Title 12 U.S.C. § 1818(g)(1) authorizes the Federal Deposit
Insurance Corporation (FDIC) to suspend from office an indicted
official of a federally insured bank if his continued service poses
a threat to the interests of the bank's depositors or threatens to
impair public confidence in the bank. Section 1818(g)(3) entitles a
suspended official to a hearing before the FDIC within 30 days of
his written request, and to a final decision within 60 days of the
hearing. At the hearing, the official may "submit written materials
(or, at the discretion of the agency, oral testimony) and oral
argument." The FDIC suspended appellee, the president and a
director of a federally insured bank, after he was indicted for
making false statements to the FDIC and the bank for the purpose of
influencing the FDIC in violation of 18 U.S.C. §§ 1001 and 1014. A
hearing was scheduled to occur 19 days after his written request
for an expedited hearing, but the FDIC's regional counsel took the
position that the oral testimony appellee proposed to offer at the
hearing would not be necessary. Before the hearing date, appellee
filed suit in the Federal District Court, which preliminarily
enjoined the FDIC from enforcing the suspension order. Although it
rejected appellee's argument that the order was invalid because it
was not preceded by a hearing, the court concluded that §
1818(g)(3)'s post-suspension procedure violates the Due Process
Clause of the Fifth Amendment because it does not guarantee a
suspended officer a sufficiently prompt decision or an unqualified
right to present oral testimony.
Held:
1. Section 1818(g)(3)'s post-suspension procedure is not
unconstitutional on its face. Pp.
486 U. S.
240-248.
(a) Appellee was not entitled to a pre-suspension hearing, since
the important governmental interest in protecting depositors and
maintaining public confidence, coupled with the fact that the
felony indictment provided substantial assurance that the
suspension was not baseless, justified prompt action before a
suspension hearing was held.
Cf. Barry v. Barchi,
443 U. S. 55. Pp.
486 U. S.
240-241.
(b) Appellee was not denied a sufficiently prompt
post-suspension hearing. Although a bank officer has an important,
constitutionally protected interest in continued employment, he
also has an interest in seeing
Page 486 U. S. 231
that a decision concerning his continued suspension is not made
with excessive haste. Moreover, a temporary suspension is not
likely to augment the injury to the officer's reputation that has
already been done by an indictment accusing him of serious
wrongdoing. Thus, even a delay of the full 90 days allowed by §
1818(g)(3) for a post-suspension decision will usually be justified
by the public interest in a correct decision as to whether
depositors' interests or public confidence are threatened, and by
the likelihood, arising from the grand jury's finding of probable
cause that the officer has committed a felony involving dishonesty,
that the suspension decision was not mistaken. The fact that the
criminal proceedings might be concluded more promptly than the FDIC
proceeding is irrelevant to the due process determination, since an
acquittal will require that the suspension order be vacated, while
a conviction will merely strengthen the case for maintaining the
suspension.
Barry v. Barchi, supra, distinguished. Pp.
486 U. S.
241-247.
(c) The District Court's reliance on § 1818(g)(3)'s failure to
guarantee an opportunity to present oral testimony was misplaced.
The relevant regulation delegates the discretionary decision
whether to accept oral testimony to the hearing officer, but
appellee never gave that officer the opportunity to render a
decision. There is no inexorable requirement that oral testimony be
heard in every administrative proceeding in which it is tendered,
and unconstitutionality cannot be premised on the fact that
discretionary authority to admit or reject such evidence may be
applied in an arbitrary or unfair way in some hypothetical case.
Pp.
486 U. S.
247-248.
2. There was no unfairness in the FDIC's use of the § 1818(g)(3)
procedure in this case. P.
486 U. S. 248.
667 F. Supp. 652, reversed.
STEVENS, J., delivered the opinion for a unanimous Court.
JUSTICE STEVENS delivered the opinion of the Court.
The question presented by this appeal concerns the
constitutionality of a statutory provision that authorizes the
Page 486 U. S. 232
Federal Deposit Insurance Corporation (FDIC) to suspend from
office an indicted official of a federally insured bank. The
District Court concluded that the statutory post-suspension
procedure is unconstitutional because it does not guarantee the
suspended officer a sufficiently prompt decision or an unqualified
right to present oral testimony. The District Court therefore
enjoined the FDIC from enforcing an order suspending appellee from
serving as the president and as a director of the Farmers State
Bank in Kanawha, Iowa, and from otherwise participating in the
conduct of the affairs of any FDIC-insured bank. 667 F. Supp. 652,
662, 664 (1987). We noted probable jurisdiction. 484 U.S. 911
(1987). We reverse.
I
In 1966, Congress adopted several amendments to the Federal
Deposit Insurance Act to give federal banking agencies more
effective regulatory powers to deal with crises in financial
institutions. [
Footnote 1] The
amendments were designed to protect the interests of depositors and
to prevent the potentially debilitating effect of public loss of
confidence in the banking industry.
See S.Rep. No. 1482,
89th Cong., 2d Sess., 4-5 (1966) (S.Rep.); 112 Cong.Rec. 20080
(1966) (remarks of Sen. Proxmire). Congress therefore enacted 12
U.S.C. § 1818(g)(1) to give the appropriate federal banking agency
[
Footnote 2] the authority to
take immediate action to suspend an officer
Page 486 U. S. 233
or director of an insured bank if he or she is formally charged
with a felony involving dishonesty or breach of trust. As
originally enacted, § 1818(g)(1) permitted the appropriate banking
agency to suspend an indicted bank officer without providing an
opportunity to be heard either before or after issuance of the
order of suspension. [
Footnote
3]
In 1974, the FDIC invoked its § 1818(g)(1) authority to suspend
the president of an Illinois bank who had been indicted for
conspiracy to commit mail fraud. That officer successfully
challenged the constitutionality of the suspension on the ground
that it had deprived him of property without due process of law.
The three-judge District Court, in
Feinberg v.
FDIC, 420 F.
Supp. 109 (DC 1976), found that the public
Page 486 U. S. 234
interest in prompt action justified a suspension without a prior
hearing, but concluded that the officer was constitutionally
entitled to a prompt and meaningful post-suspension hearing in
which he could attempt to persuade the FDIC to exercise its
discretion to revoke the suspension. In its opinion, the District
Court emphasized that the 1966 statute had given the FDIC
standardless discretion to suspend or not to suspend an indicted
bank official. [
Footnote 4]
In response to the Feinberg decision, in 1978 Congress amended §
1818(g) by incorporating standards in subsection (1) to guide the
FDIC in the exercise of its discretion, [
Footnote 5] and
Page 486 U. S. 235
by enacting a new subsection (3) to give the suspended officer
the right to a post-suspension hearing before the agency to
demonstrate that his or her continued service would not jeopardize
the interests of depositors or impair public confidence in the
bank. [
Footnote 6] It is the
adequacy of the post-suspension procedure
Page 486 U. S. 236
authorized by subsection (3) that is at issue in this
appeal.
II
On December 10, 1986, appellee was indicted by a federal grand
jury in the Northern District of Iowa. He was charged with making
false statements to the FDIC in violation of 18 U.S.C. § 1001 and
with making false statements to the Farmers State Bank with the
purpose of influencing the actions of the FDIC in violation of 18
U.S.C. § 1014, offenses that are punishable by imprisonment for
more than one year, and that unquestionably involve dishonesty or
breach of trust. [
Footnote 7]
At the time of the indictment, appellee
Page 486 U. S. 237
was the president and a director of a federally insured bank.
Thus, if the FDIC found that his continued service "[might] pose a
threat to the interests of the bank's depositors or
Page 486 U. S. 238
[might] threaten to impair public confidence in the bank," the
requirements specified in § 1818(g)(1) for a suspension order would
be satisfied.
On January 20, 1987, the FDIC issued an
ex parte order
containing the necessary findings, suspending appellee as the
president and as a director of the bank and prohibiting him "from
further participation in any manner in the conduct of the affairs
of the Bank, or any other bank insured by the FDIC." [
Footnote 8] App. to Juris. Statement 28a. A
copy of the order was served on appellee on January 26, 1987. Four
days later, appellee's attorney made a written request for "an
immediate administrative hearing" at which he proposed to offer
"both oral testimony and written evidence" to establish that
appellee's continued service was not likely to pose a threat to the
interests of the bank's depositors or to threaten public confidence
in the bank. App. 26. The letter requested
Page 486 U. S. 239
that the hearing be expedited and commence no later than
February 9, 1987.
After various communications with appellee's counsel, the FDIC's
regional counsel, and the Administrative Law Judge who was selected
to conduct the hearing, it was decided that a hearing would be held
on February 18, 1987. 667 F. Supp. at 655. In those communications,
the FDIC's regional counsel took the position that oral testimony
would not be necessary. App. 28-30. The hearing officer, however,
never had an opportunity to decide whether to receive such
testimony, because the administrative proceedings were interrupted
by this litigation.
On February 6, 1987, appellee filed his complaint against the
FDIC in the Federal District Court for the Northern District of
Iowa and promptly moved for a preliminary injunction. After
receiving evidence in the form of affidavits and exhibits, and
after hearing oral argument -- but no oral testimony -- the
District Court entered an order declaring the suspension "null and
void" and enjoining the FDIC from enforcing it. The District Court
rejected appellee's argument that the order was invalid because it
was not preceded by a hearing, 667 F. Supp. at 658, but held that
the post-suspension process was "constitutionally inadequate
because it does not contemplate a
prompt' disposition,"
id. at 659, and also "because it fails to provide for a
hearing at which oral evidence can be presented," id. at
660. [Footnote 9] The District
Court
Page 486 U. S. 240
made it clear that it was expressing no opinion on the merits of
the suspension; its decision rested entirely on the perceived
procedural shortcomings in the post-suspension process.
III
It is undisputed that appellee's interest in the right to
continue to serve as president of the bank and to participate in
the conduct of its affairs is a property right protected by the
Fifth Amendment Due Process Clause. The District Court and the
parties correctly recognized that the FDIC cannot arbitrarily
interfere with appellee's continuing employment relationship with
the bank, nor with his interest as a substantial stockholder in the
bank's holding company.
See Feinberg v. FDIC, 173
U.S.App.D.C. 120, 125, 522 F.2d 1335, 1340 (1975);
cf.
Cleveland Bd. of Education v. Loudermill, 470 U.
S. 532,
470 U. S.
538-541 (1985). It is also undisputed that the FDIC's
order of suspension affected a deprivation of this property
interest. Accordingly, appellee is entitled to the protection of
due process of law.
"Once it is determined that due process applies, the question
remains what process is due."
Morrissey v. Brewer,
408 U. S. 471,
408 U. S. 481
(1972). Here again, we at least start with substantial agreement.
Appellee does not contend that he was entitled to an opportunity to
be heard prior to the order of suspension. An important government
interest, accompanied by a substantial assurance that the
deprivation is not baseless or unwarranted, may in limited cases
demanding prompt action justify postponing the opportunity to be
heard until after the initial deprivation.
See Barry v.
Barchi, 443 U. S. 55,
443 U. S. 64-66
(1979);
Dixon v. Love, 431 U. S. 105,
431 U. S.
112-115 (1977);
North American Cold Storage Co. v.
Chicago, 211 U. S. 306,
211 U. S.
314-321 (1908). In this case, the postponement of the
hearing is supported by such an interest. The legislation under
scrutiny is premised on the congressional finding prompt suspension
of indicted bank officers may be necessary to protect the interests
of depositors and to maintain public confidence in our banking
institutions.
See S.Rep. at 4-5; 112 Cong.Rec. 20080
(1966) (remarks of Sen. Proxmire). This interest is certainly as
significant as the State's interest in preserving the integrity of
the sport of horse racing, an interest that we deemed sufficiently
important in
Barry v. Barchi, supra, at
443 U. S. 64-65,
to justify a brief period of suspension prior to affording the
suspended trainer a hearing. Moreover, as in
Barchi,
appellee's suspension was supported by findings that assure that
the suspension was not baseless. A grand jury had determined that
there was probable cause to believe that appellee had committed a
felony. Such an
ex parte finding of probable cause
provides a sufficient basis for an arrest, which of course
constitutes a temporary deprivation of liberty. [
Footnote 10]
See Baker v.
McCollan, 443 U. S. 137,
443 U. S. 142,
443 U. S. 143
(1979). It should certainly be sufficient, when coupled with the
congressional finding that
Page 486 U. S. 241
a prompt suspension is important to the integrity of our banking
institutions, to support the order entered in this case on January
20, 1987, even though the FDIC did not provide appellee with a
separate pre-suspension hearing. The three-judge District Court in
the Feinberg case, the District Court in this case, and this Court
are all in accord on that proposition.
We cannot agree with the District Court, however, that appellee
was denied a sufficiently prompt post-deprivation hearing. As our
cases indicate, the District Court was properly concerned about the
importance of providing prompt post-deprivation procedures in
situations in which an agency's
Page 486 U. S. 242
discretionary impairment of an individual's property is not
preceded by any opportunity for a pre-deprivation hearing.
See
Barchi, supra, at
443 U. S. 66.
However, the District Court seems to have been improperly concerned
with the danger of an interminable delay by the agency, rather than
by what would have happened in this case if the proceedings had not
been interrupted, or indeed, what might have happened if the FDIC
had been as dilatory as the statute permits. For even though there
is a point at which an unjustified delay in completing a
post-deprivation proceeding "would become a constitutional
violation,"
Cleveland Bd. of Education v. Loudermill, 470
U.S. at
470 U. S. 547,
the significance of such a delay cannot be evaluated in a vacuum.
In determining how long a delay is justified in affording a
post-suspension hearing and decision, it is appropriate to examine
the importance of the private interest and the harm to this
interest occasioned by delay; the justification offered by the
Government for delay and its relation to the underlying
governmental interest; and the likelihood that the interim decision
may have been mistaken.
Cf. Logan v. Zimmerman Brush Co.,
455 U. S. 422,
455 U. S. 434
(1982);
Mathews v. Eldridge, 424 U.
S. 319,
424 U. S.
334-335 (1976).
Section 1818(g)(3) requires the FDIC to hold a hearing within 30
days of a written request for an opportunity to appear before the
agency to contest a suspension and requires that it notify the
suspended officer of its decision within 60 days of the hearing.
Thus, at maximum, the suspended officer receives a decision within
90 days of his or her request for a hearing. In this case, the
agency reported that it would have been able to issue a written
decision within 30 days after the hearing. [
Footnote 11] In addition, the initial hearing
was scheduled
Page 486 U. S. 243
to take place -- had it not been interrupted by the preliminary
injunction -- 19 days after it was formally requested.
Appellee's interest in continued employment is without doubt an
important interest that ought not be interrupted without
substantial justification. We have repeatedly recognized the
severity of depriving someone of his or her livelihood.
See
Brock v. Roadway Express, Inc., 481 U.
S. 252,
481 U. S. 263
(1987);
Loudermill, 470 U.S. at
470 U. S. 543.
Yet, even assuming that the FDIC required the complete 90 days to
hear the case and reach its decision, we are not persuaded that
this exceeds permissible limits. In fact, a suspended bank officer
has an interest in seeing that a decision concerning his or her
continued suspension is not made with excessive haste. The statute
imposes a permissive standard for continuing a suspension, and
presumably, when in doubt, the agency may give greater weight to
the public interest and leave the suspension in place, particularly
when the suspension does not impose the additional harm of a
significant, incremental in jury to reputation. Through the return
of the indictment, the Government has already accused the appellee
of serious wrongdoing. The incidental suspension is not likely to
augment this injury to the officer's reputation. We thus conclude
that the 90-day period is not so long that it will always violate
due process. In many cases, perhaps most, it will be justified by
an important government interest coupled with factors minimizing
the risk of an erroneous deprivation.
Cf.
Page 486 U. S. 244
Loudermill, supra, at
470 U. S.
546-547 (9-month delay in final decision not
"unconstitutionally lengthy
per se").
The magnitude of the public interest in a correct decision
counsels strongly against any constitutional imperative that might
require overly hasty decisionmaking. The same governmental interest
that justifies permitting suspension prior to the opportunity to be
heard extends to this analysis as well. Congress has determined
that the integrity of the banking industry requires that indicted
bank officers be suspended until it is determined that they do not
pose a threat to the interests of the bank's depositors or threaten
to undermine public confidence in the bank. To return these
officers to a position of influence in the conduct of the bank's
affairs prior to an opportunity to weigh the evidence carefully
would threaten these interests in the same way as allowing them to
remain in office from the start. Thus, the public has a strong
interest in seeing the ultimate decision made in a considered and
deliberate manner. Congress certainly acted within constitutional
bounds in determining that 30 days might be required to set and
prepare for the hearing, and that, in some cases, another 60 days
may be needed to reach a decision. The decision is a serious one,
and may involve complex issues and an extensive evidentiary record.
See Feinberg, 420 F. Supp. at 120 (hearing would involve a
"complex legal question" and "subtle interrelation of fact and
policy").
Moreover, and perhaps most significantly, there is little
likelihood that the deprivation is without basis. The returning of
the indictment establishes that an independent body has determined
that there is probable cause to believe that the officer has
committed a crime punishable by imprisonment for a term in excess
of one year. This finding is relevant in at least two important
ways. First, the finding of probable cause by an independent body
demonstrates that the suspension is not arbitrary. Second, the
return of the indictment itself is an objective fact that will in
most cases
Page 486 U. S. 245
raise serious public concern that the bank is not being managed
in a responsible manner. In addition, when § 1818(g) was initially
enacted, Congress indicated that suspensions would be "virtually
routine." S.Rep. at 2. The later amendments prompted by the
Feinberg decision do not suggest that Congress has
disavowed this expectation; rather, the standard adopted by
Congress -- "may pose a threat to the bank's depositors or may
threaten to impair public confidence in the bank" -- would appear
to be easily satisfied in the case of bank officials charged with
crimes involving dishonesty. One would expect that a decision not
to suspend would be the exception. It is thus unlikely that any
particular suspension would be erroneously imposed.
We are therefore persuaded that the congressionally recognized
interest in maintaining confidence in our banking institutions,
coupled with the finding of probable cause that the officer has
committed a felony involving dishonesty, is sufficient ground for a
regulatory suspension of up to 90 days without the benefit of a
post-suspension ruling. In reaching a contrary result, the District
Court attached importance to the fact that the criminal proceedings
might be concluded more promptly than the FDIC proceeding. The
Court reasoned that, because the Speedy Trial Act requires that a
federal criminal trial take place within 70 days of indictment --
plus, of course, time properly excluded under the Act -- the
criminal trial might well take place before the FDIC need reach a
decision.
See 18 U.S.C. § 3161. The Court accordingly
concluded that the statutorily required hearing is "a toothless
remedy for the plaintiffs, since the agency can postpone a
disposition until after the criminal trial has concluded." 667 F.
Supp. at 659. "It is a remedy only if the agency chooses for it to
be a remedy."
Ibid.
We find the possibility that a suspended officer's criminal
trial may conclude before expiration of the 90-day period from
request for a hearing to decision quite irrelevant. If
Page 486 U. S. 246
appellee had been promptly acquitted, the basis for the
suspension would have disappeared, and the order would have been
vacated. On the other hand, a conviction merely strengthens the
case for maintaining the suspension, and provides grounds for
suspension under § 1829 as well. [
Footnote 12] The criminal trial merely constitutes a
potentially intervening factor that may require that the suspension
be promptly vacated; it is difficult to conceive of how this
intervening factor interferes with appellee's due process
rights.
Nor is this case controlled by our decision in
Barry v.
Barchi, 443 U. S. 55
(1979). In
Barchi, a horse trainer's license was suspended
for 15 days after a horse he trained was discovered to have had
drugs in its system during a race. The state regulatory scheme
raised a rebuttable presumption that the trainer either
administered the drug or was negligent in protecting against such
an occurrence. The trainer claimed that he neither administered the
drug nor was negligent. In considering the administrative scheme,
we first concluded that the State acted within the bounds of due
process in suspending the trainer without a pre-suspension hearing.
However, we concluded that the scheme violated due process because
"it [was] as likely as not" that the trainer would irretrievably
suffer the full penalty before the State would be put to its proof
at a post-suspension hearing.
Id. at 66. In such
situations, the State must assure a prompt post-suspension hearing,
"without appreciable delay."
Ibid.
Page 486 U. S. 247
In this case, by contrast, the appellee is not denied a
meaningful opportunity to be heard. Rather than closing the door to
the benefit of an opportunity to be heard, the possibility that the
criminal trial may precede the FDIC hearing simply provides an
additional forum at which to demonstrate that the suspension was
unjustified. If the official is successful in the criminal
proceeding, then due process has prevailed and the order of
suspension must be vacated. If he or she is convicted, the order of
suspension is further supported.
We also reject appellee's contention that § 1818(g) violates due
process because it does not guarantee an opportunity to present
oral testimony. The statute provides that the suspended officer may
"submit written materials (or, at the discretion of the agency,
oral testimony)" and present oral argument. § 1818(g)(3). The
relevant regulation, in turn, delegates the decision whether to
accept oral testimony to the hearing officer.
See 12 CFR §
308.61(e) (1987). In rejecting appellee's contention, we may assume
that there are post-suspension proceedings under § 1818(g) in which
oral testimony is essential to enable the hearing officer to make a
fair appraisal of the impact of a suspended officer's continued
service on the bank's security and reputation. Indeed, we may
assume that this is such a case. The problem with appellee's
position, however, is that he did not give the hearing officer an
opportunity to decide whether to hear whatever testimony he might
have adduced. No offer of proof was ever made, and thus certainly
was not rejected. For all we know, the hearing officer might have
accepted such evidence; or, if he rejected it, he might have been
entirely correct in deciding that it was merely cumulative to
material that was adequately covered by written submissions or that
it was otherwise unnecessary or improper. A statute such as this is
not to be held unconstitutional simply because it may be applied in
an arbitrary or unfair way in some hypothetical case not before the
Court. There is no inexorable requirement that
Page 486 U. S. 248
oral testimony must be heard in every administrative proceeding
in which it is tendered. [
Footnote 13]
See Califano v. Yamasaki,
442 U. S. 682,
442 U. S. 696
(1979). The District Court's reliance on the absence of such a
guarantee in this case was therefore misplaced.
IV
The post-suspension procedure authorized by § 1818(g)(3) is not
unconstitutional on its face, nor do we find any unfairness in the
FDIC's use of that procedure in this case. The District Court's
preliminary injunction is accordingly reversed.
It is so ordered.
[
Footnote 1]
See Financial Institutions Supervisory Act of 1966,
Pub.L. 89-695, Title II, 80 Stat. 1046-1055, 12 U.S.C. § 1818.
[
Footnote 2]
The statute defines "appropriate Federal banking agency" by
reference to the type of bank subject to regulation.
See
12 U.S.C. § 1813(q). For example, "in the case of a national
banking association, a District bank, or a Federal branch or agency
of a foreign bank," the Comptroller of the Currency is the
"appropriate Federal banking agency." § 1813(q)(1). Section
1813(q)(3) provides that "in the case of a State nonmember insured
Bank . . . or a foreign bank having an insured branch," the FDIC is
the "appropriate Federal banking agency." It is undisputed that in
this case the FDIC is the appropriate federal banking agency.
[
Footnote 3]
As enacted in 1966, 12 U.S.C. § 1818(g)(1) provided:
"Whenever any director or officer of an insured bank, or other
person participating in the conduct of the affairs of such bank, is
charged in any information, indictment, or complaint authorized by
a United States attorney, with the commission of or participation
in a felony involving dishonesty or breach of trust, the
appropriate Federal banking agency may, by written notice served
upon such director, officer, or other person suspend him from
office and/or prohibit him from further participation in any manner
in the conduct of the affairs of the bank. A copy of such notice
shall also be served upon the bank. Such suspension and/or
prohibition shall remain in effect until such information,
indictment, or complaint is finally disposed of or until terminated
by the agency. In the event that a judgment of conviction with
respect to such offense is entered against such director, officer,
or other person, and at such time as such judgment is not subject
to further appellate review, the agency may issue and serve upon
such director, officer, or other person an order removing him from
office and/or prohibiting him from further participation in any
manner in the conduct of the affairs of the bank except with the
consent of the appropriate agency. A copy of such order shall also
be served upon such bank, whereupon such director or officer shall
cease to be a director or officer of such bank. A finding of not
guilty or other disposition of the charge shall not preclude the
agency from thereafter instituting proceedings to remove such
director, officer, or other person from office and/or to prohibit
further participation in bank affairs, pursuant to paragraph (1),
(2), (3), (4), or (7) of subsection (e) of this section."
80 Stat. 1050.
[
Footnote 4]
The court noted the breadth of discretion afforded the agency
and intimated that, if suspension was mandatory upon indictment, no
pre- or post-suspension hearing would be required:
"It appears arguable that, if the issuance of a Notice and Order
of Suspension were automatic upon the return of an indictment or
the filing of an information or complaint, then there might not be
a need for a hearing or other incidents of due process. Such an
argument could only retain its vitality, though, if there were no
agency determination required prior to the issuance of the Notice
and Order of Suspension. But this is not the case. Section
1818(g)(1), by its very language, requires that the agency decide
whether the crime charged is one 'involving dishonesty or breach of
trust.' Given the variety and nature of state offenses, it is
apparent that the agency must exercise discretion as to this issue.
This discretion, in fact, is enhanced by the lack in the statute of
a definition of a crime of 'dishonesty or breach of trust.' But
this is not the only discretionary question posed by the statute.
The statute interjects an added element of discretion by providing
that the agency 'may' issue a Notice and Order of Suspension; it is
not required to do so. Furthermore, when the statute is construed,
it appears clear that, even if the agency determines that the crime
charged is one involving dishonesty or a breach of trust, the
agency is still given -- and in fact has exercised -- the
discretion not to issue a Notice and Order of Suspension. In
addition, it is significant for purposes of due process that no
specific guidelines are provided in the statute for the exercise of
this discretion. The only ascertainable guidance is the general
purpose of the statute: to insure the public's confidence in the
stability of the financial institution."
420 F. Supp. at 116-117 (footnotes omitted).
[
Footnote 5]
As amended in 1978, 12 U.S.C. § 1818(g)(1) provided:
"Whenever any director or officer of an insured bank, or other
person participating in the conduct of the affairs of such bank, is
charged in any information, indictment, or complaint authorized by
a United States attorney, with the commission of or participation
in
a crime involving dishonesty or breach of trust
which is punishable by imprisonment for a term exceeding one
year under State or Federal law, the appropriate Federal
banking agency may,
if continued service or participation by
the individual may pose a threat to the interests of the bank's
depositors or may threaten to impair public confidence in the
bank, by written notice served upon such director, officer, or
other person, suspend him from office or prohibit him from further
participation in any manner in the conduct of the affairs of the
bank. A copy of such notice shall also be served upon the bank.
Such suspension or prohibition shall remain in effect until such
information, indictment, or complaint is finally disposed of or
until terminated by the agency. In the event that a judgment of
conviction with respect to such crime is entered against such
director, officer, or other person, and at such time as such
judgment is not subject to further appellate review, the agency
may,
if continued service or participation by the individual
may pose a threat to the interests of the bank's depositors or may
threaten to impair public confidence in the bank, issue and
serve upon such director, officer, or other person an order
removing him from office or prohibiting him from further
participation in any manner in the conduct of the affairs of the
bank except with the consent of the appropriate agency. A copy of
such order shall also be served upon such bank, whereupon such
director or officer shall cease to be a director or officer of such
bank. A finding of not guilty or other disposition of the charge
shall not preclude the agency from thereafter instituting
proceedings to remove such director, officer, or other person from
office or to prohibit further participation in bank affairs,
pursuant to paragraph (1), (2), or (3) of subsection (e) of this
section.
Any notice of suspension or order of removal issued
under this paragraph shall remain effective and outstanding until
the completion of any hearing or appeal authorized under paragraph
(3) hereof unless terminated by the agency."
92 Stat. 3665-3666 (the language emphasized was added in
1978).
[
Footnote 6]
Title 12 U.S.C. § 1818(g)(3) reads as follows:
"Within thirty days from service of any notice of suspension or
order of removal issued pursuant to paragraph (1) of this
subsection, the director, officer, or other person concerned may
request in writing an opportunity to appear before the agency to
show that the continued service to or participation in the conduct
of the affairs of the bank by such individual does not, or is not
likely to, pose a threat to the interests of the bank's depositors
or threaten to impair public confidence in the bank. Upon receipt
of any such request, the appropriate Federal banking agency shall
fix a time (not more than thirty days after receipt of such
request, unless extended at the request of the concerned director,
officer, or other person) and place at which the director, officer,
or other person may appear, personally or through counsel, before
one or more members of the agency or designated employees of the
agency to submit written materials (or, at the discretion of the
agency, oral testimony) and oral argument. Within sixty days of
such hearing, the agency shall notify the director, officer, or
other person whether the suspension or prohibition from
participation in any manner in the conduct of the affairs of the
bank will be continued, terminated, or otherwise modified, or
whether the order removing said director, officer or other person
from office or prohibiting such individual from further
participation in any manner in the conduct of the affairs of the
bank will be rescinded or otherwise modified. Such notification
shall contain a statement of the basis for the agency's decision,
if adverse to the director, officer or other person. The Federal
banking agencies are authorized to prescribe such rules as may be
necessary to effectuate the purposes of this subsection."
92 Stat. 3666.
[
Footnote 7]
Appellee was convicted on both counts. The District Court,
however, set aside the 18 U.S.C. § 1014 conviction on the ground
that the indictment failed to allege the essential elements of the
crime. On appeal, the Court of Appeals for the Eighth Circuit
affirmed the conviction under 18 U.S.C. § 1001 and reversed the
District Court's decision setting aside the conviction under §
1014.
United States v. Mallen, 843 F.2d 1096 (1988).
Appellee's conviction does not moot this case. A § 1818(g)
suspension remains in effect until the charge against the bank
official "is finally disposed of or until terminated by the
agency." § 1818(g)(1). The structure of the statute makes clear
that a charge is not "finally disposed of " until the opportunity
for appellate review is exhausted. Section 1818(g)(1) provides
that, if a suspended official is convicted, the agency may remove
that individual from office once the judgment is no longer "subject
to further appellate review." It is unlikely that Congress intended
to create a window between suspension and removal for convicted
bank officials. Because appellee has not yet exhausted his
opportunity for appellate review, the § 1818(g) suspension remains
in effect. On May 10, 1988, the Eighth Circuit denied appellee's
petition for rehearing and suggestion for rehearing en banc. He has
60 days from that date to file a petition for certiorari.
See this Court's Rule 20.1.
Nor is the action mooted by appellee's suspension under 12
U.S.C. § 1829. That section provides:
"Except with the written consent of the [FDIC], no person shall
serve as a director, officer, or employee of an insured bank who
has been convicted . . . of any criminal offense involving
dishonesty or a breach of trust. . . ."
On May 29, 1987, the judge presiding over appellee's criminal
trial granted the FDIC's motion for a preliminary injunction
pursuant to § 1829, prohibiting appellee from serving "as a
director, officer or employee of the Farmers State Bank, Kanawha,
Iowa."
FDIC v. Mallen, 661 F.
Supp. 1003, 1011 (ND Iowa 1987). In certain respects, the §
1818(g) suspension is broader in scope than the § 1829 suspension,
thus giving reinstatement of the § 1818(g) suspension at least a
marginal effect. For example, § 1818(j) imposes criminal penalties
upon anyone subject to a § 1818(g) suspension who "votes for a
director . . . of any bank." Section 1829 does not impose a similar
prohibition.
Finally, counsel informs us that, after the jurisdictional
statement was filed in this case, the Iowa Superintendent of
Banking placed the Farmers State Bank in receivership. The FDIC,
which was appointed receiver, executed a "purchase and assumption"
transaction, whereby the deposit liabilities of the Farmers State
Bank were assumed by another bank. The building that once housed
the Farmers State Bank now serves as a branch for the assuming
bank. Yet, even though § 1818(g) simply authorizes the suspension
of an indicted official as to a specified bank -- a bank that in
this case at least arguably no longer exists -- we are persuaded
that the order of suspension and the District Court's nullification
of that order are not moot. The Farmers State Bank has challenged
the order of receivership and the "purchase and assumption"
transaction. Brief for Appellant 13, n. 11. That challenge is
currently before the Supreme Court of Iowa.
In the matter of
the Receivership of Farmers State Bank, Kanawha, Iowa v.
Bernau, No. 87-1199. Because the Farmers State Bank has not
yet been finally dissolved as a corporate entity, and because the
State Supreme Court might invalidate the receivership, we conclude
that the order of suspension is not meaningless, and thus further
conclude that it forms an adequate prerequisite for coverage under
§ 1818(j). Moreover, we note that even confirmation of the
receivership might not moot the order entered pursuant to §
1818(g). Mere changes in corporate structure would not necessarily
terminate an otherwise effective order.
[
Footnote 8]
In September and October, 1986, extensive hearings were held to
determine whether to suspend appellee from office pursuant to §§
1818(e)(1), (e)(5). Those subsections permit the appropriate
federal banking agency, after conducting a hearing, to remove or
suspend a director or officer of an insured bank from office for
various forms of misconduct. However, because the presiding
Administrative Law Judge recused himself before rendering a
decision, the proceedings were never completed. 667 F. Supp. 652,
655, n. 1 (1987).
[
Footnote 9]
Although the District Court assumed that appellee had an
unqualified right to offer oral testimony at some stage of the
administrative proceeding, it expressed the opinion that such
testimony could be deferred until after an adverse ruling on
appellee's challenge to the suspension order. It stated:
"A hearing limited to written submissions and oral argument as
described in 12 CFR Section 308.61 could pass constitutional muster
if it provided for a sufficiently prompt resolution and if an
adverse ruling was followed by a hearing at which oral evidence
could be presented. However, neither the Code of Federal
Regulations nor the statute provide for a prompt resolution of such
a hearing, nor do they provide for a later opportunity to present
live testimony."
Id. at 661.
[
Footnote 10]
Section 1818(g)(1) authorizes the suspension of a bank
officer
"charged in any information, indictment, or complaint authorized
by a United States attorney, with the commission of or
participation in a crime involving dishonesty or breach of trust
which is punishable by imprisonment for a term exceeding one year
under State or Federal law. . . ."
Federal crimes punishable by imprisonment for a term in excess
of one year must be prosecuted by indictment, unless the defendant
waives this right. Fed.Rules Crim.Proc. 7(a) and (b).
[
Footnote 11]
In its order denying the FDIC's motion to alter or amend its
injunction, the District Court wrote:
"The Federal Deposit Insurance Corporation (FDIC) now requests
that this Court alter the relief that it ordered. The FDIC proposed
that it could hold a post-suspension hearing under 12 U.S.C.
Section 1818(g) on March 9, 1987; with an oral disposition within
15 days (March 26, 1987); and written disposition within 30 days
(April 8, 1987). The Court finds that this proposed schedule
suffers from the same difficulties that prompted this Court's
decision of February 17, 1987. Mallen's criminal trial is set for
March 16, 1987, and it is estimated that it will last one week. The
FDIC's disposition concerning the suspension under this proposed
schedule would be entered only after Mallen has 'suffered the full
penalty imposed' by the suspension. This procedure does not offer a
sufficiently prompt process as required under
Barry v.
Barchi, 443 U. S. 55,
443 U. S.
66 . . . (1979)."
667 F. Supp. at 662-663.
[
Footnote 12]
Section 1829 provides:
"Except with the written consent of the Corporation, no person
shall serve as a director, officer, or employee of an insured bank
who has been convicted, or who is hereafter convicted, of any
criminal offense involving dishonesty or a breach of trust. For
each willful violation of this prohibition, the bank involved shall
be subject to a penalty of not more than $100 for each day this
prohibition is violated, which the Corporation may recover for its
use."
Imposition of a § 1829 suspension or removal does not moot a §
1818(g) suspension.
See n 7,
supra.
[
Footnote 13]
The three-judge District Court in
Feinberg concluded
that oral testimony is not constitutionally required in FDIC §
1818(g) suspension hearings:
"While the hearing need not be a trial-type hearing, notice, the
opportunity to be represented by counsel, for written submissions,
and for oral argument, appear mandated by the circumstances.
Certainly notice of the right to be heard is essential.
See
Mullane v. Central Hanover Bank & Trust Co., 339 U. S.
306 . . . (1950). The assistance of counsel is also
needed in these cases, particularly since the hearing will involve
a complex legal question: whether the crime charged is one
involving dishonesty or breach of trust, as well as a question
requiring the subtle interrelation of fact and policy: the effect
upon the public of the indictees holding office and participating
in the affairs of the bank. As to the presentation of live
evidence, the 'nature of the relevant inquiry,' 424 U.S.
424 U. S. 343, . . . does
not seem to require any more than written submission. However, oral
argument would be necessary."
420 F. Supp. at 120 (footnotes omitted).