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United States v. Gibson

United States District Court, D. Delaware

April 12, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
DAVID R. GIBSON, ROBER V.A. HARRA, WILLIAM B. NORTH, and KEVYN RAKOWSKI, Defendants.

          MEMORANDUM ORDER

         The Government filed a motion in regard to the admissibility of a "Question and Answer" ("Q&A") from the website of the Office of Thrift Supervision ("OTS")[1] related to the reporting of past due construction loans. (D.I. 714). The issues are fully briefed. (D.I. 716, 719, 722, 726, 730).

         As an initial matter, there seems to be no dispute that, during the relevant time period, Wilmington Trust was required to file Thrift Financial Reports ("TFR") with OTS, in which the Bank disclosed its number of past due loans.

         OTS, like the Federal Reserve Bank, was a member of the Federal Financial Institutions Examination Council ("FFIEC"). Established in 1979, FFIEC "is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions" and "to make recommendations to promote uniformity in the supervision" of those institutions. About the FFIEC, Federal Financial Institutions Examination Council, https://www.ffiec.gov/about.htm (last visited April 12, 2018).

         The TFR Instruction Manual, Schedule PD, provides in relevant part:

2. Report loans ... as past due when either interest or principal is unpaid in the following circumstances: ...
c) Single payment and demand notes providing for the payment of interest at stated intervals (such as certain construction loans) after one interest payment is due and unpaid for 30 days or more.
d) Single payment notes providing for the payment of interest at maturity if interest or principal remains unpaid for 30 days or more after maturity.

(D.I. 667-1, Exh. A[2] at p. 2 (emphasis omitted)). Defendants maintain, and I agree, that those two circumstances mirror circumstances #3 and #4 related to past due loans from the RC-N Call Report Instructions. (Compare id., with D.I. 396-5 at pp. 1-2).

         The OTS Q&A at issue, dated September 5, 2002, can be accessed through OCC's website. See TFR Questions and Answers, Office of the Comptroller of the Currency, https://occ.gov/static/ots/thrift-financial-files/trf-q-and-a.pdf (last visited April 12, 2018). The Q&A reads:

Q&A No. 179 SUBJECT: Loans Past Maturity LINE(S): Schedule PD Dated: September 5, 2002
Question: We have a portfolio of construction loans that require interest-only payments due monthly with the principal due at maturity. Some of these loans are past their maturity date. The borrowers have continued to pay the contractual monthly interest payments. Should these loans be excluded from Schedule PD?
Answer: If management has restructured or extended a loan -formally or informally, then the loan would not be past due. An informal extension (not the same as a restructuring) is when the bank has agreed to accept interest payments until the property is rented or sold. The extension should be for a limited and reasonable length of time and the bank should get the extension in writing. From the borrower's perspective, if he is doing what the bank has told him, the loan is not in default and does not have to be reported in Schedule PD.

(D.I. 667-1, Exh. Cat p. 99).

         In its motion, the Government seeks to exclude the OTS Q&A from jury instructions and at trial. As to jury instructions, it argues the Call Report Instructions related to past due loans are unambiguous as a matter of law and that I should so instruct the jury. (D.I. 714 at 1, 7-8). Further, citing United States v. Willson,708 F.3d 47, 58 (1st Cir. 2013), the Government argues Defendants are not entitled to an instruction incorporating the Q&A absent evidence "they actually held an objectively reasonable belief that their conduct in reporting past due loans conformed to the information on the Q and A webpage." (Id. at 1). As to whether the Q&A is admissible at ...


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