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

Heading: Culpability

Text: 31 In order for the FDIC to issue a prohibition order against a party, the party's violation, practice, or breach must involve[ ] personal dishonesty on the part of such party; or ... demonstrate[ ] willful or continuing disregard by such party for the safety or soundness of such insured depository institution. § 1818(e)(1)(C). We think that there is substantial evidence that Hutensky's conduct in relation to the Harding and Reveruzzi loans involved personal dishonesty. 32 The record shows that Hutensky was an attorney and a sophisticated businessman, and that he had been involved in numerous business projects. At the time of the Harding loan, Hutensky's venture, CityPlace, needed funds. In addition, at the time of the Reveruzzi loan, B & H was having cash flow problems. 10 As a result of the two loans, Hutensky's entities were able to obtain needed funds, without having to follow the formal approval process mandated by Regulation O. In Greenberg v. Board of Governors, 968 F.2d 164 (2d Cir.1992), we held that the record supported a determination of personal dishonesty, where two bank directors did not disclose to the bank's board of directors that they had a controlling interest in partnerships that received loans from the bank. Id. at 171. Similarly, the record here supports a finding of personal dishonesty. Hutensky failed to inform the First Central and Central boards of directors of his business relationship with the parties obtaining the loans, or that the proceeds of the loans would pass to entities he controlled. Even though in the present case, the proceeds were not directly lent to Hutensky's interests as in Greenberg, but instead first passed through Harding and Reveruzzi, Hutensky still was required under Regulation O to obtain prior approval of the loans. Hutensky bypassed the required procedures and received the benefit of the proceeds as a result of his actions, and, therefore, his conduct demonstrated personal dishonesty. 33 Hutensky, however, contends that he did not know that he was required under Regulation O to obtain prior approval of the loans. In respect to the Harding loan, Hutensky testified, I did not give a lot of thought, this wasn't pressed in my mind should I tell the board, not tell the board, what should I do. As to the Reveruzzi loan, Hutensky testified, Did I feel that I had an obligation? Again, I don't think I sat down and said, okay, Mr. Reveruzzi's borrowing money from Central Bank, I'm on the board at Cenvest, what are my obligations with regard to that. In Cavallari v. Office of the Comptroller of the Currency, 57 F.3d 137 (2d Cir.1995), we found that substantial evidence supported the finding that an attorney was culpable for disregarding a cease and desist order issued against a bank, even though the attorney claimed: I knew there was [sic] cease and desist orders, I didn't know what the contents were. I didn't think about it, to tell you the truth. Id. at 140 (alteration in original); cf. Greenberg, 968 F.2d at 171 (stating that the Board and the ALJ were well within their discretion in rejecting the [bank directors'] self-serving testimony that they had revealed their insider transactions to the bank's board of directors). In view of the evidence of Hutensky's extensive experience in law and business, the fact that his business interests received needed funds from the banks, and his willingness to forgo any consideration of whether these personally advantageous deals were consistent with his legal and fiduciary obligations, we agree with the FDIC that Hutensky's actions manifested personal dishonesty, despite his claims that he acted without culpability. 34