44 F.3d 1127 (2nd Cir. 1995), 506, In re McVane

Docket Nº:506, Docket 94-6118.
Citation:44 F.3d 1127
Party Name:In re McVANE. M. Patricia McVANE, Jeffrey S. Hoffman, Michael G. Economous, Robert H. Haines, III, Richard R. Rangoon and Kenneth S. Schwartz, Petitioners-Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Respondent-Appellee.
Case Date:January 12, 1995
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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44 F.3d 1127 (2nd Cir. 1995)

In re McVANE.

M. Patricia McVANE, Jeffrey S. Hoffman, Michael G.

Economous, Robert H. Haines, III, Richard R.

Rangoon and Kenneth S. Schwartz,

Petitioners-Appellants,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION, Respondent-Appellee.

No. 506, Docket 94-6118.

United States Court of Appeals, Second Circuit

January 12, 1995

Argued Oct. 18, 1994.

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Richard P. Weinstein, West Hartford, CT (Weinstein & Wisser, P.C., of counsel), for petitioners-appellants.

Lawrence H. Richmond, F.D.I.C., Washington, DC (Ann S. DuRoss, Asst. Gen. Counsel, Colleen B. Bombardier, Sr. Counsel, Michelle Kosse, Counsel, of counsel), for respondent-appellee.

Before: OAKES, ALTIMARI, and CABRANES, Circuit Judges.

OAKES, Senior Circuit Judge:

This appeal concerns the enforcement of administrative subpoenas duces tecum issued by the Federal Deposit Insurance Corporation ("FDIC") in aid of its investigation of

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the former directors of a failed bank. At issue in particular is the subpoenas' request for extensive personal financial information from the former directors and their spouses and family members.

The six former directors (the "Directors") appeal from an order of the United States District Court for the District of Connecticut, Alfred V. Covello, Judge, approving, adopting and ratifying the ruling of F. Owen Eagan, Magistrate Judge, denying the Directors' motions to quash the subpoenas and granting the FDIC's cross-motion for summary enforcement. We conclude that administrative subpoenas which seek personal records from family members of the targets of an investigation into corporate wrongdoing must face more exacting scrutiny than subpoenas seeking records from the targets themselves. We conclude further that the challenged subpoenas, to the extent they seek information from family members, fail to withstand that heightened scrutiny. Therefore, we vacate the district court's order insofar as it enforces those portions of the subpoenas which seek personal information from the Directors' families.

BACKGROUND

This appeal arises out of the failure of the Landmark Bank of Hartford, Connecticut ("Landmark"). Landmark was declared insolvent in March 1991, and the FDIC was appointed receiver. In July 1993, acting pursuant to statutory authority, the FDIC issued an Order of Investigation of Landmark's former officers and directors. See Order of Investigation of July 12, 1993 (citing 12 U.S.C. Secs. 1818-21 & 12 C.F.R. Sec. 308 subpart K) (the "Order of Investigation" or the "Order").

According to the Order, the investigation had four purposes:

to determine whether (1) such former officers, directors, and others ... may be liable ... as a result of any actions or failures to act which may have affected The Landmark Bank; (2) pursuit of such litigation would be cost effective, considering the extent of the potential defendants' ability to pay a judgment in any such litigation; (3) the FDIC should seek to avoid a transfer of any interests or an incurrence of any obligation; and (4) the FDIC should seek an attachment of assets.

Order of Investigation at 1.

The Order, among other things, authorized FDIC representatives to issue subpoenas duces tecum to assist their investigation. Pursuant to this authorization, the FDIC issued subpoenas duces tecum to the six Directors, seeking extensive personal financial records of them and their immediate families for the five years preceding August 1992 (the "subpoenas"). (The FDIC has consented to withdraw its subpoena of the records of one of the Directors, Kenneth Schwartz, so we consider only the appeals of the five remaining Directors.) 1 The subpoenas to the five remaining Directors are identical. They require the Directors to produce all documents "prepared, generated, or received" on or after August 1, 1987, as follows:

  1. Your current financial statement and all financial statements listing your assets and liabilities, (alone or with others).

  2. All financial statements of your spouse.

  3. All credit applications submitted by you or your spouse, alone or with others, to any depository institution or any other person or entity.

  4. All records [prepared, generated, or received on or after August 1, 1992] referring or relating to any account in any depository institution maintained by you or any member of your immediate family, or over which you or they have exercised control, or as to which you or they are or were a signatory, or in which you or they had or have a financial interest, including but not limited to: (a) checking and savings account statements; (b) records of

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    loans made or received; (c) records of certificates of deposit and other time deposit items purchased or redeemed; (d) records of safe deposit boxes; (e) cancelled checks.

  5. All promissory notes or other forms of indebtness [sic] under which you are or were liable (with or without recourse) individually or with any other person or entity.

  6. All records prepared, generated, or received on or after August 1, 1992 referring or relating to the source and amount of any income received by you on your behalf, including but not limited to all wages, salary, commissions, bonuses, interest and dividend payments, and any other form of income received by you.

  7. Records of all accounts, notes or other debt obligations owed to you individually or with others.

  8. All records referring or relating to real property owned by you individually or with others, including but not limited to all deeds, tax statements, mortgages, liens, encumbrances and appraisals.

  9. All Federal, state and local tax returns filed by you either individually or jointly with another, along with all forms and schedules filed with such returns.

  10. Titles and registrations for all motor vehicles, boats and airplanes owned by you or in which you have any interest, either individually or jointly with others.

  11. All records prepared, generated, or received on or after August 1, 1992 referring or relating to stocks, bonds, securities or other investments currently owned by you individually or with others, including but not limited to any statements showing their value.

  12. All documents referring or relating to any pension or profit-sharing plan, including any individual retirement account, simplified employee pension plan, 401(k), ERISA, KEOGH, or any other form of deferred tax, retirement or profit sharing plan in which you or your spouse have or had an interest.

  13. All documents relating to any interest held by you in any stamp, coin, antique, jewelry, art work; furnishings, or other personal collections having a value in excess of $5,000.

  14. All records referring or relating to any ownership interest by you in any entity, partnership, corporation, limited partnership, general partnership, joint venture or other business association or sole proprietorship, including but not limited to records of assets and liabilities, income statements and balance sheets.

  15. All documents which refer or relate to any interest held by you, either as beneficiary, grantor, or trustee in any trust of any kind.

  16. Copies of all insurance on your life or any annuity policies for your life or any term of years, whether or not such policies are owned by you, and the cash surrender value and loan amount (if any) on each policy.

  17. All documents that reflect, refer or relate to any financial, real or personal property transactions in which you, or anyone acting on your behalf, or under your control or influence, have been involved, (except as the attorney, employee or agent of another party on transactions in which you had no personal interest), having a value of $5,000 or more, per person or organization per year, including, but not limited to, the following:

    a. all real and personal property purchases, sales or transfers, with or without consideration;

    b. all trust participations;

    c. mortgages, trusts or other liens on security interests obtained or supplied to any third party;

    d. lawsuits; and

    e. repossessions and returns.

  18. All records of inheritances, bequests, and other such gifts received by you or any member of your immediate family.

  19. All documents which reflect any interests or title held by you in accounts receivable, business fixtures, equipment, inventory or machinery.

  20. All documents reflecting any interests held by you in any property settlements to which you are or may be entitled.

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  21. All documents reflecting any interests held by you in any tax refund, whether liquidated, contingent, or unliquidated.

  22. All documents referring or relating to any transfer of assets exceeding $5,000 to any entity, account, place or person located outside the United States of America.

  23. All documents listing any beneficial ownership of, or control over, any asset with a value exceeding $5,000 which was located outside the United States of America.

  24. All records referring or relating to any interest you hold in any real personal or other type of property exceeding $5,000 in value not described above.

  25. All documents referring or relating to any debt or obligation owed by you or claim asserted against you, in an amount greater than $5,000.

    Upon receipt of the subpoenas, the Directors each filed separate motions to quash, and their motions were consolidated into this single action. The FDIC countered with a cross-motion for summary enforcement of the subpoenas. In support of its enforcement motion, the FDIC submitted a declaration by an FDIC investigator, Allen Glass (the "Glass Declaration"), which set out the factual basis for the FDIC's suspicions of wrongdoing by the Directors. The FDIC's allegations of wrongdoing are set out in their entirety in four...

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