Opinion ID: 2966345
Heading Depth: 3
Heading Rank: 3

Heading: The RTC-controlled Debtors

Text: The RTC took control of the Debtors on September 12, 1992, and replaced the boards of directors. On November 5, 1992, the RTCcontrolled Debtors sought, by means of a consent order, to withdraw the Reimbursement Motion. The district court denied the withdrawal because it had already heard argument on the motion and had taken the motion under advisement. The district court also recognized that the beneficiaries of the Reimbursement Motion--namely, the Directors and the Employees--were not represented in the proposed consent order. The RTC, once it took control of the Debtors, decided that it was advantageous to operate the Debtors in bankruptcy and chose not to withdraw the Debtors from the bankruptcy proceedings. The RTC even decided to place another Bank subsidiary, Carmel Valley Ranch, in bankruptcy. The RTC filed a reorganization plan for the Debtors that was approved by the district court. 13 Meanwhile, the OTS settled its civil administrative actions against some of the Directors and Employees. On October 30, 1992, the OTS dropped its charges against Cone and Motahari in exchange for their consent to orders (1) prohibiting them from participating in the affairs of any insured depository institution and (2) debarring them from practicing before the OTS. Although Cone and Motahari accepted prohibition and debarment, neither admitted, and both specifically disputed, the OTS charges. On April 1, 1993, the OTS dropped the charges against Ille with only the mildest rebuke: Ille had to sign a cease and desist order, prohibiting him from engaging in unsafe and unsound banking practices and from breaching fiduciary duties to a federally insured depository institution. In other words, Ille agreed to follow diligently in the future the standard of conduct already required of him. Ille received this lenient treatment because he did not participate in the bankruptcy filings. He learned of the decision to place the Debtors in bankruptcy during a telephone call from Barton on the evening of October 10, 1991, the day before the bankruptcy filings; that same evening, he resigned from his position as a director of the Bank. At most, Ille failed only to follow the affairs of the Bank more diligently. As of the date of this opinion, the OTS proceedings against Barton, Vaughan, and Walser remain unresolved.