Bank Director & Officer Defense
Bank Directors and Officers are increasingly facing the prospect of personal liability for actions that they took during a more benign economic and regulatory environment. Bank regulatory and other government agencies, including the Department of Justice, Securities and Exchange Commission and state Attorneys General, have become more proactive in investigating possible wrongdoing by bank insiders.
When a bank fails or becomes troubled, bank directors and senior officers face heightened scrutiny and risk. As receiver of a failed bank, the FDIC may sue individual directors and officers civilly for having failed to meet their fiduciary duties. The FDIC also aggressively pursues directors and officers of both failed and open banks for reckless lending and other actions considered unsafe or unsound. Such actions are normally preceded by formal investigations characterized by sworn statements and document subpoenas. Bank directors and officers can face significant civil money penalties, prohibition orders and restitution orders.
BuckleySandler counsels bank directors, bank boards, and bank officers on how to establish a decision-making process that will minimize personal liability, and defends them against enforcement and civil actions filed by banking agencies and other governmental authorities. The defense begins at the time that the director or officer is put on notice by the government agency that it has initiated an investigation or has provided a letter to the insider providing an opportunity to respond to certain allegations. The Firm also advises bank boards and management on how to protect themselves against personal liability through D&O insurance policies, charter and bylaw indemnification provisions, and individual indemnification agreements with individual directors.
Once a bank is at risk of being closed, BuckleySandler will conduct a thorough review of facts and circumstances that might place directors and officers at risk and counsel them as to how to minimize that risk and prepare for potential litigation or enforcement action.
Once a bank is closed, BuckleySandler will assist directors and senior officers in responding to demand letters from the FDIC, prepare for sworn depositions, advance arguments to the FDIC why civil or enforcement action is not warranted, sue to challenge the seizure and if a suit or enforcement action is initiated, defend the client or negotiate a settlement.
BuckleySandler has represented a number of bank directors and officers in a variety of enforcement and civil action matters. Representative experience includes:
- Defense of directors of failed banks against threatened civil suits and enforcement actions by the FDIC
- Preparation of defense of various directors of troubled banks prior to bank failure
- Amicus brief for the American Association of Bank Directors defending the right of directors of failed banks to have access and copies of bank records to defend themselves (See FDIC v. BryanCave)
- Suit on behalf of former directors of United Western Bank challenging the closing of United Western Bank by the OTS and FDIC
Members of the D&O Defense practice group include former bank regulators and experienced civil and criminal litigators and the Executive Director of the American Association of Bank Directors, a nonprofit trade association representing the interests of bank and savings institution directors.