United States Court of Appeals, District of Columbia Circuit
William R. Blanton, Petitioner
Office of the Comptroller of the Currency, Respondent
April 3, 2018
Petition for Review of an Order of the Final Decision and
Order of the Office of the Comptroller of the Currency.
E. Bertschi, pro hac vice, argued the cause for petitioner.
On the briefs were Mary C. Zinsner and Syed M. Reza.
N. Melton, Attorney, Office of the Comptroller of the
Currency, argued the cause for respondent. With her on the
brief were Charles M. Steele, Deputy Chief Counsel, and
Gregory F. Taylor, Douglas B. Jordan, and Daniel Prieve,
Before: Tatel, Srinivasan and Millett, Circuit Judges.
SRINIVASAN, CIRCUIT JUDGE.
Comptroller of the Currency assessed a $10, 000 civil money
penalty against William Blanton, the former Chief Executive
Officer of a Georgia bank. The penalty was based on two
distinct sets of allegations against Blanton. First, the
Comptroller found that Blanton engaged in unfair and unsound
banking practices by allowing the bank to honor repeated
overdrafts in the accounts of a frequent customer. Second,
the Comptroller determined that Blanton caused the bank to
file materially inaccurate reports concerning the bank's
seeks review of the Comptroller's decision. We uphold the
Comptroller's determination concerning Blanton's
involvement in honoring the overdrafts. But we set aside the
Comptroller's decision with regard to the financial
Americas Bank, chartered in the late 1990s, aimed to serve
the growing Hispanic community in Atlanta, Georgia. In 2007,
William Blanton acquired a shareholder interest in the Bank.
He assumed a seat on the Bank's Board of Directors and
served as the Bank's Vice Chairman.
and 2010, the Bank underwent an examination by the Office of
the Comptroller of the Currency (OCC), the federal agency
tasked with supervising national banks. The OCC determined
that the Bank was in "an unsafe and unsound
condition" and that its management was "critically
deficient." ALJ Decision, William R. Blanton,
AA-EC-2015-24 (Office of the Comptroller of the Currency Jan.
19, 2017) at 2, J.A. 137.
Blanton's behest, the Board asked the Chief Executive
Officer to resign, and the Board chose Blanton to serve as
interim CEO during the search for a permanent replacement.
The OCC authorized the arrangement, permitting Blanton to
serve in the interim position until September 2010. At that
time, the Board sought to retain Blanton as the permanent
CEO, but Blanton neglected to submit the proper paperwork to
secure the OCC's approval. In September 2010, he resigned
as CEO and Vice Chairman, and, one month later, resigned from
the Board. Despite efforts by the OCC and the Bank to revive
its financial condition, the Bank closed its doors in
December 2010 and went into receivership.
2015, the OCC issued a Notice of Assessment of a civil money
penalty against Blanton. The OCC can assess a civil money
penalty of up to $25, 000 per day if it determines, as
relevant here, that a federal bank affiliate violated any law
or regulation or recklessly engaged in an unsafe or unsound
banking practice, and that the violation or practice is part
of a pattern of misconduct. See 12 U.S.C. §
1818(i)(2)(B). In this case, the OCC's assessment arose
from Blanton's involvement while interim CEO in two sets
of bank transactions. The facts of each set of transactions
were as follows.
the OCC asserted that Blanton recklessly engaged in unsafe
and unsound banking practices by allowing the Bank to honor
several overdrafts in the accounts of a longstanding customer
without adequate controls.
time Blanton became interim CEO, the Bank had developed a
longstanding relationship with a local businessman, Alex
Campos. Campos had over thirty personal and business accounts
with the Bank. Over the years, Campos made numerous transfers
that caused substantial overdrafts in some of his accounts,
and the Bank always honored the overdrafts.
2003, the OCC became aware of the Bank's practices
concerning Campos's overdrafts. At the time, Campos had
incurred a $5.4 million overdraft at the Bank. The OCC
decided against taking action after Campos corrected the 2003
overdrafts and paid attorney's fees to the Bank.
Bank then implemented two controls designed to mitigate the
risk caused by the Campos overdrafts. First, the Bank decided
to honor overdrafts only in amounts less than the total funds
available in Campos's accounts. Second, the Bank
instituted a practice of transferring funds between
Campos's accounts (with his permission) to cover
overdrafts nonetheless continued through 2010. Between June
and October 2010, for instance, there were at least thirty
instances in which one of Campos's accounts was overdrawn
by more than $50, 000. At times, the overdrafts in his
accounts reached amounts exceeding 50% of the Bank's
overall Tier 1 capital, i.e., its most reliable
aggregation of assets.
early 2010, OCC examiners asked the Bank to place additional
controls on the Campos overdrafts. Blanton assured the
examiners that he would resolve the problem by expelling
Campos's accounts from the Bank, by securing a formal
contract enabling the Bank to transfer funds between his
accounts at will, or by refusing to honor Campos's
overdrafts altogether. Although Blanton did not specify when
he would take action, the OCC examiners expected that he
would enact the controls "immediately," which they
took to mean within thirty to sixty days. Lawrence Dep. 30,
Mar. 2, 2016, J.A. 955. Blanton delegated the task of
implementing the controls to the Bank's Chief Credit
Officer, Robert Beal.
Bank, though, continued to honor the Campos overdrafts, and
Blanton continued to assure the OCC that he was taking steps
to enact the promised controls. In April 2010, Blanton
emailed the OCC, vowing that the Bank had the issue
"close to resolution," although there were
"still some parts left." Blanton Email to Lawrence,
Apr. 30, 2010, J.A. 966. The next month, at a meeting with
Blanton, OCC examiners provided him a draft report of
examination discussing "the risks involved with allowing
a customer to make large and frequent intra fund transfers
that result in overdrafts." Final Decision, William R.
Blanton, AA-EC-2015-24 (Office of the Comptroller of the
Currency July 10, 2017) at 7,
[hereinafter Final Decision]. In June 2010, the Bank's
Chief Financial Officer, Charles Knight, notified Blanton
that Campos continued to overdraw his accounts, but the
Bank's position, according to a Bank employee, still was
to "pay everything." Id. at 8. After
sending Blanton a second draft report of examination warning
against authorization of the Campos overdrafts, the OCC
issued a final report stating that the Bank's practice
was unsafe and unsound, posing an "unwarranted and
excessive credit risk" to the Bank. OCC Report of
Examination 35, Dec. 31, 2009, J.A. 420.
August 2010, Blanton met with Campos to discuss the
overdrafts, and they orally agreed to three additional
controls: first, the overdrafts would be limited to ten
percent of the total balance of Campos's accounts;
second, the Bank would have a written right to make transfers
between his accounts to offset any overdrafts; and third,
Campos and his companies would guarantee any overdrafts. None
of the controls took effect, however, and Campos continued to
overdraw his accounts. Ultimately, after Blanton's
resignation and shortly before the Bank's failure, Beal
notified Campos that the Bank would no longer honor
overdrafts on his accounts.
the OCC alleged that Blanton had violated the National Bank
Act by causing the Bank to file three materially inaccurate
"call reports." Those reports describe a bank's
financial condition and enable banking agencies to
"monitor the condition, performance, and risk
profile" of banks and the financial industry as a whole.
12 C.F.R. § 304.3(a); see 12 U.S.C. §
161(a). When preparing call reports, a bank must adhere to
Generally Accepted Accounting Principles (GAAP) and
"accurately reflect" the bank's capital. 12
U.S.C. § 1831n(a)(1)(A), (2)(A).
OCC's allegations about the Bank's call reports stem
from the Bank's valuation of loans issued to two property
developers. In May 2006, the Bank loaned $2.1 million to
Brooks Avenue for acquisition and rehabilitation of an
apartment complex in Atlanta. In 2007 and 2008, the Bank made
two loans totaling $2.2 million to AH&H Property for the
purchase of land and construction of single-family homes in
the city. All three loans were secured by the targeted
property and guaranteed by each debtor-company's
properties securing the loans failed to develop as planned.
The Bank attempted to salvage the loans by amending the
companies' loan agreements. The companies, however, were