Candelaria v. F.D.I.C.
| Decision Date | 29 November 1993 |
| Citation | 134 F.3d 382 |
| Parties | 98 CJ C.A.R. 647 NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of |
| Court | U.S. Court of Appeals — Tenth Circuit |
Before ANDERSON, McKAY, and LUCERO, Circuit Judges.
Petitioner Ramon M. Candelaria seeks review of an order of respondent Federal Deposit Insurance Corporation (FDIC) permanently removing him from future participation in the affairs of any insured financial institution or organization. 1 For the following reasons, we affirm.
The basic facts in this case are undisputed. Petitioner, a twenty-five year career banker, worked the last thirteen years of his career as a loan officer and senior loan officer for Sunwest Bank of Santa Fe, New Mexico. Up until the discovery of the two loan transactions that triggered his resignation in lieu of termination from the bank on March 31, 1996, petitioner had an unblemished reputation in the banking industry.
The two loans which led to this action were approved by petitioner for his sister-in-law, Olivia Aleman. The first loan, in the amount of $9,550, was approved on or about July 21, 1994, and the second, in the amount of $5,050, was approved on or about February 3, 1995. The proceeds of both loans, disbursed as cashier's checks payable to Ms. Aleman, were endorsed by petitioner in Ms. Aleman's name and in his own name and deposited in petitioner's personal bank account. None of the loan proceeds were ever disbursed to Ms. Aleman.
When confronted with the loans following a bank auditor's discovery of the transactions, petitioner explained that Ms. Aleman was the true borrower who intended the proceeds of the loan to go to petitioner as payment for existing debt. It appears that, for an extended period of time prior to the loans, petitioner had been providing Ms. Aleman and her husband with sums of money for various personal needs. Petitioner claimed that Ms. Aleman's debt to him was approximately $15,000. During 1994 and 1995, petitioner suffered his own personal financial difficulties, and consequently decided that Ms. Aleman would have to repay the debt. Petitioner alleged that, because Ms. Aleman did not have the resources to repay the debt, they agreed that the loans from the bank would be necessary.
The promissory notes prepared by petitioner reflected Ms. Aleman's name and social security number, but petitioner's address and telephone number, thereby insuring that any correspondence regarding the loans would be sent to petitioner. Petitioner signed the notes on behalf of Ms. Aleman. Petitioner alleged that, because of medical reasons, Ms. Aleman could not travel from her home in Almogordo to Santa Fe to sign the notes and, therefore, she authorized petitioner to sign in her stead. Petitioner continually represented that he had Ms. Aleman's authority to sign the notes, indorse the checks, and personally use the proceeds. At the time of his resignation, petitioner agreed that the full amount of the loans should be completely repaid from the assets of his pension investment account. Both loans were thus repaid.
The Board of Directors of the FDIC (the Board) issued a notice of intent to seek to have petitioner permanently prohibited from participation in the activities of any federally-insured banking institution. Following a hearing, an administrative law judge (ALJ) recommended that petitioner be removed from participation in the industry for a one-year period. Upon consideration of the ALJ's recommendation and both parties' objections and exceptions, the Board ordered petitioner permanently removed from participation in the affairs of any insured financial institution, with the reminder that the order was statutorily modifiable upon petitioner's application to the FDIC. The Board stated that the possibility of modification provided flexibility to petitioner and protection for the banking industry.
On appeal, petitioner states his appellate issues as (1) the Board's decision was not supported by substantial evidence, and (2) the Board did not adequately articulate its reasons for rejecting the ALJ's recommendation regarding the remedy to be imposed.
The Administrative Procedure Act, 5 U.S.C. § 706, governs appellate review of the Board's removal decisions. See 12 U.S.C. § 1818(h)(2); Hoyl v. Babbitt, 129 F.3d 1377, 1382 (10th Cir.1997); Grubb v. FDIC, 34 F.3d 956, 961 (10th Cir.1994). "We review the Board's findings to determine whether they are supported by substantial evidence in the record." Id. (citing 5 U.S.C. § 706(2)(E), and Sunshine State Bank v. FDIC, 783 F.2d 1580, 1584 (11th Cir.1986)). "[W]e must consider the findings of both the ALJ and the Board," and where, as here, the ALJ and the Board reached different conclusions, we must ascertain whether the Board provided sufficient reasons for rejecting the ALJ's conclusions. Id.; see also Harberson v. NLRB, 810 F.2d 977, 984 (10th Cir.1987) ().
Pursuant to section 8(e)(1) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(e)(1), a determination as to whether a removal and/or a prohibition sanction may be levied must be predicated on a three-part conjunctive test determining whether an institution-affiliated party has: (1) violated a law, regulation, final cease-and-desist order, or participated in an unsafe or unsound practice, or breached a fiduciary duty; (2) as a result, exposed the bank to financial loss, or caused prejudice to the bank's depositors, or personally received financial benefit; and (3) committed the violation, practice, or breach with personal dishonesty or demonstrated a willful or continuing disregard for the safety or soundness of the bank. Therefore, to justify its order permanently prohibiting petitioner from participation in banking activities, the Board must have shown substantial evidence of "at least one of the prohibited acts, accompanied by at least one of the three prohibited effects and at least one of the two specified culpable states of mind." Seidman v. Office of Thrift Supervision (In re Seidman), 37 F.3d 911, 930 (3d Cir.1994).
In Grubb, 34 F.3d at 963-64, this court upheld a decision of the Board to permanently remove a director from the banking industry. The petitioner in Grubb was the majority shareholder and served as chairman of the board of a bank in Oklahoma. When, because of regulatory concern, the FDIC issued a cease and desist order requiring the bank strictly to adhere to its loan policies and to deny credit to questionable borrowers, the petitioner resigned as board chairman, but remained as a director. Id. at 958.
Following the cease and desist order, the bank extended credit to the petitioner and several of his business interests. The bank examiners determined these credit extensions to be in excess of the bank's legal lending limits. Id. at 958-59. The FDIC initiated a removal action alleging that the petitioner's actions constituted willful or continuing disregard for the safety and soundness of the bank. Id. at 960-61. Following a hearing, the ALJ recommended that the removal action be dismissed, but that the petitioner be assessed a $50,000 penalty. Id. at 961.
Although the Board adopted the ALJ's recommendation of a monetary penalty, it rejected the ALJ's recommendation that the removal action be dismissed, concluding that the petitioner had shown a willful or continuing disregard for the safety and soundness of the bank. Id. at 961. In so doing, the Board concluded that the extensions of credit to the petitioner for his personal benefit constituted unsafe and unsound banking practices, a breach of fiduciary duty, and a violation of federal banking laws and regulations. Id. at 962.
Moreover, the Board refused to excuse the repetitive nature of the violations simply because the petitioner became unable to repay the extensions of credit, or because the petitioner pledged collateral in response to repeated warnings by the banking regulators. Id. Finally, the Board rejected the contention that the petitioner's reputation in the banking industry should be viewed as a mitigating factor, concluding that the petitioner's prior good reputation made his actions all the more objectionable. Id. at 962-63.
On petition for review of the Board's decision in Grubb, this court held that § 1818(e) would be satisfied upon a showing that the person: "(1) violated the law, (2) the violation caused either losses to the bank or financial gain to the perpetrator, and (3) the violation constituted a willful or continuing disregard for the safety and soundness of the bank." 34 F.3d at 961. We held that "[w]illful disregard' and 'continuing disregard' present two alternative standards for removal." Id. (citing Brickner v. FDIC, 747 F.2d 1198, 1202 (8th Cir.1984)). We defined "willful disregard" as "deliberate conduct which exposed the bank to 'abnormal risk of loss or harm contrary to prudent banking practices,' " id. at 961-62 (quoting Van Dyke v. Board of Governors of Fed. Reserve, 876 F.2d 1377, 1380 (8th Cir.1989)), and defined "continuing disregard" as actions which have been " 'voluntarily engaged in over a period of time with heedless indifference to the prospective consequences,' " id. at 962 (quoting Docket No. FDIC-85-215e, 1986 F.D.I.C. Enf. Dec. (P-H) p 5069 at 6741).
In affirming, this court concluded that the Board's decision in Grubb was supported by substantial evidence in the record as a whole, and...
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