Inner City Reporter's Bank Beat: Mergers, Community Reinvestment Act, Antitrust, Revolving Doors

Bank Named Mega Cites 2004 NYBD Letter As Preventing Showing Documents to SDNY Judge

SDNY COURTHOUSE, May 22 – Mega International Commercial Bank passed information about its P&G Auditors to Navigant, and an allegedly absolute privilege for bank regulatory documents is being cited and now "documented," if only with a partially redacted 2004 interpretative letter of the then-NYSBD. Inner City Press is on the case, which still has the potential to simply disappear into settlement world.

U.S. District Court for the Southern District of New York Judge J. Paul Oetken asked to see the documents at issue.

But Mega Bank's lawyer from Gottesman, Wolge, Secunda said that would not be possible, without angering the NYS Department of Financial Services.

Judge Oetken said, one week to convince me otherwise with case law, or turn over the documents in three weeks. Or settle. A number was floated by the parties but Inner City Press due to recent unclarity is still not publishing it.

But now this: late on May 22 Mega's lawyer filed a 2004 letter: "2004 NY Bank. LEXIS 14 State of New York Banking Department August 31, 2004 Reporter 2004 NY Bank. LEXIS 14 * Subject: Re: Outsourcing of Bank Human Resources and Payroll Functions Core Terms outsource, service provider, payroll, administrative duty, national bank, general supervision, bank's board, third party, confidential, supervisory, underwrite, interview, lease, opine Request By: [*1] [REDACTED BY THE AGENCY] Reply Staff Letters and Memoranda Supervisory Procedure G 101 Dear Mr. []: Your letter of November 21, 2003 to Superintendent of Banks Taylor has been referred to me for reply. Let me begin by apologizing for the delay in responding to your letter. In part, this delay resulted from our need to review this matter with several of our supervisory divisions in the Department. As we understand it, [] is a company that leases employees to companies for the purposes of performing administrative duties in their Human Resources and Payroll Departments. You have inquired as to whether the Banking Law would prohibit a State-chartered bank from outsourcing the administrative duties of its Human Resources and Payroll departments to[]. To date, the Banking Department has not opined as to whether a State-chartered bank may outsource the administrative duties of its Human Resources and Payroll departments. The Department has permitted banking organizations to enter into contracts with third parties to provide certain services that the bank previously performed itself. For example, under Supervisory Policy G 101 banks are permitted to outsource automated data processing [*2] services, subject to the Superintendent's right to examine all records and material, use the equipment and interview employees of the independent service provider.

The Department has also permitted banks to outsource loan underwriting, subject to the requirement that bank officers take final responsibility for approving the underwriting decisions. Some guidance is provided in this area by referring to those activities deemed permissible for national banks. The OCC has opined, with respect to outsourcing the administrative functions of a bank's Human Resources and Payroll departments, that national banks may lease the services of its employees from a third party as long as the bank's board of directors continues to retain and exercise general supervision over the officers of the bank. Interpretive Letter No. 431, reprinted in [1988-1989 Transfer Binder] Fed. Banking L. Rep. (CCH) 85,655 (November 5, 1987); 12 CFR § 7.2010. See, also the "2003 Activities Permissible for a National Bank", published by the Office of the Comptroller of the Currency in March 2004. Accordingly, we conclude that it is permissible under the Banking Law for a State-chartered bank [*3] to enter into an agreement whereby the bank would outsource the administrative duties of its Human Resources and Payroll departments to an independent service provider. The bank and the independent service provider entering into such an outsourcing agreement will be subject to certain conditions. First, the bank must provide the Banking Department with prior written notice of its intention to enter such an outsourcing agreement. Second, the bank's board of directors must continue to retain and exercise general supervision over the affairs of the bank. Third, the independent service provider must agree that the Superintendent has the right to examine all of its records and material, use the equipment and interview its employees. And fourth, the independent service provider must agree that it is bound by the limitations of Banking Law Section 36(10), with respect to confidential supervisory and examination material, and provide the Department with a description of how it will ensure the confidentiality of such material. I trust the foregoing is responsive to your inquiry. Should you have any further questions please feel free to contact me at (212) 709-1649. Sincerely yours, Written By: Jay [*4] Kane Assistant Counsel."

Bank Named Mega Says DFS Prevents Showing Documents to SDNY Judge Even In Camera

SDNY COURTHOUSE, May 15 – Mega International Commercial Bank passed information about its P&G Auditors to Navigant, and now an allegedly absolute privilege for bank regulatory documents is being cited. Inner City Press is on the case, which has the potential to simply disappear in three weeks' time into settlement world.

U.S. District Court for the Southern District of New York Judge J. Paul Oetken asked to see the documents at issue.

But Mega Bank's lawyer from Gottesman, Wolge, Secunda said that would not be possible, without angering the NYS Department of Financial Services.

May 1, Puerto Rico, Coronavirus Delays FirstBank's Acquisition of Santanders's PR Unit: https://www.americanbanker.com/news/coronavirus-delays-firstbanks-acquisition-of-santanders-puerto-rico-unit (paywall - even for COVID-19 related coverage)

April 27, Virginia: "Pinnacle-Virginia Bank Merger Delayed by COVID-19" -- "Pinnacle Bank and Virginia Bank have delayed their planned merger due to “near-term operational challenges” stemming from the COVID-19 pandemic. In its first-quarter earnings report, Pinnacle said both banks had “dedicated a significant amount of time and resources” to facilitiatng Paycheck Protection Program loans in the past few weeks.

As US Bank Regulators Rubber Stamp Mergers Opposed by FFW Now Pandemic Anti Monopoly Act

SOUTH BRONX, SDNY, April 29 – Amid escalating attacks on the U.S. Community Reinvestment Act, Inner City Press / Fair Finance Watch filed comments under the CRA opposing Banco Bradesco's application to acquire BAC Florida.

Now amid the Coronavirus pandemic, it still appears that the Federal Reserve is churning forward to try to rubber stamp a bank merger, while allowing Bradesco to redact all information about the pandemics impact on it, see below. Meanwhile Comptoller Joe Otting is approving as many mergers as he can, while ignoring and even outright rejecting public comments. Inner City Press and Fair Fair Finance have been questioning this for weeks.

Now on April 28, the unveiling of the proposed Pandemic Anti-Monopoly Act, which would prohibit approvals of large mergers during this period. While it is tied to the idea of small, struggling firms being acquired, Inner City Press and FFW believe the bank regulators should not approve mergers while the impacted public cannot comment or organize. The Act would impose a moratorium on mergers and acquisitions that currently need to be reported to the federal agencies for antitrust review, and ban all transactions involving companies with over $100 million in revenue or financial institutions with a market capitalization over $100 million. Inner City Press will have more on this.

On April 7 the Fed asked Banco Bradesco's New York law firm to supplement the record with how it is dealing with current economic situation. On April 24 the bank's law firm Shearman & Sterling sent an answer to the Fed - with the entire Covid section, as sent as required to Fair Finance Watch and Inner City Press, entirely redacted.

Inner City Press has written to the Fed: "This is a FOIA request for the all withheld portions of the applications and applications additional information submitted by Banco Bradesco to aquire BAC including but not limited to the redacted portions of the April 24 submission, required to be sent to Fair Finance Watch and Inner City Press under the ex parte rules, which redacted the ENTIRE RESPONSE as to the impact of the Coronavirus economic downturn on the banks and merger. This is unacceptable."

SDNY COURTHOUSE, April 20 – Amid the Covid-19 pandemic, many criminal cases in the U.S. District Court for the Southern District of New York are being put over. On April 20 the US Attorney for the SDNY announced a case again Industrial Bank of Korea and its New York branch - but a deferral for two years, in exchange for $51 million:

"IBKNY and IBK failed to promptly identify a series of transactions that violated the United States’ economic sanctions against Iran (the “Zong Transactions”): From January 2011 until July 2011, Kenneth Zong,[1] an American citizen, and various primarily Iranian co-conspirators exploited bank accounts that had been established at IBK and at another bank to permit certain forms of trade between Korea-based entities and Iran (the “CBI Won Accounts”), to transfer U.S. Dollars (“USD”) unlawfully to Iranian-controlled entities. In order to evade U.S. sanctions, Zong and his co-conspirators set up shell companies in Korea, Iran, and elsewhere, which engaged in sham trade transactions and submitted fictitious documentation to Korean banks, including IBK, in order to facilitate the transfer of Iranian funds from the CBI Won Accounts to Korean entities’ accounts, the conversion of the funds into USD, and the subsequent transfer of USD from those entities through U.S. financial institutions to other accounts controlled by Zong and his co-conspirators and/or for the benefit of Zong and his co-conspirators.

IBKNY did not review and identify the Zong Transactions as unlawful until more than five months after they began to be processed through IBK, after IBK had already processed more than $1 billion worth of such transactions."

Amid Coronavirus In Civil Case Credit Suisse Secrecy Still Sought As Inner City Press Reports

SDNY COURTHOUSE, April 13 – While many or most civil cases are on hold, on April 13 the case of Valtus Capital Group v. Parq Equity LP churned forward, with attempts to keep secret settlement discussions with Credit Suisse and other discovery disputes still unresolved.

In the initial, removed Complaint, the reference was to a "CAD$390 million first lien security with a large international commercial bank."

Inner City Press covered the telephonic hearing before U.S. District Court for the Southern District of New York Judge Denise L. Cote, who repeated the prohibition on any recording or re-broadcasting.

Amid COVID 19 IMF Standards For Debt Relief Questioned by Inner City Press Response Here

SDNY COURTHOUSE, April 14 – Before the International Monetary Fund's February 13 embargoed briefing, Inner City Press asked the IMF to confirm or deny something in the crypto-currency media, that "IMF ADVISES EASTERN CARIBBEAN STATES TO TRIAL DIGITAL CURRENCY." See below.

Now on April 15 amid the Coronavirus crisis to the IMF and World Bank's Annual Meetings Inner City Press posed these questions, after it got an IMF answer on Morocco, here: "On the IMF's CCRT debt service relief, please explain why Tanzania is not among the 19 African countries on the list. Also, please comment on public reports Kenya is not on because over-income, and the Zambia is off due to "corruption" issues. What about Cameroon's Paul Biya, not seen in public for weeks? Does the IMF have a view on how countries should address their prison systems as the Coronavirus spreads in them?"

The Director of the IMF's Africa Department Abebe Aemro Selassie replied, diplomatically as ever, that thirty two countries have made requests, and that the IMF envisions $11.5 billion, with an initial focus on the poorest 25 or so, more if more money comes in, citing the UK and Japan and the IMF's speed on Madagascar. More to follow.

The other issues were not addressed, nor have some of Inner City Press' other pending questions been answered. But we remain hopeful.

For now, the IMF has said, "the countries that will receive debt service relief today are: Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, D.R., The Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo and Yemen."

Inner City Press covers not only the IMF but also all things crypto in the U.S. District Court for the Southern District of New York, for example SEC v. Telegram and the prosecution of Virgil Griffith formerly of Ethereum. Inner City Press asked the IMF, "It is reported that to the Eastern Caribbean Currency Union, the IMF suggests to experiment with a common digital currency, on a blockchain. Can you elaborate?"

While IMF spokesperson Gerry Rice during the briefing answered Inner City Press' Somalia and Egypt questions, it was afterward that this answer arrived by e-mail, "attributable to Gerry Rice, IMF Spokesman and Director of Communications:

'The IMF did not suggest to experiment with a common digital currency. In March 2019, the Eastern Caribbean Central Bank (ECCB) launched a central bank digital currency pilot project, using blockchain technology, on its own initiative.

As noted in the IMF Concluding Statement of the 2019 discussion on the common policies of the Eastern Caribbean Currency Union (ECCU) member countries, the digital currency could expose the ECCB and the financial system to various risks, including for financial intermediation, financial integrity, and cybersecurity. Given these risks of the digital currency, the IMF stressed that the ongoing pilot project should proceed cautiously.”

As National Banks Turn Underserved Businesses Away From PPP Otting Closes Comment Period

BRONX / SDNY, April 8 -- With the Community Reinvestment Act under attack by US Comptroller of the Currency Joseph Otting, Fair Finance Watch and Inner City Press on April 8 submitted a sixth comment, demanding that he not close the comment period while even amid Coronavirus large national banks turn away underserved business from the Paycheck Protection Program. Otting makes things worse.

Groups have asked that in light of Coronavirus / COVID-19 the comment period on the assault on CRA be extended for months. See also here. Though it shouldn't have been necessary, Fair Finance Watch commented again on March 20, noting postponements by SEC and others.

With Otting even still resisting postponing his dream of weakening the CRA, his OCC has joined not only his sometime partner in crime the FDIC but also the Fed providing a TWO YEAR extension for big banks, while still threatening to push through his attack on CRA, ghoulishly using Coronavirus, see below.

From the April 8 comment: "even now at the absurdly (even ghoulishly) enforced deadline, no response so far from the OCC. In fact, this was the canned quote from Comptroller Otting: 'Slowing the rulemaking would only delay relief and support that communities across the country need. Modernization would bring valuable additional resources to communities across America that are currently underserved by the current regime. Further delay will prevent these additional resources from reaching those who need them most in this time of national emergency.'

So Otting is trying to use this deadly virus to deregulate the national banking system. This is a historic low for US financial regulators. The comment period must be extended or re-opened, and Otting must be recused from any decision making on this. In fact, we contend, he should resign. Large national banks are excluding underserved businesses from PPP loans, and all Otting can think of is further deregulating them. The FDIC is complicit."

On April 2, an even more telling move involving the OCC (and the FDIC, Fed and others) - to refuse to extend a comment period, in this case ending April 1, but to say that for those commenting on the Volcker Rule, comments will be considered for at least a month after the "expiration" of the comment period.

As Bank in West Virginia Fails Amid COVID 19 Community Reinvestment Act Comment Period Must Be Extended

BRONX / SDNY, April 5 -- With the Community Reinvestment Act under attack by US Comptroller of the Currency Joseph Otting, Fair Finance Watch and Inner City Press on March 11 submitted a third comment this time making an obvious request.

They ask that in light of Coronavirus / COVID-19 the comment period on the assault on CRA be extended for months. See also here. Though it shouldn't have been necessary, Fair Finance Watch commented again on March 20, noting postponements by SEC and others.

Now amid the Coronavirus crisis a bank has failed: A small bank in West Virginia has failed and been taken over by the FDIC after experiencing difficulties since 2015 and its 2019 capital levels were too low, the Federal Deposit Insurance Corp. announced Friday. FDIC officials said the failure was not connected to the recent economic shocks from the spread of the coronavirus. The First State Bank of Barboursville with $152 million in total assets was closed Friday by the West Virginia Division of Financial Institutions. The bank’s $139.5 million in deposits will be acquired by MVB Bank Inc. of Fairmont, W.Va. The four branches of The First State Bank will reopen as branches of MVB Bank on Saturday, the FDIC said. The closing is expected to take a bite from the FDIC’s Deposit Insurance Fund. The FDIC estimated the failure would cost the DIF about $46.8 million, representing nearly a third of the bank’s assets. The hit is the largest since late 2017, when the failure of Washington Federal Bank for Savings in Chicago cost the DIF more than $80 million. First State’s branches was expected to reopen as MVB locations on Saturday during normal business hours. But the agency pointed to guidance from the Centers for Disease Control and Prevention and encouraged customers to follow “social distancing and utilize online and electronic banking capabilities” as the COVID-19 pandemic continues. West Virginia issued a statewide stay-at-home order last week, leading the FDIC to advise depositors that they enter bank branches only if absolutely essential and after making an appointment with branch staff."

Another SDNY Sealed Proceeding For Money Laundering in Miami Diaz in MCC Until Friday

SDNY COURTHOUSE, March 25 -- Amid the Coronavirus crisis in a sealed proceeding on March 25 a defendant referred to as Mr. Diaz was presented on charges of money laundering in Miami before U.S. District Court for the Southern District of New York Magistrate Judge Sarah L. Cave.

Judge Cave earlier in the afternoon had ordered Inner City Press out of the Magistrates Courtroom on the motion of the US Attorney's Office.

Now Assistant US Attorney Thomas S. Burnett told Judge Cave that he had an ex parte application, and that this proceeding should be sealed and not docketed. Without any written presentation viewable by the Press or public, the applications were all granted.

The US is favoring the release of Mr. Diaz, but since he is from Costa Rica (it sounded like), they need to find a place for him to go. So he will go to the MCC until Friday - hardly the place for a cooperator.

AUSA Burnett also said he had an ex parte application to disqualify Federal Defenders as conflicted. He said that there were three others presented on money laundering in Miami charges, once represented by FD, and that Diaz used the same company.

So how hard is this, to triangulate? What is the basis of this sealing and secrecy? Judge Cave asked for nothing more than an update, probably also confidential, in six months. How many cases / defendants / cooperators like this are there? Watch this site.

Juan Marcos Matos Ruiz was presented not in person but by video on charges of money laundering Brazil bribes,

Judge Cave, an interpreter, Assistant US Attorney Benet J. Kearney and Inner City Press were all in SDNY Courtroom 24B, the new Magistrates Court complete with social distancing and a big bottle of Purell hand sanitizer.

But Juan Marcos Matos Ruiz was in Florida, were he was ordered to not be employed by his Matos LCC and to have no contact with Premier X and Premier RX.

In SDNY Prince Uko Is Bailed On Bank Fraud Charges Amid Coronavirus and GPS Bracelet Shortage

SDNY COURTHOUSE, March 20 -- A defendant up from Georgia came at 2 pm on March 19 to be arraigned in the U.S. District Court for the Southern District of New York.

But in this time of Coronavirus, the usual 4:30 pm cut off for same day presentments has been pushed earlier, to noon. So this defendant, Prince Uko, returned to the SDNY on March 20.

The Magistrates Court remains on the 24th floor in a larger than normal courtroom to allow social distancing. In the lobby outside the courtroom, where Midtown Manhattan was not visible due to fog, folding chairs had been set up, each six feet from the other. But they were all empty.

In the courtroom, presided over by SDNY Chief Magistrate Judge Gabriel W. Gorenstein, Prince Uko had a publicly-funded Criminal Justice Act lawyer appointed, and pled not guilty. He is charged with bank fraud.

The Assistant US Attorney told Judge Gorenstein a bail package, the same as in Georgia, had been agreed to. Judge Gorenstein asked her to spell it out, rejected some of the item as already being covered by law.

The AUSA mentioned "stand alone GPS monitoring" and Gorenstein said, Stop. He noted, as Inner City Press first reported this week, that there is a lack of GPS bracelet. The Pre Trial Services officer, sitting in the jury box, said there is a shipment on the way - but that Prince Uko already has a bracelet on.

So how did he travel to New York from Georgia? The case is back on in front of assigned Judge Denise L. Cote on May 8, at least scheduled for now.

Due to Coronavirus - Judge Gorenstein notably was wearing gloves - she has allowed Prince Uko's co-defendants to get Provisionally Appointed Counsel without showing up in person.

Amid OCC Contempt For Protest to Steuben Trust Bid By Community Bank NA 3 Branches 39 Workers

Bronx / DC, March 10 – With US Comptroller of the Currency Joseph Otting on December 12 formally moving along with the FDIC to undermine the Community Reinvestment Act, now with comment period to April 8, hearings have been by held the House Financial Services Committee. And see our comment here.

On January 11 Inner City Press / Fair Finance Watch filed a CRA protest with the OCC to Community Bank NA's application to acquire Steuben Trust Company. It was filed electronically, but there was no response at all from the OCC until a snail-mailed January 27 letter stating "The OCC has decided not to extend the comment period and will not hold a public hearing/meeting."

Now, without any inquiry or disclosure by Otting's OCC, both branch closings and job cuts are being openly bragged about by these two banks: "Community Bank System plans to close three Steuben Trust branches as the two banks merge, but Steuben Trust's Clarence branch will not be among those affected. Steuben Trust branches in Alfred, Bolivar and Geneseo are set to close and be combined with nearby Community Bank locations. The deal still needs the approval of regulators." If you can call Otting a regulator. And what does "nearby" mean? Otting doesn't care. Nor about this: "As Community Bank takes over Steuben Trust Co. and eliminates duplication in some areas, it expects to lay off 39 Steuben Trust Co. workers. Community, based in Dewitt, Onondaga County, plans to close three Steuben branches in communities where both banks had been represented. They are in Alfred and Bolivar, both in Allegany County; and in ... "

Here's from the underlying comment: "Dear Deputy Comptroller Kiefer, Ms. Cummings and others in the OCC, including Barry Weides (and Otting) -- This is a timely first comment opposing and requesting an extension of the OCC's public comment period on the Application by Community Bank NA to acquire Steuben Trust Company. This comment is timely. Community Bank N.A. is getting worse and worse. Even as reflected by the too-limited 2018 HMDA data available on the CFPB's website, in New York State in 2018 Community Bank NA made 3636 loans to whites - and only FIFTEEN to African Americans, out of proportion to the demographics of its service area and of other lenders' activities in it.

Significantly, while Community Bank NA in NYS in 2020 originated six loans to whites for each of its denials to whites, for African Americans it made only 1.66 loans to every denial. See attached, for hte records. CBNA is 3.6 times more disparate to African Americans than whites, denying then 3.6 times more frequently than whites, worse than its peers This application should be denied. And for the record, the CFPB's elimination of the HMDA informaiton that has been available on the FFIEC's and even its own website for 2017 data is part of the destruction of CRA and HMDA of which the OCC is a part.

Also for the record, CBNA is bragging about closing branches, to investment analysts: "During Community Bank's earnings conference call, CEO Mark Tryniski provided some commentary on the pending deal: [W]e're thrilled to be partnering with Steuben Trust Corporation, a $570 million asset bank in Western New York. This is a high-value, lower-risk transaction of a solid performing in-market institution. We have considerable close proximity branch overlap and so also have consolidation opportunities."