Source: https://law.resource.org/pub/us/case/reporter/F3/111/111.F3d.376.96-60326.html
Timestamp: 2019-12-13 15:12:44
Document Index: 63309530

Matched Legal Cases: ['§ 1842', '§ 1841', '§ 1843', '§ 1847', '§ 1842', '§ 2462', '§ 1843', '§ 1847', '§ 2462', '§ 1841', '§ 1841', '§ 1841', '§ 161', '§ 1847', '§ 1847', '§ 1818', '§ 1818', '§ 1818', '§ 1847', '§ 1847', '§ 1818', '§ 1818', '§ 1818', '§ 1818', '§ 263', '§ 263', '§ 1818', '§ 1818', '§ 1818']

111 F.3d 376
INTERAMERICAS INVESTMENTS, LTD. and Peter Ulrich, Petitioners,
No. 96-60326.
The Board concurred in the extremely detailed and extensive findings of the Administrative Law Judge that, through a series of surreptitious transactions, Interamericas Investments, Ltd. (IAI), a Cayman Islands corporation largely owned by Mexican nationals, acquired and retained control of the National Bank of Conroe (NBC), of Conroe, Texas. Such conduct clashed with the Bank Holding Company Act (BHCA), which requires, inter alia, prior approval by the Board for "any action to be taken that causes any company to become a bank holding company". 12 U.S.C. § 1842(a)(1).
A company becomes a bank holding company when it acquires "control" of a bank, defined as: owning, controlling, or having the "power to vote 25 per centum or more of any class of voting securities of the bank"; or "control[ling] in any manner the election of a majority of the directors or trustees of the bank"; or exercising a direct or indirect "controlling influence over the management or policies of the bank". 12 U.S.C. § 1841(a)(2). In addition, a bank holding company is prohibited, with certain exceptions, from acquiring or retaining "direct or indirect ownership or control of any voting shares of any company which is not a bank". 12 U.S.C. § 1843(a). For violation of the Act, civil money penalties and cease and desist orders may issue. 12 U.S.C. §§ 1847(b)(1), 1818(b)(3).
Rice also formed a one bank holding company, Sun Belt Bancshares, which would own the NBC shares purchased by the Conroe investors. Twice in 1985, Rice submitted applications to the Federal Reserve Board at Dallas, Texas (FRB-Dallas), seeking approval of Sun Belt as a bank holding company (BHC), under the BHCA, 12 U.S.C. § 1842(a)(1). Both were returned: the first, for being substantially incomplete; the second, which did not mention any relation between Sun Belt and IAI, NBC, or even Rice, for failing to meet the FRB-Dallas' equity structure requirements.
Because the initial violations--such as in July 1985, when Rice and the Conroe investors acquired NBC, and in January 1986, when Sun Belt became a BHC--occurred more than five years prior to commencement of the Board's action, we must determine if IAI's and Ulrich's actions qualify as "continuing violations". In short, under a continuing violation theory, a new claim accrues each day the violation is extant. Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 502 n. 15, 88 S.Ct. 2224, 2236 n. 15, 20 L.Ed.2d 1231 (1968).
A continuing violation applies where the conduct is ongoing, rather than a single event. See Toussie v. United States, 397 U.S. 112, 136, 90 S.Ct. 858, 871, 25 L.Ed.2d 156 (1970)(continuing violations "set on foot by a single impulse and operated by an unintermittent force"). Along that line, statutes of limitations in the civil context are to be strictly construed in favor of the Government against repose. Badaracco v. Commissioner of Internal Revenue, 464 U.S. 386, 104 S.Ct. 756, 78 L.Ed.2d 549 (1984); E.I. DuPont De Nemours & Co. v. Davis, 264 U.S. 456, 462, 44 S.Ct. 364, 366, 68 L.Ed. 788 (1924).
The court should defer to the agency interpretation whether a continuing violation theory is available under a certain statute if the statute of limitations is entrusted to the agency's interpretation, Capital Telephone v. Federal Communications Commission, 777 F.2d 868 (2d Cir.1985). On the other hand, the interpretation of the general statute, § 2462, may not be influenced by the governmental agency bringing the action. 3M v. Browner, 17 F.3d 1453, 1461 (D.C.Cir.1994). With this in mind, we turn to the BHCA, the substantive statute underlying the Board's claim, to determine whether it contemplates a continuing violation theory.
For reporting statutes such as the BHCA, so long as the reporting need not occur within a certain time span, a failure to report certain conditions will generally constitute a continuing violation for so long as the failure to report persists. Hanover Shoe, Inc., 392 U.S. at 502 n. 15, 88 S.Ct. at 2236 n. 15. In addition, the BHCA requires, inter alia, that any company becoming a BHC register with the Board within 180 days of doing so, and that, except under limited circumstances, a BHC not acquire companies performing non-banking functions. 12 U.S.C. §§ 1843(a), 1844(a).
12 U.S.C. § 1847(b)(1)(emphasis added). Where the civil penalty provision at hand contemplates per diem penalties for violations, then continuing violations are cognizable under the general statute of limitations. United States v. Marine Shale Processors, 81 F.3d 1329, 1357 (5th Cir.1996).
Here, the BHCA has more than per diem penalties; as emphasized above, it refers to "continuing violations". Furthermore, the BHCA uses the present tense in describing the offenses, making reasonable reading it as contemplating continuing violations. Abercrombie v. OCC, 833 F.2d 672, 676 (7th Cir.1987).
And, unlike § 2462, the interpretation of the BHCA is entrusted to the Board; therefore, that interpretation is due the deference demanded by Chevron USA v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). To hold other than that a continuing violation is allowed in this instance would be contrary not only to our precedent, but also to the plain language of the BHCA and the Board's interpretation of it.
As for whether a continuing violation of the BHCA occurred, the Act prohibits the unapproved acquisition and retention of a United States bank. As discussed, such acquisition is based on the notion of "control", defined as, inter alia, owning, controlling, or having the power to vote 25 percent of the voting shares of a bank. 12 U.S.C. § 1841(a)(1), (a)(2)(A). So long as the approval has not been received, such control is in violation of the Act. As discussed infra, the Board found sufficient control of NBC by both IAI and Ulrich to trigger the reporting requirements of the BHCA, and neither relinquished control until after the proceeding commenced. Among other violations, this continued control constituted a continuing violation actionable under the BHCA for a period of five years after, among other proscribed actions, IAI and Ulrich last had the power to vote 25 percent of NBC's shares. The Notice of Charges, well within that period, was timely. Along that line, the penalties imposed were well under the maximum for the total number of days that fell within five years of the date of the Notice.
As noted, control exists under the BHCA when, inter alia, a "company directly or indirectly or acting through one or more other persons owns, controls, or has the power to vote 25 per centrum or more of any class of voting securities of the bank or company." 12 U.S.C. § 1841(a)(2)(A). In short, the BHCA may be triggered by, inter alia, the mere potential for manipulation of a bank.
IAI and Ulrich contend that the Board's findings fail to meet a different standard for "control" promulgated with the 1970 revision to the BHCA. That standard triggers the reporting requirements when a "company directly or indirectly exercises a controlling influence over the management or policies of the bank or company". 12 U.S.C. § 1841(a)(2)(C). Because of other discussed violations, we need not look to whether that standard was violated.
First National Bank of Gordon v. OCC, 911 F.2d 57, 63-64 (8th Cir.1990), held that 12 U.S.C. § 161(a), requiring, inter alia, that banks make true condition reports, allowed a cease and desist order for banks which erroneously, but reasonably, believe their reports are correct, absent the statute explicitly imposing such a standard; but, in dicta, it questioned whether civil penalties could be imposed. Petitioners rely on this to maintain that civil penalty provisions which do not state a scienter requirement, such as in the BHCA, 12 U.S.C. § 1847(b)(1), require scienter. Concomitantly, they maintain that we must bear in mind a claimed atmosphere of trust pervading the Mexican economy, so that Ulrich must have implicitly trusted Rice's word that the transactions were legal.
The BHCA defines a "violation" of its provisions as "any action ... for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation". 12 U.S.C. § 1847(b)(5). There is no mention of scienter: the action alone constitutes the violation. Indeed, the very mental state which petitioners contend bars a civil penalty, "good faith", is listed instead in the Act as a mitigating factor for the penalty. 12 U.S.C. § 1818(i)(2)(G). Needless to say, a statute should be read to give effect to all of its language. See Fitzpatrick v. FDIC, 765 F.2d 569, 578 (6th Cir.1985)("good faith goes only to the amount of the penalty" in construction of 12 U.S.C. § 1818(i)(2)(I)(identical to current § 1818(i)(2)(G))).
An agency's penalty determination is reviewed with significant deference. See Butz v. Glover Livestock Comm'n, 411 U.S. 182, 185, 93 S.Ct. 1455, 1457, 36 L.Ed.2d 142 (1973). Accordingly, petitioners concede that the Board's decision not to mitigate the penalties imposed under 12 U.S.C. § 1847(b)(1) is reviewed only under the "arbitrary and capricious" standard. They maintain, however, that there are clearly defined factors which the Board must consider in making that decision: harm, vel non, to the institution or public confidence; willfulness; frequency or recurrence of the alleged violations; cooperation by respondents; concealment or voluntary disclosure; restitution to the institution; previous criticism; compliance by respondents; unsafe or unsound practices; and preventive measures.
Although many of these factors may seem proper for the Board to consider in determining the penalty, they are by no means mandatory. An assessment under 12 U.S.C. § 1847(b)(1) is "subject to" subparagraphs (E),(F),(G), and (I) of 12 U.S.C. § 1818(i)(2)(Federal Deposit Insurance Corporation Act violations). Subsection (G) of § 1818(i)(2) requires only that, for possible mitigation of penalties, the Board consider:
12 U.S.C. § 1818(i)(2)(G). These factors were considered, as hereinafter discussed.
The "gravity of the violation[s]" at issue was correctly considered not to mitigate the penalties. The BHCA was enacted to protect, inter alia, against precisely this sort of control of a United States bank, with little or no accountability among the true owners. Also, the owners used their anonymous ownership of the NBC to launch into other non-banking businesses in the United States, again with little or no accountability.
The factors listed by petitioners as mandatory, but that are not specifically listed in § 1818(i)(2)(G), come from "Relevant considerations for assessment of civil penalty", 12 C.F.R. § 263.62, and In re Rapp, 1992 WL 560907. In short, these two sources are not binding on the Board.
The Notice must contain, inter alia, "[a] statement of the matters of fact or law showing that the Board is entitled to relief" and "[a] proposed order or prayer for an order granting the requested relief". 12 C.F.R. § 263.18(b)(2), (3). Although the Notice did not refer to a general cease and desist order, it did reference a specific cease and desist order, and "other affirmative action" that may be required by petitioners' prior acts. It stated further that the affirmative action "may include divestiture of all of IAI's, Ulrich's and Rice's interests in Sun Belt and NBC".
Petitioners contend that the reference to "other affirmative action" references instead to 12 U.S.C. § 1818(b)(6), which implies a more limited remedy for "other affirmative action". The section appears to equate "[a]ffirmative action" with action "to correct conditions resulting from violations", such as restitution. 12 U.S.C. § 1818(b)(6). A reference to § 1818(b)(6), however, is not explicit in the Notice, and therefore the remedies available to the Board are not so limited.