Director.
(d) For the
purposes of this paragraph 9: (i)
"affiliate" shall be defined as set forth in section 23A(b)(1) of the
Federal Reserve Act (12 U.S.C. §371c(b)(1)); (ii) "Insider" shall
include any of the Insured Institution's current or former executive officers,
directors, principal shareholders, members of their immediate families, related
interests thereof, or persons acting on their behalf; (iii) "immediate
family" shall be defined as set forth in section 225.41(b)(3) of
Regulation Y of the Board of Governors (12 C.F.R. 225.41(b)(3)); (iv)
"related interest" shall be defined as set forth in section 215.2(n)
of Regulation O of the Board of Governors (12 C.F.R. 215.2(n)); (v)
"transaction" shall include, but not be limited to, the transfer or
payment of cash, the transfer, contribution, sale or purchase of any other
asset, the direct or indirect payment of any expense or obligation, the direct
or indirect assumption of any liability, the provision of any service, the
payment of a management or service fee of any nature, any extension of credit,
any overdraft, or any advance; and (vi) "extension of credit" shall
be defined as set forth in section 215.3 of Regulation O of the Board of
Governors (12 C.F.R. 215.3). Notwithstanding the foregoing definition of
"transaction," for the purposes of paragraph 9(c),
"transaction" shall not include: (1) the payment of fees and salaries
to directors and officers and the reimbursement of expenses, including but not
limited to the expenses of legal counsel paid pursuant to approval by the
Insured Institution's board of directors in accordance with the Insured
Institution's bylaws and in compliance with 12 U.S.C. §1828k and 12 C.F.R.
section 359.5, provided that similar types and amounts of payments and
reimbursements have previously been made and fully documented in the Insured
Institution's books and records; (2) the provision of any unpaid services to the
Insured Institution by any officer, director, or employee of the Insured
Institution; and (3) banking transactions between directors and officers and
members of their immediate families on the one hand and the Insured Institution
on the other hand which are in the normal course of business and are consistent
with banking transactions offered by the Insured Institution to members of the
general public.
(e) Any request for
prior approval pursuant to paragraph 9(a) and (c) above shall be submitted in
writing to the Regional Director at least fifteen (15) days prior to the
proposed transaction, and shall include a complete and detailed description of
the proposed transaction.
Regulatory Reports
[.10] 10. The Insured Institution shall continue to file
regulatory reports and shall promptly file amended regulatory reports to
correct any reports filed in 2002, 2003, 2004
{{
and 2005 that are determined to contain material errors.
For purposes of this paragraph, "material" means a qualitative
characteristic of accounting information which is defined in Financial
Accounting Standards Board Concepts Statement No. 2 as "the magnitude of
an omission or misstatement of accounting information that, in the light of
surrounding circumstances, makes it probable that the judgment of a reasonable
person relying on the information would have been changed or influenced by the
omission or misstatement." The Insured Institution shall maintain
sufficient records to indicate how each report was prepared and shall retain
such records for subsequent supervisory review.
[.11] 11. The Insured Institution shall take steps to ensure
that all balance sheet and income statements and general ledger and subsidiary
ledger accounts are reconciled on at least a monthly basis and that the Insured
Institution's internal audit unit periodically reviews the Insured
Institution's procedures for the preparation of regulatory reports to monitor
adherence to the Insured Institution's policies, GAAP, and regulatory guidance.
Approval, Implementation, and Progress
Reports
[.12] 12. (a) The Insured Institution shall submit an
engagement letter and written plans, programs, policies, and procedures that
are acceptable to the Regional Director within the applicable time periods set
forth in paragraphs 1, 2, 5 and 6 of this ORDER. The Insured Institution shall
adopt the approved plans, programs, policies, and procedures within 10 days of
approval by the Regional Director. During the term of this ORDER, the approved
plans, programs, policies, and procedures shall not be amended or rescinded
without the prior written approval of the Regional Director.
(b) Once adopted,
the Insured Institution shall take immediate steps to implement the approved
plans, programs, policies, and procedures and thereafter shall continue to
fully comply with the approved plans, programs, policies, and procedures.
13. Within 30 days after the end of each
calendar quarter following the date of this ORDER, the board of directors shall
furnish to the Regional Director written progress reports detailing the form
and manner of all actions taken to secure compliance with this ORDER and the
results thereof. Such reports may be discontinued when the corrections required
by this ORDER have been accomplished and the Regional Director has, in writing,
released the Insured Institution from making further reports.
Miscellaneous
The provisions of this ORDER shall be
binding upon the Insured Institution, its directors, officers, employees,
agents, successors, assigns, and other institution-affiliated parties of the
Insured Institution.
The provisions of this ORDER shall not bar,
stop or otherwise prevent the FDIC, or any other federal or state or
commonwealth agency from taking any other action affecting the Insured
Institution or any of their current or former institution-affiliated parties
and their successors and assigns.
This ORDER shall become effective upon its
issuance.
The provisions of this ORDER shall remain
effective and enforceable except to the extent that, and until such time as,
any provisions of this ORDER shall have been modified, terminated, suspended,
or set aside by the FDIC.
Pursuant to delegated authority. Dated:
FDIC Enforcement
Decisions and Orders
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[¶12,546] In the Matter of R-G Premier Bank of Puerto Rico, Hato Rey, Puerto Rico, Docket
No. 06-045b (3-16-06).
A cease and desist order was issued, based
on findings by the FDIC that it had reason to believe that respondent was
engaged in unsafe and unsound practices.
[.1]
Mortgage—Independent Consultant to Review Mortgage Loans
[.2]
Mortgage—Written Plan Required
[.3]
Mortgage—Identify Reclassified Loans
[.4]
Bank Operations—Written Progress Report Required
[.5]
Capital Plan—Minimum Requirements Specified
{{
[.6]
Funds Management and Liquidity—Preparation or Revision of Funds Management Policy
Required
[.7]
Bank Operations—Advance Notice of Change in Capital Debt
[.8]
Dividends—Dividends Restricted
[.9]
Transactions—Restricted
[.10]
Regulatory Reporting—Required
[.11]
Regulatory Reporting—Review Procedure for Preparation of Reports
[.12]
Progress Report—Written Report Required
In the Matter of
R-G PREMIER BANK OF PUERTO RICO
HATO REY, PUERTO RICO
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-06-045b
R-G PREMIER OF PUERTO RICO, HATO REY, PUERTO
RICO ("Insured Institution"), having been advised of its right to a
Notice of Charges and of Hearing detailing the unsafe or unsound banking
practices alleged to have been committed by the Insured Institution and of its
right to a hearing on the alleged charges under section 8(b)(1) of the Federal
Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b)(1), and having
waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF
AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the
Federal Deposit Insurance Corporation ("FDIC"), dated March 16, 2006,
whereby solely for the purpose of this proceeding and without admitting or
denying the alleged charges of unsafe or unsound banking practices, the Insured
Institution consented to the issuance of an ORDER TO CEASE AND DESIST
("ORDER") by the FDIC.
The FDIC considered the matter and
determined that it had reason to believe that the Insured Institution failed to
properly account for and document certain mortgage loan transactions and thereby
had engaged in unsafe or unsound banking practices. The FDIC, therefore,
accepted the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED that the Insured
Institution, its directors, officers, employees, agents, and other
institution-affiliated parties (as that term is defined in Section 3(u) of the
Act, 12 U.S.C. §1813(u)), and its successors and assigns cease and desist from
operating in contravention of certain provisions of the Interagency Guidelines
Establishing Standards for Safety and Soundness set forth at Appendix A to Part
364 of the FDIC's Rules and Regulations, 12 C.F.R. Part 364, Appendix A.
IT IS FURTHER ORDERED that the Insured
Institution, its institution-affiliated parties, and its successors and assigns
take affirmative action as follows:
Mortgage Portfolios
[.1] 1. Within 30 days of this ORDER, the Insured Institution's
board of directors shall engage an independent consultant acceptable to the
Regional Director of the FDIC's New York Regional Office ("Regional
Director") to conduct a review of the (i)
mortgage loans on the balance sheet of the Insured Institution as of the
effective date of this ORDER; (ii) mortgage loans sold by the Insured
Institution with recourse, if any, as of the effective date of this ORDER,
except for conforming loans sold to FNMA, FHLMC, and GNMA; and (iii) any
mortgage loans that, as a result of a change in the accounting treatment of the
Insured Institution's mortgage sale transactions with other financial institutions
or entities, are subsequently included as assets on the balance sheet of the
Insured Institution (collectively, the "Mortgage Portfolio"); and to
prepare a written report that includes findings and recommendations (the
"Mortgage Portfolio Review"). Prior to the commencement of the
Mortgage Portfolio Review, the Insured Institution shall submit an engagement
letter with the independent consultant to the Regional Director for approval.
The terms of the engagement letter shall provide that the independent
consultant will submit its written report within 60 days of its engagement and
will provide a copy of its report to the Regional Director at the same time
that it is provided to the Insured Institution.
{{
[.2] 2. Within 30 days after the Insured Institution's receipt of
the Mortgage Portfolio Review report, the Insured Institution shall submit an
acceptable written plan to the Regional Director describing specific actions
that the board of directors proposes to take, with timeframes for completion,
to fully address the findings and recommendations of the Mortgage Portfolio
Review report.
[.3] 3. The Insured Institution shall identify any mortgage
portfolio transaction with another financial institution or entity that was
originally accounted for as a purchase of the mortgage portfolio by the Insured
Institution and was subsequently reclassified as a commercial loan to the other
financial institution or entity (for which the mortgage portfolio serves as
collateral). With respect to each such mortgage portfolio transaction, the
Insured Institution shall submit to the Regional Director a report that:
(a) Demonstrates
that the Insured Institution possesses complete, accurate and legally
enforceable documentation that describes in detail the true nature of the
underlying transactions (including the Insured Institution's or entity's legal claim to the underlying collateral;
(b) Includes an
assessment of the overall asset quality of the underlying collateral; and
(c) Explains the
expected cash flows associated with the reclassified transactions (including
servicing fees and repayments of principal on the mortgages in the mortgage
portfolio).
The Insured Institution shall submit a
report for each reclassified mortgage portfolio to the Regional Director within
15 days of this ORDER or within 15 days after the reclassification of such
mortgage portfolio, whichever occurs later. With respect to the information
called for in subparagraph (b), the report shall be supplemented within 30 days
after submission of the initial report with any additional information received
from the owner or servicer of the mortgage portfolio,
which the Insured Institution has promptly and diligently requested.
Policies and Procedures Report
[.4] 4. Within 30 days of this ORDER, the Insured Institution
shall submit to the Regional Director a report summarizing recommendations made
by independent consultants or counsel or by internal audit since April 2005 to
revise the Insured Institution's policies, procedures, plans, and programs. The
report shall, at a minimum, indicate the status of recommended policies,
procedures, plans, and programs, including but not limited to, approval by the
Insured Institution's board of directors, plans for approval by the Insured
Institution's board of directors, implementation, schedule for implementation,
and, if applicable, the basis for rejecting any recommendations by management
or the board of directors.
Capital Plan
[.5] 5. Within 45 days of this ORDER, the Insured Institution
shall submit to the Regional Director an acceptable written capital plan. The
plan shall be designed to ensure that an adequate capital position is
maintained by the Insured Institution in light of the reclassification of any
mortgage portfolio. The plan shall, at a minimum, address, consider, and
include:
(a) The Insured
Institution's current and future capital requirements, including compliance
with the Capital Maintenance Requirement set forth in Part 325 of the FDIC's
Rules and Regulations, 12 C.F.R. Part 325, and the Statement of Policy on
Risk-Based Capital as set forth in Appendix A to Part 325 of the FDIC's Rules
and Regulations, 12 C.F.R. Part 325, Appendix A;
(b) The adequacy of
capital at the Insured Institution, taking into account the volume of adversely
classified credits, concentrations of credit, adequacy of loan loss reserves,
current and projected growth of assets, and projected retained earnings;
(c) The volume of
problem or volatile assets held by the Insured Institution that could require
the maintenance of higher capital levels;
(d) The source and
timing of additional funds to fulfill the Insured Institution's future capital
requirements;
(e) Procedures for
the Insured Institution to notify the Regional Director, in writing, within ten
(10) days of the end of any calendar quarter that the Insured Institution's
capital ratios (Tier 1 leverage, Tier 1 risk-based, or total risk based) fall
below the plan's minimum capital requirements and to submit to the Regional Director
an acceptable written plan that details the steps the Insured Institution will
{{
take to increase its capital ratios above the plan's
minimum capital requirements within thirty (30) days of such calendar
quarter-end date.
(f) The Insured
Institution may comply with the requirements of this Paragraph 5 by submitting
a copy of a capital plan prepared by its parent holding company for the
consolidated enterprise provided that the plan includes a separate and distinct
plan for the Insured Institution.
Liquidity Contingency Plan
[.6] 6. Within 45 days of this ORDER, the Insured Institution
shall submit to the Regional Director an acceptable, updated written plan to
provide for the maintenance of an adequate liquidity position. The plan shall,
at a minimum, address, consider, and include:
(a) Maintenance of
sufficient liquidity to meet current contractual liability maturities without
incurring any additional unsecured debt and to meet unanticipated demands;
(b) Appropriate
measures for monitoring the Insured Institution's liquidity position, including
quantitative guidelines to establish adequate coverage of volatile liabilities
by liquid assets; and
(c) Submission to
the board of directors of periodic written reports documenting the Insured
Institution's progress in complying with the plan; such reports shall include,
but not be limited to, (i) a complete review of the
Insured Institution's then-current position in meeting targeted liquidity
thresholds; (ii) a schedule of anticipated sources and uses of funds projected
for the future; (iii) an analysis of strategies or steps taken during the
reporting period to address deviations from the plan; and (iv) a discussion of
contingency plans if actual sources or uses of funds vary materially from
projections.
Debt and Stock Redemption
[.7] 7. (a) The Insured Institution shall
provide advance informational notice to the Regional Director before the
Insured Institution directly or indirectly increases, restructures, or
repurchases its unsecured capital debt, if any, including but not limited to
its senior notes or bonds, if any. All notices shall contain, but not be
limited to, a written statement regarding the purpose of the debt or other
transaction, the terms of the transaction, the planned source(s) for repayment,
and an analysis of the cash flow resources available to meet repayment
obligations. Notices shall be provided as soon as practicable, but not less
than 10 days prior to the transaction.
(b) The Insured
Institution shall not, directly or indirectly, purchase or redeem any shares of
its stock without the prior written approval of the Regional Director pursuant
to Section 18(i) of the Act, 12 U.S.C. §1828(i).
Dividend Payment
[.8] 8. (a) While this ORDER is in
effect, the Insured Institution shall not declare or pay dividends or any other
form of payment representing a reduction in capital without the prior written
approval of the Regional Director. All requests for prior approval shall be
received at least 30 days prior to the proposed dividend declaration date (at
least 5 days with respect to any request filed within the first 30 days after
the date of this Order) and shall contain, but not be limited to, an analysis
of the impact such dividend or other payment would have on the Insured
Institution's capital position, cash flow, concentrations of credit, asset
quality and allowance for loan and lease loss needs. The Regional Director will
approve a dividend or any other form of payment representing a reduction in
capital provided that the Regional Director determines that such dividend or
payment will not have an unacceptable impact on the Insured Institution's
capital position, cash flow, concentrations of credit, asset quality and
allowance for loan and lease loss needs.
(b) During the term
of this ORDER, the Insured Institution shall not make any distributions of
interest, principal or other sums on subordinated debentures, if any, without
the prior written approval of the Regional Director.
Restricted Transactions
[.9] 9. (a) The Insured Institution shall not, directly or
indirectly, enter into, participate, or in any other manner engage in any of
the following transactions with any affiliate without the prior written
approval of the Regional Director: (i)
a loan or extension of credit to the affiliate; (ii) a purchase of or an
investment in securities issued by the affiliate; (iii) a purchase of assets,
including assets subject to an agreement to repurchase, from the affiliate;
(iv) the acceptance of securities issued by the affiliate as collateral
{{05-31-06 p.12546.4}}
security for a loan or extension of credit
to any person or company; (v) the issuance of a guarantee, acceptance, or
letter of credit, including an endorsement or standby letter of credit, on
behalf of an affiliate; (vi) the sale of securities or other assets to an
affiliate, including assets subject to an agreement to repurchase; (vii) the
payment of money or furnishing of services to an affiliate under contract,
lease or otherwise; (viii) any transaction in which an affiliate acts as agent
or broker or receives a fee for its services to the Insured Institution; and
(ix) any transaction or series of transactions with a third party (a) if an
affiliate has a financial interest in the third party, or (b) an affiliate is a
participant in such transaction or series of transactions. For purposes of this
paragraph 9(a), any transaction by the Insured Institution with any person or
entity shall be deemed to be a transaction with an affiliate of the Insured Institution
if any of the proceeds of the transaction are used for the benefit of, or
transferred to such affiliate.
(b) Within ten (10)
days following the end of each month, the Insured Institution shall submit a
report to the Regional Director summarizing all transactions of the type
described in subparagraph (a)(i)–(ix) above between
and among the Insured Institution, its holding company, and any of its
affiliates within the month.
(c) The Insured
Institution shall not, directly or indirectly, enter into, participate, or in
any other manner engage in any transaction with any Insider without the prior
written approval of the Regional Director.
(d) For the
purposes of this paragraph 9: (i)
"affiliate" shall be defined as set forth in section 23A(b)(1) of the
Federal Reserve Act (12 U.S.C. §371c(b)(1)); (ii) "Insider" shall
include any of the Insured Institution's current or former executive officers,
directors, principal shareholders, members of their immediate families, related
interests thereof, or persons acting on their behalf; (iii) "immediate
family" shall be defined as set forth in section 225.41(b)(3) of
Regulation Y of the Board of Governors (12 C.F.R. 225.41(b)(3)); (iv)
"related interest" shall be defined as set forth in section 215.2(n)
of Regulation O of the Board of Governors (12 C.F.R. 215.2(n)); (v)
"transaction" shall include, but not be limited to, the transfer or
payment of cash, the transfer, contribution, sale or purchase of any other
asset, the direct or indirect payment of any expense or obligation, the direct
or indirect assumption of any liability, the provision of any service, the
payment of a management or service fee of any nature, any extension of credit,
any overdraft, or any advance; and (vi) "extension of credit" shall be
defined as set forth in section 215.3 of Regulation O of the Board of Governors
(12 C.F.R. 215.3). Notwithstanding the foregoing definition of
"transaction," for the purposes of paragraph 9(c),
"transaction" shall not include: (1) the payment of fees and salaries
to directors and officers and the reimbursement of expenses, including but not
limited to the expenses of legal counsel paid pursuant to approval by the
Insured Institution's board of directors in accordance with the Insured
Institution's bylaws and in compliance with 12 U.S.C. §1828k and 12 C.F.R.
section 359.5, provided that similar types and amounts of payments and
reimbursements have previously been made and fully documented in the Insured
Institution's books and records; (2) the provision of any unpaid services to
the Insured Institution by any officer, director, or employee of the Insured
Institution; and (3) banking transactions between directors and officers and
members of their immediate families on the one hand and the Insured Institution
on the other hand which are in the normal course of business and are consistent
with banking transactions offered by the Insured Institution to members of the
general public.
(e) Any request for
prior approval pursuant to paragraph 9(a) and (c) above shall be submitted in
writing to the Regional Director at least fifteen (15) days prior to the
proposed transaction, and shall include a complete and detailed description of
the proposed transaction.
Regulatory Reports
[.10] 10. The Insured Institution shall continue to file regulatory reports and
shall promptly file amended regulatory reports to correct any reports filed in
2002, 2003, 2004 and 2005 that are determined to contain material errors. For
purposes of this paragraph, "material" means a qualitative characteristic
of accounting information which is defined in Financial Accounting Standards
Board Concepts Statement No. 2 as "the magnitude of
{{
an omission or misstatement of accounting information
that, in the light of surrounding circumstances, makes it probable that the
judgment of a reasonable person relying on the information would have been
changed or influenced by the omission or misstatement." The Insured
Institution shall maintain sufficient records to indicate how each report was prepared
and shall retain such records for subsequent supervisory review.
[.11] 11. The Insured Institution shall take steps to ensure that all balance
sheet and income statements and general ledger and subsidiary ledger accounts
are reconciled on at least a monthly basis and that the Insured Institution's
internal audit unit periodically reviews the Insured Institution's procedures
for the preparation of regulatory reports to monitor adherence to the Insured
Institution's policies, GAAP, and regulatory guidance.
Approval, Implementation, and Progress
Reports
[.12] 12. (a) The Insured Institution shall submit an engagement letter and
written plans, programs, policies, and procedures that are acceptable to the
Regional Director within the applicable time periods set forth in paragraphs 1,
2, 5 and 6 of this ORDER. The Insured Institution shall adopt the approved
plans, programs, policies, and procedures within 10 days of approval by the
Regional Director. During the term of this ORDER, the approved plans, programs,
policies, and procedures shall not be amended or rescinded without the prior
written approval of the Regional Director.
(b) Once adopted,
the Insured Institution shall take immediate steps to implement the approved
plans, programs, policies, and procedures and thereafter shall continue to
fully comply with the approved plans, programs, policies, and procedures.
13. Within 30 days after the end of each
calendar quarter following the date of this ORDER, the board of directors shall
furnish to the Regional Director written progress reports detailing the form
and manner of all actions taken to secure compliance with this ORDER and the
results thereof. Such reports may be discontinued when the corrections required
by this ORDER have been accomplished and the Regional Director has, in writing,
released the Insured Institution from making further reports.
Miscellaneous
The provisions of this ORDER shall be
binding upon the Insured Institution, its directors, officers, employees,
agents, successors, assigns, and other institution-affiliated parties of the
Insured Institution.
The provisions of this ORDER shall not bar,
stop or otherwise prevent the FDIC, or any other federal or state or
commonwealth agency from taking any other action affecting the Insured
Institution or any of their current or former institution-affiliated parties
and their successors and assigns.
This ORDER shall become effective upon its
issuance.
The provisions of this ORDER shall remain
effective and enforceable except to the extent that, and until such time as,
any provisions of this ORDER shall have been modified, terminated, suspended,
or set aside by the FDIC.
Pursuant to delegated authority. Dated: