Haynes v. Federal Deposit Insurance Corp., 664 F. App'x 635

Steven D. Haynes was an officer/loan approver at Silver State Bank who approved construction loans for single-family homes over ~9 months without verifying borrowers’ income/assets or confirming meaningful alternate repayment sources.
Bank policy required written disclosure when deviating from verification policy; Haynes did not complete the exception form the Bank required.
Eighteen of the loans at issue defaulted, producing multi-million-dollar losses to the Bank; Haynes received commissions on the loans.
An ALJ recommended prohibiting Haynes from participating in insured depository institutions and imposing a civil money penalty; the FDIC Board adopted the recommendation and assessed a $75,000 penalty.
Haynes petitioned for review in the Ninth Circuit challenging the prohibition order and the civil penalty.

Issue	Haynes' Argument	FDIC/Board's Argument	Held
Whether Haynes engaged in "misconduct" under 12 U.S.C. § 1818(e)(1)	Haynes contends he did not commit the requisite misconduct or that any deviations were disclosed to senior officers	Haynes approved risky loans and failed to follow verification policy or disclose exceptions	Held: Substantial evidence supports finding of misconduct (unsafe/unsound practice and breach of fiduciary duty)
Whether his conduct had an impermissible effect on the Bank’s financial soundness	Haynes argues effects were not sufficient to justify prohibition	Board points to defaults, losses, and that Haynes profited via commissions, making the risks foreseeable	Held: Substantial evidence that conduct impermissibly affected bank’s financial soundness
Whether Haynes acted with requisite culpable state of mind (willful or continuing disregard or dishonesty)	Haynes denies culpability and disputes credibility findings	Board relied on deliberate approval over nine months without required verifications by an experienced banker	Held: Substantial evidence supports finding of willful and continuing disregard (culpable state of mind)
Whether civil monetary penalty was appropriate and properly calculated	Haynes challenges penalty amount and methodology	ALJ considered mitigating factors (including ability to pay); Board adopted ALJ’s recommended penalty; statutory criteria met (pattern, loss, pecuniary gain)	Held: Penalty upheld as supported by record and statutory standards

De La Fuente v. FDIC, 332 F.3d 1208 (9th Cir. 2003) (standard for prohibition: misconduct, impermissible effect, culpable state of mind; willful/continuing disregard doctrine)
Kim v. Office of Thrift Supervision, 40 F.3d 1050 (9th Cir. 1994) (discussion of culpability standard including willful or continuing disregard)