Opinion ID: 3009588
Heading Depth: 2
Heading Rank: 6

Heading: The OTS Investigation, Charges and

Text: Seidman's District Court Action Though Crestmont had made no prohibited loan and now proposed none, OTS went on with its investigation into what it suspected were violations of OTS's regulations on conflict of interest. On September 13, 1991, OTS deposed Seidman, focusing on the draft letter Seidman had faxed to Risko. Seidman never admitted writing the original draft of Risko's letter. He said he believed that Risko had dictated it over the phone to Seidman's secretary, Janet Greenhill (Greenhill). Greenhill testified she did not remember these details.12 Seidman admitted that he had approved the text of the letter as sent with the additional sentence stating it would be in UJB's best interest to free him from the guarantee because that could open another source of end-user financing for FSA. After he was deposed, Seidman learned that Risko and Poole & Co.'s records had been subpoenaed by OTS and that Risko planned to testify on deposition without an attorney. Seidman called Risko to find out what Poole & Co.'s files contained concerning Seidman's request for a release from his guarantee and asked whether he could review the file. Risko testified he told 12 . Greenhill did testify it was her practice to put Seidman's initials on any letter he dictated to her and there were no such initials on the initial draft of Risko's letter. She also testified it was not unusual for her to take dictation from others over the phone. Seidman that he had a fax of the initial draft along with the fax sheets showing it was transmitted from Crestmont. On September 16, 1991, before his OTS deposition, Risko met with Seidman. Seidman testified Risko told him he was going to tell OTS the letter was Seidman's idea. Seidman testified he told Risko this was a lie. Seidman said he reviewed the file and pulled out a number of documents relating to his request for a release. Risko testified Seidman asked him to make sure that [the documents] get thrown away and asked Risko to do his best to make sure [the documents were] not around. Seidman Appendix (Seidman App.) at 347-48. Risko also testified that Seidman told him to forget the documents ever existed. Seidman emphatically denies ever saying this. Both Risko and Seidman agree that Seidman told Risko he should tell OTS the truth. Things grew tense. Risko left the room to speak with Poole. Seidman was left alone with the documents. Poole reentered the conference room, picked up the draft, crumpled it and left the room with it. Seidman followed Poole to his office where they had a heated exchange. Seidman grabbed the crumpled copy of the draft and tore it up. Seidman testified he did this in a rage of anger after learning Risko had made copies of all the relevant documents. Id. at 481-82. Risko testified he never informed Seidman that copies existed.13 13 . The ALJ found Seidman destroyed the documents intentionally but it was done in a fit of anger and not for the purpose of destroying material and relevant evidence. Seidman App. at 49. The Director's decision concluded cryptically that the ALJ found Seidman had destroyed material evidence. While the ALJ found On October 30, 1991, OTS filed notice of charges against Seidman and Bailey.14 On the same day, it issued a preliminary Order of Suspension removing Seidman from his posts at Crestmont without pay.15 From April 20, 1992, through May 1, 1992, Treasury Department ALJ Walter Alprin (Alprin) held hearings on the charges against Seidman and Bailey. On August 13, 1992, Alprin issued his decision recommending that the Director issue a Removal and Prohibition Order permanently barring Seidman from any work in the banking field and assessing $930,000 in civil penalties against him. Alprin also recommended an order directing Bailey to cease and desist from engaging in (..continued) Seidman engaged in a number of culpable acts, it seems clear that the ALJ did not think destruction of evidence was one of them. 14 . The OTS sought the following relief against Seidman: (1) a preliminary order immediately suspending Seidman from his office at Crestmont and from further participating in Crestmont's affairs; (2) an order removing Seidman from his office at Crestmont and banning him from the banking industry; (3) disgorging any unjust enrichment or avoidance of loss; (4) providing a new guarantee to UJB on the FSA loan; (5) civil monetary penalties; and (6) any other relief the Director deemed appropriate. 15 . Seidman commenced a district court action seeking a preliminary injunction to enjoin further enforcement of the Order of Suspension on February 7, 1992. In his complaint, Seidman alleged that the Order of Suspension was facially invalid because it exceeded OTS's statutory authority. On February 17, 1992, OTS filed a motion for dismissal under Federal Rule of Civil Procedure 12(b)(1), 12(b)(6), or, in the alternative, summary judgment under Federal Rule of Civil Procedure 56. On May 22, 1992, the district court granted OTS's Rule 12(b)(1) motion and dismissed the Rule 12(b)(6) and Rule 56 motions as moot. Because we will grant Seidman's petition for review and reverse the Director's order removing him from office and banning him from banking, we do not consider Seidman's appeal of the May 22, 1992 order. See infra Part VII. any unsafe or unsound practices in conducting the business of any financial institution . . . . Id. at 89. Alprin did not recommend any monetary penalty against Bailey.