Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-12-01162/USCOURTS-caDC-12-01162-0/pdf.json

Parties Involved:
Louis A. DeNaples
Petitioner
Office of the Comptroller of the Currency
Respondent

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 11, 2012 Decided January 29, 2013 

No. 12-1162 

LOUIS A. DENAPLES, 

PETITIONER

v. 

OFFICE OF THE COMPTROLLER OF THE CURRENCY, 

RESPONDENT

Consolidated with 12-1198 

On Petitions for Review of the Final Decisions of the Office 

of the Comptroller of the Currency and the Board of 

Governors of the Federal Reserve System 

Howard N. Cayne argued the cause for petitioner. With 

him on the briefs were Lisa S. Blatt, Dirk C. Phillips, and R. 

Stanton Jones. 

Douglas B. Jordan, Attorney, Office of the Comptroller 

of the Currency, argued the cause for respondent. With him 

on the brief were Horace G. Sneed, Director of Litigation, 

Allen H. Denson, Attorney, Richard M. Ashton, Deputy 

General Counsel, Board of Governors of the Federal Reserve 

System, Katherine H. Wheatley, Associate General Counsel, 

and John L. Kuray, Attorney. 

USCA Case #12-1162 Document #1417662 Filed: 01/29/2013 Page 1 of 22
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Before: ROGERS and BROWN, Circuit Judges, and 

WILLIAMS, Senior Circuit Judge. 

 Opinion for the Court filed by Circuit Judge BROWN. 

 BROWN, Circuit Judge: Section 19 of the Federal Deposit 

Insurance Act (FDIA) is enforced by several financial 

regulators offering varied (and occasionally inconsistent) 

interpretations of its scope. The provision restricts who may 

participate in the affairs of insured depository institutions and 

bank and savings and loan holding companies; specifically, it 

bars from participation individuals who have been convicted 

of certain criminal offenses or who have “agreed to enter into 

a pretrial diversion or similar program in connection with a 

prosecution for” the covered offenses, unless they obtain 

consent from the appropriate regulatory agency. 12 U.S.C. 

§ 1829. Petitioner Louis DeNaples thought he successfully 

avoided the consequences of § 19 by convincing a 

Pennsylvania district attorney not to prosecute him for 

perjury, but he was wrong: he emerged from the state 

proceedings to find that the Office of the Comptroller of the 

Currency (“OCC”) and the Board of Governors of the Federal 

Reserve System (“Board”) had issued cease-and-desist orders 

enforcing § 19. DeNaples now challenges the agencies’ 

authority to issue the cease-and-desist orders, as well as their 

respective conclusions that DeNaples’ agreement with the 

prosecutor triggered § 19. We grant his petition in part and 

remand to the agencies.

I 

 At the time of the events that generated this case, 

DeNaples wielded significant influence over three financial 

institutions. He served as chairman and as a director of First 

USCA Case #12-1162 Document #1417662 Filed: 01/29/2013 Page 2 of 22
3 

National Community Bank (“First National”) in Pennsylvania 

and its parent bank holding company First National 

Community Bancorp (“Bancorp”). He also owned a large 

number of shares in Bancorp and an unrelated bank holding 

company in Connecticut, Urban Financial Group, Inc. 

(“Urban”). DeNaples does not dispute that these positions 

made him an “institution-affiliated party” of First National, 

Bancorp, and Urban, as defined by FDIA. See 12 U.S.C. 

§ 1813(u). 

 For a while, DeNaples also owned the Mount Airy 

Casino in Pennsylvania. In 2008, however, the local district 

attorney charged him with perjury, alleging he had lied to the 

Pennsylvania Gaming Control Board about his relationships 

with suspected members of the mob when applying for the 

casino’s gaming license. The Gaming Board promptly 

suspended DeNaples’ gaming license and prohibited him 

from controlling and managing the casino. OCC followed 

suit, suspending DeNaples from serving as an officer of First 

National and prohibiting him from further participation in the 

affairs of any depository institution until the charges were 

resolved. See 12 U.S.C. § 1818(g). 

 In April 2009, DeNaples entered an Agreement for 

Withdrawal of Charges (“Agreement”) under which the 

district attorney would withdraw all pending criminal charges 

if DeNaples would divest his financial and operational 

interests in the casino, permit the public release of a report 

about procedural irregularities in the underlying grand jury 

proceeding, pay the costs of prosecution, waive all legal 

claims against the state and its agents arising from the perjury 

investigation and prosecution, and file written quarterly 

reports with the district attorney describing the status of both 

his compliance with the Agreement and any proceedings 

before the Gaming Board. The Agreement further provided 

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that the district attorney could reinstate the charges if 

DeNaples breached its terms in any material way. The district 

attorney subsequently withdrew the charges and entered a 

disposition of nolle prosequi.

 Unfortunately for DeNaples, things did not end there. 

Though the district attorney’s office advised OCC that the 

Agreement did not constitute a pretrial diversion or similar 

program under state law, OCC nevertheless notified DeNaples 

that it considered the Agreement to be such a program and 

that it triggered § 19. The Board did the same. 

DeNaples did not agree with the agencies’ interpretations 

of § 19, so he neither resigned his positions with First 

National and Bancorp nor divested his shares of Bancorp and 

Urban. The agencies accordingly issued Notices of Charges 

and ordered hearings to determine whether they should issue 

cease-and-desist orders under 12 U.S.C. § 1818(b). The ALJ 

assigned to the case issued a consolidated decision rejecting 

DeNaples’ arguments that the agencies were not statutorily 

authorized to issue the cease-and-desist orders and that the 

Agreement did not constitute a § 19 “pretrial diversion or 

similar program.” Seeking to avoid the consequences of the 

ALJ’s recommendations, DeNaples entered into a 

“superseding addendum” to the Agreement with the 

Pennsylvania district attorney acknowledging the parties 

negotiated and executed the Agreement with the 

understanding that “the criminal charges against Mr. 

DeNaples would under no circumstances be disposed of in a 

manner that would constitute, or that could be construed as 

constituting, Mr. DeNaples’ entry into a pretrial diversion or 

similar program”; he also successfully sought expunction of 

all records of the charges, including the Agreement. But to no 

avail. Both OCC and the Board generally adopted the ALJ’s 

recommendations and, in the spring of 2012, issued the 

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dreaded cease-and-desist orders, requiring DeNaples to stop 

violating § 19 and to terminate his relationships with First 

National, Bancorp, and Urban. DeNaples then filed these 

petitions for review. 

II 

 

 DeNaples argues that the agencies’ cease-and-desist 

orders exceeded their statutory authority under FDIA § 8(b), 

which empowers OCC and the Board to initiate cease-anddesist proceedings against an institution-affiliated party who 

is violating or has violated a law. See 12 U.S.C. § 1818(b). 

The provision is hardly a model of clarity, but the parties’ 

dispute allows us to avoid wandering FDIA’s linguistic 

labyrinth: DeNaples challenges only the agencies’ use of their 

cease-and-desist powers to remove him from office when 

FDIA provides specific removal mechanisms in § 8(e) and 

(g). Subsection (e) empowers the agencies to remove 

institution-affiliated parties from office or prohibit them from 

participating in the affairs of depository institutions if and 

only if the appropriate agency can establish misconduct, 

culpability, and a statutorily-defined effect.1 Proffitt v. FDIC, 

 1

 In relevant part, subsection (e) (“Removal and prohibition 

authority”) reads: 

(1) AUTHORITY TO ISSUE ORDER.—Whenever the appropriate 

Federal banking agency determines that— 

(A) any institution-affiliated party has, directly or 

indirectly— 

(i) violated— 

(I) any law or regulation; 

. . . . 

(B) by reason of the violation, practice, or breach 

described in . . . subparagraph (A)— 

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200 F.3d 855, 862 (D.C. Cir. 2000). Subsection (g), 

meanwhile, authorizes removal and prohibition when there is 

a conviction or a “pretrial diversion or other similar program” 

in connection with certain crimes, but agencies may invoke 

this authority only if the individual’s continued participation 

in the institution’s affairs threatens public confidence in the 

institution or the interests of the depositors. 12 U.S.C. 

§ 1818(g)(1).2

 DeNaples insists the agencies may remove 

 

(i) such insured depository institution or business 

institution has suffered or will probably suffer 

financial loss or other damage; 

(ii) the interests of the insured depository 

institution’s depositors have been or could be 

prejudiced; or 

(iii) such party has received financial gain or other 

benefit by reason of such violation, practice, 

or breach; and 

(C) such violation, practice, or breach— 

(i) involves personal dishonesty on the part of 

such party; or 

(ii) demonstrates willful or continuing disregard 

by such party for the safety or soundness of 

such insured depository institution or business 

institution, 

the appropriate Federal banking agency for the depository 

institution may serve upon such party a written notice of the 

agency’s intention to remove such party from office or to 

prohibit any further participation by such party, in any manner, 

in the conduct of the affairs of any insured depository 

institution. 

12 U.S.C. § 1818(e). 

2

 In relevant part, subsection (g) (“Suspension, removal, and 

prohibition from participation orders in the case of certain criminal 

offenses”) reads: 

(1) SUSPENSION OR PROHIBITION.— 

. . . . 

(C) REMOVAL OR PROHIBITION.— 

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institution-affiliated parties from office only through one of 

these two mechanisms. We review de novo the agencies’ 

interpretation of their cease-and-desist authority, see Grant 

Thornton, LLP v. Office of the Comptroller of the Currency, 

514 F.3d 1328, 1331 (D.C. Cir. 2008), and affirm. 

DeNaples swims against the current because he asks us to 

restrict what the statute apparently authorizes. DeNaples 

concedes he is an “institution-affiliated party” and never 

disputes that § 19 is a “law,” so assuming the agencies 

properly determined that DeNaples triggered the § 19 

prohibition, DeNaples continues to violate it while he 

maintains his relationships with First National, Bancorp, and 

Urban without the requisite agency consent. We take no 

position on whether § 8(b) generally authorizes removal and 

prohibition orders, see Kaplan v. U.S. Office of Thrift 

 

(i) IN GENERAL.—If a judgment of conviction or an 

agreement to enter a pretrial diversion or other similar 

program is entered against an institution-affiliated 

party in connection with a crime [either involving 

dishonesty or breach of trust, punishable by more 

than one year of imprisonment under either state or 

federal law, or that violates specified federal statutes], 

at such time as such judgment is not subject to further 

appellate review, the appropriate Federal banking 

agency may, if continued service or participation by 

such party posed, poses, or may pose a threat to the 

interests of the depositors of, or threatened, threatens, 

or may threaten to impair public confidence in, any 

relevant depository institution . . ., issue and serve 

upon such party an order removing such party from 

office or prohibiting such party from further 

participation in any manner in the conduct of the 

affairs of any depository institution without the prior 

written consent of the appropriate agency. 

12 U.S.C. § 1818(g). 

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Supervision, 104 F.3d 417, 420 & n.1 (D.C. Cir. 1997), and 

indeed, the agencies tell us it does not. But this is a case 

where an individual’s relationship with the financial 

institution in question is itself the legal violation, a unique 

enforcement scenario, and on such facts, an agency ceaseand-desist order is not rendered improper because it entails 

the individual’s removal and prohibition. 

We are mindful of the obligation both to recognize the 

agencies’ “broad authority,” Golden Pac. Bancorp v. Clarke, 

837 F.2d 509, 512 (D.C. Cir. 1988), and to preserve the 

statute’s “remedial safeguards,” Oberstar v. FDIC, 987 F.2d 

494, 502 (8th Cir. 1993). Section 8, after all, balances the 

need to protect financial institutions and the economy against 

concerns of fairness and the need to protect against the 

possibility of abuse. But we are also mindful of the 

“fundamental principle that where Congress has entrusted an 

administrative agency with the responsibility of selecting the 

means of achieving the statutory policy the relation of remedy 

to policy is peculiarly a matter for administrative 

competence.” Kornman v. SEC, 592 F.3d 173, 186 (D.C. Cir. 

2010) (ellipsis and internal quotation marks omitted). And so 

it is here. Whatever the arguments against an agency’s general 

use of cease-and-desist authority to remove officers, see, e.g.,

S. REP. NO. 94-843, at 6 (May 13, 1976) (explaining that 

cease-and-desist action “can be taken to require the cessation 

of such practices short of removal of the individual from 

participation in the affairs of the institution” (emphasis 

added)); Seidman v. Office of Thrift Supervision, 37 F.3d 911, 

929, 939 (3d Cir. 1994) (similar), they have less force when 

the agency uses the power to enforce § 19. Subsection (e)’s 

misconduct, culpability, and effect requirements may have no 

analogue in § 19, but § 19 serves the same function as a proxy 

for Congress’s judgment that certain predicate facts are 

immediately disqualifying; and there is no call to fear 

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unbridled agency action when the agency action does no more 

than enact congressional will. Likewise, though a single set of 

predicate facts might trigger both subsection (g) and § 19—

suggesting that a cease-and-desist order could be an end-run 

around the limits Congress imposed on the agencies’ 

prohibition authority—the benefits and detriments are pretty 

evenly matched: subsection (g) requires only a 

postdeprivation hearing, 12 U.S.C. § 1818(g)(3), while 

subsection (b) requires predeprivation procedures, id.

§ 1818(b)(1),3

 thus enabling the agencies to pick the 

enforcement mechanism “best-suited to a given situation in 

light of the balance between supervisory exigency and due 

process concerns.” Resp’t’s Br. at 46; see FDIC v. Mallen, 

486 U.S. 230, 236 n.7, 246 n.12 (1988) (explaining that § 19 

suspension or removal “does not moot a § 1818(g) 

suspension” because “[i]n certain respects, the § 1818(g) 

suspension is broader in scope than the § 1829 suspension, 

thus giving . . . the § 1818(g) suspension at least a marginal 

effect”). 

That there is overlap among the various enforcement 

provisions is not surprising. Congress sought to give the 

agencies “more effective regulatory powers to deal with crises 

in financial institutions.” Mallen, 486 U.S. at 232. In doing so, 

Congress could reasonably hand the agencies a palette 

sufficiently sophisticated to capture the full spectrum of 

 3

 For this reason, we reject DeNaples’ suggestion that the 

agencies’ invocation of subsection (b) implicates due process 

concerns because it does not impose the same sort of constraints on 

the agencies’ use of the power as do subsections (e) and (g).

DeNaples’ assertion that under Feinberg v. FDIC, 420 F. Supp. 109 

(D.D.C. 1976), the original version of subsection (g) was 

constitutionally defective because it contained no standards to guide 

agencies’ discretion is imprecise. See FDIC v. Mallen, 486 U.S. 

230, 234 n.4 (1988). 

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enforcement possibility. See RadLAX Gateway Hotel, LLC v. 

Amalgamated Bank, 132 S. Ct. 2065, 2072 (2012) (explaining 

that the interpretive canon that the specific governs the 

general is “not an absolute rule,” only a “strong indication of 

statutory meaning that can be overcome by textual indications 

that point in the other direction”). 

III 

 

The agencies’ statutory authority to enforce § 19 

notwithstanding, their cease-and-desist orders are proper only 

if DeNaples in fact violated the statute. Predictably, DeNaples 

claims he did not. Before reaching the merits, however, we 

must address the Board’s claim that its interpretations of 

FDIA § 19 are entitled to deference under Chevron, U.S.A., 

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 

(1984). They are not. Justifications for deference begin to fall 

when an agency interprets a statute administered by multiple 

agencies. See Bowen v. Am. Hosp. Ass’n, 476 U.S. 610, 642 

n.30 (1986). This Court has accordingly distinguished among 

“generic statutes like the APA, FOIA, and FACA,” statutes 

like FDIA under which agencies have specialized—but 

potentially overlapping—authority, and statutes “where expert 

enforcement agencies have mutually exclusive authority over 

separate sets of regulated persons.” Collins v. Nat’l Transp. 

Safety Bd., 351 F.3d 1246, 1253 (D.C. Cir. 2003). It is only 

the last category that unequivocally demands deference. 

We have repeatedly pointed to the agencies’ joint 

administrative authority under FDIA to justify refusing 

deference to their interpretations.4 See, e.g., Grant Thornton, 

 4

 We have not been entirely consistent and unambiguous on 

this point. In Stoddard v. Board of Governors of the Federal 

Reserve System, 868 F.2d 1308, 1310 (D.C. Cir. 1989), for 

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LLP, 514 F.3d at 1331; Proffit, 200 F.3d at 860, 863 n.7; 

Rapaport v. U.S. Dep’t of Treasury, Office of Thrift 

Supervision, 59 F.3d 212, 216–17 (D.C. Cir. 1995); Wachtel 

v. Office of Thrift Supervision, 982 F.2d 581, 585 (D.C. Cir. 

1993). We have never addressed § 19, but we will not change 

course now. 

Section 19 vests the Board with exclusive authority to 

allow persons who would otherwise be excluded to participate 

in the affairs of bank and savings and loan holding 

companies. See 12 U.S.C. § 1829(d)–(e). But that does not 

mean the Board has exclusive enforcement authority over 

§ 19 violations. See, e.g., United States v. Carter, 652 F.3d 

894, 897 (8th Cir. 2011) (affirming district court’s sentencing 

declaration under 12 U.S.C. § 1829 that convicted defendant 

“shall not obtain employment in an institution insured by the 

FDIC”). As this case illustrates, a single individual may be 

subject to enforcement action by multiple agencies, and were 

we to defer to the Board’s interpretation here, we “would lay 

the groundwork for a regulatory regime in which either the 

same statute is interpreted differently by the several agencies 

or the one agency that happens to reach the courthouse first is 

allowed to fix the meaning of the text for all.” Rapaport, 59 

F.3d at 216–17. We have no reason to think Congress 

intended such “peculiar corollaries.” Id. at 217. 

Accepting the possibility of multiple coexisting 

interpretations as the Board urges us to do is particularly 

problematic because, as the Board informs us, § 19 violations 

 

example, we summarily invoked Chevron in rejecting the Board’s 

interpretation of FDIA § 8(e). Other circuits have taken a similar 

approach. See, e.g., Akin v. Office of Thrift Supervision Dep’t of 

Treasury, 950 F.2d 1180, 1185 (5th Cir. 1992); Van Dyke v. Bd. of 

Governors of Fed. Reserve Sys., 876 F.2d 1377, 1379 (8th Cir. 

1989).

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may trigger criminal penalties. There is therefore a 

compelling need for interpretive uniformity. See Collins, 351 

F.3d at 1253; cf. United States v. Santos, 553 U.S. 507, 514 

(2008) (plurality opinion) (noting “the fundamental principle 

that no citizen should be held accountable for a violation of a 

statute whose commands are uncertain, or subjected to 

punishment that is not clearly prescribed”). No one should 

face “multiple and perhaps conflicting interpretations of the 

same requirement,” Collins, 351 F.3d at 1253, when 

disobedience may result in imprisonment and million-dollara-day penalties. See 12 U.S.C. § 1829(b). 

IV 

 DeNaples argues he did not violate § 19 because he never 

entered into a “pretrial diversion or similar program” and 

because the record of his prosecution has been expunged. We 

agree the agencies need to reevaluate both issues. 

A 

In determining that the Agreement constituted a “pretrial 

diversion or similar program,” both agencies claimed they 

considered the “ordinary meaning” of the phrase and 

concluded it extends to any diversion from prosecution in 

exchange for an agreement to abide by particular conditions. 

As OCC put it, the provision is triggered any time an 

individual is “diverted from prosecution by agreeing to certain 

conditions”—that is, by any “quid pro quo for the 

prosecutor’s withdrawal of charges.” The Board, in turn, 

offered a tighter definition, concluding the provision turns on 

whether the agreement provides for both a “suspension or 

eventual dismissal of charges or criminal prosecution” and a 

“voluntary agreement by the accused to treatment, 

rehabilitation, restitution or other noncriminal or nonpunitive 

USCA Case #12-1162 Document #1417662 Filed: 01/29/2013 Page 12 of 22
13 

alternatives,” but it ultimately applied an approach much 

closer to OCC’s, determining that the Agreement fell within 

the statutory ambit because “the District Attorney withdrew 

criminal perjury charges against Respondent conditioned on 

Respondent agreeing to certain noncriminal alternatives.” 

Neither approach works. The agencies properly sought the 

ordinary meaning of the statutory phrase, see Taniguchi v. 

Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012), but 

despite their efforts, they did not find it. 

 “[T]here is no one model of pretrial diversion,” John 

Clark, PRETRIAL JUSTICE INST., PRETRIAL DIVERSION AND THE 

LAW I-1 (2006), but a few conceptual threads loosely bind the 

myriad definitions. Generally, the term “pretrial diversion” 

refers to (1) a discrete program that (2) seeks some offenderor community-oriented outcome. The term is thus defined by 

functional, not formal, criteria; it is nothing more than a 

recognition that not all offenders need be clapped in irons. 

See, e.g., United States v. Moore, 486 F.2d 1139, 1193 (D.C. 

Cir. 1973); NATIONAL ASSOCIATION OF PRETRIAL SERVICES 

AGENCIES, PERFORMANCE STANDARDS AND GOALS FOR 

PRETRIAL DIVERSION/INTERVENTION 1–2 (2008) (“NAPSA,

PRETRIAL DIVERSION”). A standard pretrial diversion might 

therefore require education, job services and vocational 

training, counseling and psychiatric care, community service, 

or restitution payments. See, e.g., BLACK’S LAW DICTIONARY 

546, 1307 (9th ed. 2009); DEP’T OF JUSTICE, UNITED STATES 

ATTORNEYS’ MANUAL: CRIMINAL RESOURCE MANUAL

§ 712(E) (1997); NATIONAL ASSOCIATION OF PRETRIAL 

SERVICES AGENCIES, PRETRIAL DIVERSION IN THE 21ST 

CENTURY: A NATIONAL SURVEY OF PRETRIAL DIVERSION 

PROGRAMS AND PRACTICES 5 (2009). But at the very least, 

pretrial diversion is more than just a quid pro quo resulting in 

the dismissal of charges. A plea bargain, for instance, would 

not be a pretrial diversion, no matter its similarity to pretrial 

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diversion for other purposes, see, e.g., United States v. Harris, 

376 F.3d 1282, 1287 (11th Cir. 2004), nor would an 

agreement to testify against a codefendant. Indeed, the 

prosecutor might have overcharged the defendant in the first 

place hoping to leverage a deal. See H. Mitchell Caldwell, 

Coercive Plea Bargaining: The Unrecognized Scourge of the 

Justice System, 61 CATH. U. L. REV. 63, 65 & n.13 (2011). If a 

quid pro quo alone triggered § 19, an individual like 

DeNaples who wished to maintain his relationship with a 

bank or bank holding company would have to throw the dice 

and hope either the prosecutor unilaterally dismisses the 

charges or that he prevails at trial. 

The statutory expansion of the pretrial diversion concept 

through the “or similar program” language does not, as the 

agencies suggested at oral argument, disconnect “pretrial 

diversion” from the term “program”; it expands the category 

to encompass programs that do not necessarily constitute 

pretrial diversion. If, for instance, pretrial diversion is 

available only in cases with “prosecutorial merit,” see 

NAPSA, PRETRIAL DIVERSION, at 3, or where defendants 

“acknowledge responsibility for their actions,” Taylor v. 

Gregg, 36 F.3d 453, 455 (5th Cir. 1994), the phrase “or 

similar program” ensures the provision might nonetheless be 

triggered where the prosecutor decides the case cannot be 

successfully prosecuted or where the arrangement does not 

require the defendant to acknowledge responsibility. Or it 

might be triggered by a defendant who does not meet the 

formal eligibility criteria of the available pretrial diversion 

program, see, e.g., Note, Pretrial Diversion from the Criminal 

Process, 83 YALE L.J. 827, 832–34 (1974), or where the 

program involves specialty courts like drug courts, which 

arguably do not amount to pretrial diversion because they 

require the participation of judicial officers. See, e.g., United 

States v. Hicks, 693 F.2d 32, 34 (5th Cir. 1982) (“[N]o 

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15 

‘adjudicative element’ is present in the pretrial diversion 

context . . . .”); Joseph M. Zlatic et al., Pretrial Diversion: 

The Overlooked Pretrial Services Evidence-Based Practice, 

FED. PROBATION, Vol. 74, June 2010, at 29 (“Zlatic et al., 

Pretrial Diversion”) (differentiating pretrial diversion from 

“seemingly similar programs, such as specialty courts” that 

involve a “judicial officer”). But whatever the contours of the 

programs that trigger §19, the ultimate effect of the “or 

similar program” language is not to turn the statute from a 

scalpel into a chainsaw; it simply ensures that competition 

among the various definitions of “pretrial diversion” does not 

short-circuit the statute. 

To be clear, we do not establish a set of necessary or 

sufficient criteria for the term “pretrial diversion” or for the 

types of programs that are “similar” to pretrial diversion 

programs: the concepts are not amenable to that sort of 

precision. But the statutory text dictates a set of parameters 

the agencies may not exceed. The Board’s definition—

invoking “treatment, rehabilitation, restitution”—

acknowledges these parameters, and the agencies’ counsel 

confirmed them at oral argument when he applied the ejusdem 

generis canon of interpretation5

 to that definition and 

conceded that a defendant’s agreement not to sue the state for 

malicious prosecution, to be reaffirmed every year for five 

years, would not fall within the Board’s catch-all category of 

“other noncriminal or nonpunitive alternatives.” We agree 

with this approach. Adherence to the parameters dictated by 

the text, generally referenced by the Board’s definition, and 

confirmed by the agencies’ counsel at oral argument is 

 5

 “A canon of construction holding that when a general word 

or phrase follows a list of specifics, the general word or phrase will 

be interpreted to include only items of the same class as those 

listed.” BLACK’S LAW DICTIONARY 594 (9th ed. 2009). 

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particularly important because § 19 violations may trigger 

steep criminal penalties: the nature of that trigger must be 

clear. The agencies’ approaches must accordingly be 

consistent with the nature of pretrial diversion; clarity 

demands no less. We therefore remand for both agencies to 

reconsider whether DeNaples’ Agreement constitutes a 

“pretrial diversion or similar program.” 

We offer the following additional observation to guide 

the agencies on remand: the agencies’ claim that state law is 

irrelevant to defining “pretrial diversion or similar program” 

misses the relationship between federal and state law in this 

context. Section 19 ties the “pretrial diversion or similar 

program” to “a prosecution for such offense,” namely “any 

criminal offense involving dishonesty or a breach of trust or 

money laundering.” As the expansive “any” suggests—and as 

the agencies’ enforcement actions in this case confirm—the 

category of offenses that trigger § 19 includes more than 

federal law. See, e.g., Farlow v. Wachovia Bank of N.C., N.A., 

259 F.3d 309, 311 (4th Cir. 2001); see also Scott v. Illinois, 

440 U.S. 367, 380 n.10 (1979) (Brennan, J., dissenting). 

Whether someone triggers § 19 by agreeing to enter a pretrial 

diversion therefore cannot be neatly severed from the 

predicate offense, and we expect agencies will heed the 

nuances of federalism. To the extent Congress was concerned 

with punishment and expected § 19 to do more than just 

provide the agencies a vehicle to make technical 

determinations of fitness unique to the financial industry, its 

expectations are vindicated by the incorporation of state law 

into an agency’s § 19 calculus. See, e.g., H.R. REP. NO. 101-

681(I), at 69, 171, 173 (Sept. 5, 1990), reprinted in 1990 

U.S.C.C.A.N. 6472, 6473, 6577, 6579; cf. Nat’l State Bank, 

Elizabeth, N.J. v. Long, 630 F.2d 981, 988 (3d Cir. 1980) 

(explaining about § 8(b) that Congress “was concerned not 

only with federal but with state law as well, particularly as it 

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17 

might bear on corruption of bank officials or the financial 

stability of the institution,” so a state prohibition might 

“directly implicate[] concerns in the banking field”). Of 

course, as our discussion of the “or similar program” language 

makes clear, a finding that the Agreement does not fall under 

any state conception of pretrial diversion would not preclude 

application of § 19. Indeed, if, as OCC suggested in a letter to 

DeNaples and the ALJ subsequently affirmed, the terms of the 

Agreement amounted to a restitution plan, the extension of 

§ 19 to the Agreement may very well be proper. But if not, we 

expect the agencies’ ultimate decisions to nevertheless 

account for the importance of a mechanism for putting 

individuals like DeNaples—who negotiated the Agreement 

precisely because it would have no § 19 implications—on 

notice about what triggers § 19.

The Board recognized the potential relevance of state law 

in its decision below, but it also appears to have minimized 

the relevance by claiming that state law definitions of 

“pretrial diversion” are “not meant to address” the statutory 

interest in assessing “the benefits and risks of [individuals’] 

continued involvement in banking.” There is a difference, 

however, between the Board’s administrative authority to 

grant waivers and the events that trigger § 19 in the first 

place. Perhaps state law does not track the interests of federal 

regulators, but when congressional judgment about what 

should trigger § 19 in the first place turns on state law 

precisely because of the interests that the state law 

presumably seeks to vindicate, the ostensible gap between the 

interests of state actors and federal regulators is a non 

sequitur. 

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B 

DeNaples rests his entire expunction argument on an 

FDIC policy statement excluding “completely expunged” 

convictions from the scope of § 19. FDIC Statement of Policy 

on FDIA Section 19, 63 Fed. Reg. 66,177, 66,180, 66,184 

(Dec. 1, 1998) (“FDIC Policy Statement”). An expunction is 

complete, FDIC explained, when “the records of conviction 

are not accessible by any party, including law enforcement, 

even by court order.” Clarification of Statement of Policy for 

Section 19 of the Federal Deposit Insurance Act, 76 Fed. Reg. 

28,031, 28,032 (May 13, 2011). According to DeNaples, 

because no one—including law enforcement, state licensing 

authorities, or other governmental officials—is permitted 

access to the record of his prosecution, even by court order, 

§ 19 does not apply. 

In the cease-and-desist proceedings, the agencies rejected 

the FDIC policy as irrelevant. OCC punted on the issue, 

explaining that the expunction is relevant only to an FDIC 

waiver decision and declaring that the Agreement had legal 

force under Pennsylvania law for a period before it was 

expunged, so DeNaples in fact violated the statute at some 

point. The Board, meanwhile, stated that it is not bound by the 

FDIC policy, and even if the policy applied, its treatment of 

expunged convictions does not govern an expunged 

prosecution; this makes sense, the Board reasoned, because 

§ 19 addresses the historical fact of an agreement to enter a 

pretrial diversion or similar program, which expunction does 

not affect. 

According to DeNaples, however, OCC and the Board in 

fact adopted the FDIC policy, rendering their refusals to 

follow that policy arbitrary and capricious. In particular, he 

points to (1) a rule implementing the Secure and Fair 

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Enforcement for Mortgage Licensing Act the agencies jointly 

adopted, in which they expressly invoked FDIC’s § 19 

exemption of expunged convictions as the touchstone for 

determining the scope of certain regulated parties’ disclosure 

obligations, see Registration of Mortgage Loan Originators, 

75 Fed. Reg. 44,656, 44,670 (July 28, 2010); and (2) an 

interim final rule the Board issued “to implement section 19 

of the FDI Act with respect to [savings and loan holding 

companies]” after the Dodd-Frank Wall Street Reform and 

Consumer Protection Act gave the Board supervisory 

authority over them. Savings and Loan Holding Companies 

Rule, 76 Fed. Reg. 56,508, 56,518 (Sept. 13, 2011). In the 

interim final rule, the Board explained that § 19 is not 

triggered with respect to savings and loan holding companies 

by “arrests, pending cases not brought to trial, . . . or 

expunged convictions.” Id. at 56,551.6

 Though DeNaples does 

not point it out, we note also that OCC’s initial § 19 

enforcement letter to DeNaples twice invoked the FDIC 

policy statement to justify its legal conclusion. OCC further 

noted in its decision below an FDIC staff lawyer’s 

explanation that the FDIC policy statement does not 

distinguish between expunction of convictions and expunction 

of a pretrial diversion agreement. (It is not clear whether this 

contradicts FDIC’s assertion in the preamble to its policy 

statement that exempting expunged convictions “appears to 

create an anomalous result when compared with” the pretrial 

 6

 The agencies suggest DeNaples waived these arguments by 

not raising them below, see Coburn v. McHugh, 679 F.3d 924, 929 

(D.C. Cir. 2012), but the record belies the agencies’ claim: 

DeNaples raised the issue, and the agencies’ orders clearly reflect 

their respective positions on the matter. The agencies essentially 

ask us to find waiver because DeNaples failed to point the agencies 

to their own regulations. This we will not do. See Nuclear Energy 

Inst. v. EPA, 373 F.3d 1251, 1290–92 (D.C. Cir. 2004); White v. 

U.S. Dep’t of the Army, 720 F.2d 209, 211 (D.C. Cir. 1983). 

USCA Case #12-1162 Document #1417662 Filed: 01/29/2013 Page 19 of 22
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diversion language in § 19. See FDIC Policy Statement, 63 

Fed. Reg. at 66,180.) 

Synthesizing the various agencies’ positions, we are 

apparently left with a scheme that, in practice, operates as 

follows. First, FDIC takes the position that individuals whose 

pretrial diversion agreements have been completely expunged 

need not apply for a § 19 waiver because the statute exempts 

them. Second, OCC relied on FDIC’s policy statement when 

it initiated its enforcement against DeNaples, but it 

nevertheless believes that, notwithstanding a subsequent 

expunction, the pre-expunction period is sufficient to trigger 

§ 19 and, therefore, its waiver scheme—even though the 

agency administering that waiver scheme does not recognize 

the need for a waiver application. Third, the Board disclaims 

the relevance of the FDIC policy statement with respect to 

bank holding companies, but it adopted an equivalent 

approach with respect to savings and loan holding companies 

even though § 19 provides no clear textual basis for treating 

the two types of institutions differently. Perhaps, as the Board 

now explains, the interim final rule simply preserved the 

status quo set by the Office of Thrift Supervision when it 

regulated savings and loan holding companies, but that does 

not change the consequence of the interim final rule. Fourth, 

both OCC and the Board adopted FDIC’s position on 

expunged convictions in the course of administering a 

different statute. Different statutes, of course, reflect different 

policy goals and seek to achieve different real-world results, 

so an agency might reasonably take different approaches to 

similar issues in different statutes, but the effect in this 

context is bizarre. 

This is untenable. Discerning the effect of an expunged 

conviction under § 19, let alone an expunged pretrial 

diversion arrangement, is like trying to draw a twoUSCA Case #12-1162 Document #1417662 Filed: 01/29/2013 Page 20 of 22
21 

dimensional shape on the surface of a grapefruit. As we have 

explained, the operation of a statute that may result in the type 

of severe criminal penalties imposed by § 19 must be clearer. 

On remand, we expect the agencies to sort out their respective 

positions. 

DeNaples’ argument that the agencies acted arbitrarily 

turns on the FDIC policy statement both exempting 

expunction of pretrial diversion agreements and binding OCC 

and the Board on that point. The agencies argue that is not 

clearly the case, and we agree. See FDIC Policy Statement, 63 

Fed. Reg. at 66,180. However, other explanations by the 

regulators have less traction. While distinctions between 

convictions and pretrial diversions may be justifiable, the 

agencies must acknowledge these differences explicitly—and 

consistently—and explain why they make sense or why the 

policy statement should govern in some instances but not 

others. See County of L.A. v. Shalala, 192 F.3d 1005, 1022 

(D.C. Cir. 1999) (“A long line of precedent has established 

that an agency action is arbitrary when the agency offer[s] 

insufficient reasons for treating similar situations 

differently.”). Until now, the agencies have dedicated little 

effort to that explanatory enterprise, focusing rather on the 

applicability of the policy statement to the Agreement. On 

remand, then, we instruct the agencies to offer a rational 

explanation for the applicability (or not) of the policy 

statement and a rational distinction (if they have one) between 

expunction of convictions and expunction of pretrial diversion 

programs. Such is the essence of reasoned decision making. 

V 

 Because the agencies applied an improper definition of 

“pretrial diversion or similar program” and failed to 

adequately justify their positions on DeNaples’ expunction, 

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we grant DeNaples’ petitions for review in part, vacate the 

agencies’ orders, and remand for the agencies to determine 

whether the Agreement falls within the parameters we now 

identify. In its current form, the agencies’ scattergun approach 

is too unpredictable. We deny DeNaples’ petitions in all other 

respects. 

So ordered. 

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