909 F.3d 1162
D.C. Cir.2018Background
- William Blanton served as interim CEO of United Americas Bank in 2010 after joining its board; the bank later failed and went into receivership in December 2010.
- The OCC assessed a $10,000 civil money penalty against Blanton based on (1) allowing repeated large overdrafts by a longtime customer (Alex Campos) and (2) directing the reversal/rebooking of charge-offs that resulted in amended call reports.
- Campos maintained numerous personal and business accounts and frequently caused large overdrafts; the bank repeatedly honored these, sometimes exceeding a large share of the bank’s Tier 1 capital.
- OCC examiners repeatedly warned the bank (and Blanton) that the Campos overdrafts posed excessive risk; Blanton promised controls but no effective controls were implemented while he was CEO.
- The bank initially charged off two impaired, collateral-dependent developer loans in May 2010 (reducing capital by $2.6 million), then reversed those charge-offs in July 2010 and filed amended call reports; the OCC disputed the reversals and later the bank re-charged-off the loans.
- An ALJ granted summary disposition for the OCC; the Comptroller adopted it and imposed the penalty; Blanton petitioned for review in the D.C. Circuit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations for overdraft claim | Claims accrued earlier; suit is time-barred by 28 U.S.C. § 2462 | Each post-June 30, 2010 overdraft created a new accrual; OCC timely filed | Held for OCC: each instance during Blanton’s tenure after cutoff accrued anew, so claims were timely |
| Whether honoring Campos overdrafts was an "unsafe or unsound" practice | Overdrafts were managed via transfers and longstanding practice; no actual loss shows no undue risk | Large, frequent overdrafts (often huge relative to Tier 1 capital) posed reasonably foreseeable undue risk | Held for OCC: practice was unsafe/unsound given size, frequency, and bank’s weakened capital position |
| Whether Blanton acted recklessly regarding overdrafts | He attempted controls, delegated implementation, and relied on prior controls | He was repeatedly warned by OCC, took only perfunctory steps, and failed to ensure controls were enacted | Held for OCC: Blanton acted recklessly by failing to implement/ensure adequate controls |
| Whether reversing charge-offs and filing amended call reports violated the National Bank Act | Blanton reasonably believed reports were accurate (charge-offs were improper or reversible given guarantor support) | Rebooking was improper in light of OCC instructions; amended reports were materially inaccurate | Held for Blanton on summary disposition issue: material factual disputes (Blanton’s reason for reversal and scope of OCC warnings) precluded summary decision; Comptroller’s call-report finding vacated and remanded |
Key Cases Cited
- Landry v. Federal Deposit Insurance Corp., 204 F.3d 1125 (D.C. Cir. 2000) (standard for "unsafe or unsound" banking practice involves reasonably foreseeable undue risk)
- Proffitt v. Federal Deposit Insurance Corp., 200 F.3d 855 (D.C. Cir. 2000) (accrual of regulatory claims and when patterns give rise to new claims)
- Van Dyke v. Board of Governors, 876 F.2d 1377 (8th Cir. 1989) (honoring overdrafts can be an unsafe or unsound practice under certain circumstances)
- First National Bank of Gordon v. Department of the Treasury, 911 F.2d 57 (8th Cir. 1990) (officials' reasonable belief in call-report accuracy defeats strict liability)
- Heckler v. Chaney, 470 U.S. 821 (U.S. 1985) (agency enforcement timing can be influenced by many non-merit factors)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary-judgment standard regarding genuine factual disputes)
- Reuters Ltd. v. Federal Communications Commission, 781 F.2d 946 (D.C. Cir. 1986) (agencies must adhere to their rules and procedures)