Opinion ID: 717547
Heading Depth: 2
Heading Rank: 3

Heading: The Modification of the B & H Line of Credit

Text: 35 The FDIC also based its prohibition order on Hutensky's conduct in connection with the modification of the B & H line of credit by Central's board of directors on August 27, 1990. Hutensky contends that there was insufficient evidence to show that he acted with culpability at the August 27th meeting. We agree that the record does not support a determination of culpability as required under § 1818(e)(1)(C). 36 In its Decision and Order, the FDIC made the following findings: 37 9. On August 27, 1990, Hutensky had no contract for the sale of the Mall Partnership. At that time he could not have known whether a sale would take place or the amount of proceeds to be derived from such a sale in the event it did occur. 38 10. On August 27, 1990, when he represented to Central that it would receive $2.2 million from the proceeds of the sale of the Mall Partnership, Hutensky intentionally misled the Bank for the purpose of inducing it to release its security interest in the Mall Partnership. 39 11. Hutensky's intentional misrepresentation that Central would receive $2.2 million from the proceeds of sale of the Mall Partnership was a breach of his fiduciary duty of loyalty to Central and an act of personal dishonesty. 40 We do not think, however, that Hutensky's statements to the Board on August 27, 1990 constituted intentional misrepresentations to Central's board of directors. In his written summary of the modification proposal, Hutensky stated that B & H is in the process of selling [its] interest in the partnership presently held as collateral. The sale will take place in the latter part of 1990 or early 1991. At the time of the August 27th meeting, Hutensky had a draft of a purchase and sale agreement for B & H's interest in the Mall. Thus, B & H was in the process of selling its Mall interest, and Hutensky intended for the sale to take place. The fact that the sale later fell through does not mean that Hutensky's statements on August 27th were misrepresentations. 11 Accordingly, there is insufficient evidence that Hutensky acted with culpability in respect to the August 27, 1990 modification of the B & H line of credit by Central's board. 12 41