Opinion ID: 782377
Heading Depth: 2
Heading Rank: 1

Heading: The Entities, the Transactions, and the Agency Proceedings

Text: 3 De La Fuente became a board member of FIB, formerly known as People's Bank, on March 30, 1987, and served in that position until he was removed. This appeal centers around twelve FIB loans and two loan-related transactions, all of which occurred between 1990 and 1995, involving entities in which De La Fuente, his family, or his close associates were interested. 4 The loans that formed the basis for the removal action are (in chronological order): 5 (1) a May 17, 1990 loan in the amount of $1 million to the Roque de la Fuente Alexander Trust (Fuente Alexander Trust), a revocable trust set up by De La Fuente's father in which De La Fuente had a 25% contingent interest. 6 (2) an October 8, 1990 loan in the amount of $1 million to Rancho de la Fuente International Industrial Park (Fuente/ IIP), an entity owned by De La Fuente's mother through offshore corporations. De La Fuente's mother is a housewife who lives in Mexico City and does not participate in the operations of Fuente/IIP. Jose Luis Andreu, one of De La Fuente's close associates — who is also vice president of American International Enterprises (AIE), a company solely owned by De La Fuente — is the agent for Fuente/IIP. 7 (3) a December 26, 1990 loan in the amount of $400,000 to Rancho Vista del Mar, Inc. (RVDM), another entity owned by De La Fuente's mother through offshore corporations. As he is for Fuente/IIP, Andreu is the company's agent. RVDM has no employees. 8 (4) a January 24, 1992 loan in the amount of $800,000 to RVDM. 9 (5) a July 15, 1992 loan in the amount of $1.6 million to RVDM. 10 (6) September 9, 1992 personal loan to De La Fuente in the amount of $800,000. 11 (7) a July 20, 1995 loan in the amount of $763,000 to the Fine Particle Technology Corporation (FPTC), a company of which De La Fuente owned 5.6%. De La Fuente transferred his interest in FPTC into trusts for his children in 1995. Among FPTC's other shareholders are Andreu (24.42%), and Isaias Zapata (5.02%), another close De La Fuente associate. Andreu is also the president of FPTC, and has been a director and board chairman. This company also has no employees. 12 (8) an August 11, 1995 loan in the amount of $1.35 million to FPTC. 13 (9) an October 27, 1995 loan in the amount of $750,000 to National Enterprises, Inc. (NEI), an entity of which De La Fuente was the sole owner. De La Fuente transferred his interest in NEI into his children's trusts in 1995. The trustees at relevant times were Zapata and Sidney Schwartz, another close De La Fuente associate, who is currently the chairman of the FIB board. Schwartz is also a director of NEI. 14 (10) a November 8, 1995 loan in the amount of $600,000 to FPTC. 15 (11) a December 18, 1995 loan in the amount of $200,000 to C.T. Produce, Inc. (C.T.Produce), an entity of which Andreu is a director, and which is engaged in a joint venture with NEI. 16 (12) a December 28, 1995 loan in the amount of $800,000 to FPTC. 17 The Board's removal order was based on two additional transactions involving collateral for FIB loans: 18 (13) a 1994 FIB decision to accept the substitution of inferior substitute collateral to secure a loan the bank had made to RVDM (the Collateral Substitution Transaction); and 19 (14) a 1995 FIB decision to allow a non-creditworthy NEI employee to assume liability for a loan the bank had made to the Parking Company of America (PCA Transaction). 20 In 1997, the Federal Deposit Insurance Corporation notified De La Fuente that it was proceeding against him under 12 U.S.C. § 1818(e) for his role in FIB's lending practices. It charged him with lending sums to the various entities identified above over the period from 1990 through 1995, which exceeded the percentage of a bank's funds that may be loaned to affiliates or insiders of a bank's directors under Regulation O and Section 23A of the Federal Reserve Act. It also charged De La Fuente with facilitating the Collateral Substitution Transaction and the PCA Transaction, alleging that his role in these transactions violated 12 U.S.C. § 1818(e). 21 The case was tried before an administrative law judge (ALJ), who issued a recommended decision finding that all of the above loans and transactions violated § 1818(e) and concluding that De La Fuente should be ordered removed from the board of FIB and prohibited from participating in the banking industry for life. On review, the Board adopted and incorporated these findings, and affirmed the ALJ's recommended decision.