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Civil Money Penalties to be Imposed on
Officers and Directors of Failed Connecticut Bank of Commerce

November 26, 2002

State Banking Commissioner John P. Burke has notified eight officers and directors of the failed Connecticut Bank of Commerce (CBC) that he intends to impose civil money penalties totaling more than $2.3 million for their role in contributing to the bank’s severe undercapitalization which ultimately resulted in the bank’s failure. Burke declared the Stamford-based bank insolvent on June 26, 2002 and the Federal Deposit Insurance Corporation was named as receiver. The FDIC today announced that it also has issued civil money penalties against these officers and directors.

Burke stated that the administrative actions taken are based upon allegations that the officers and directors engaged in violations of banking laws and regulations, unsafe and unsound banking practices, and misused their official positions, thereby breaching their fiduciary duty to the bank.

Randolph W. Lenz, the bank’s majority shareholder and chairman of the board, could face up to $555,000 in civil penalties for allegedly engaging and participating in unsafe and unsound practices and for using his official position in a manner contrary to the interest of CBC and its depositors. An investigation conducted by the FDIC, in conjunction with the banking department, uncovered many instances of alleged impropriety involving Lenz.

The other seven that will face civil penalties are: J. Donald Weand, Jr., President, Chief Executive Officer and Chief Lending Officer, $390,000; Marcial Cuevas and Jack W. Dunlap, Directors, each $375,000; Steven B. Levine, Director, $360,000; Brian A. Marks, Director, $240,000; and Marshall C. Asche and Timothy S. Reed, Directors, each $30,000.

"There will be no tolerance for bank professionals who engage in unethical behavior," Burke said. "Executive officers and directors are held to a higher standard and any abandonment of the responsibilities associated with their fiduciary duties is inexcusable," Burke added, emphasizing that sound and prudent corporate governance has never been more important than it is today.

 According to Burke, CBC had a lengthy history of regulatory issues and had been under increased regulatory scrutiny since 1999. Its financial condition ultimately eroded to an unsafe and unsound condition. Prior to the bank’s closing, regulators uncovered a number of questionable loans and a comprehensive investigation was begun. The action taken is a direct result of that investigation, and the considerable loan losses identified in the most recent joint examination by state and federal regulators. Burke did not rule out the possibility that further administrative actions could be forthcoming.

"It’s unfortunate that many trustworthy depositors at CBC had to pay for the sins of a few," Burke said, explaining that the activities of the individuals named in today’s action contributed to the fate of the bank and resulted in a payout from the federal deposit insurance fund for insured depositors. However, there remains some $72 million in uninsured deposits.

"Officers and directors at Connecticut’s depository institutions should take heed of our policy of no tolerance and fully recognize that we will vigorously enforce the laws of the State of Connecticut when such unconscionable behavior is detected," Burke said.

Connecticut Bank of Commerce was the former Amity Bank, based in Woodbridge, Connecticut. It changed its name to Connecticut Bank of Commerce in January 1993, and later relocated its main office to Stamford. It maintained branches in Branford and Woodbridge, Connecticut, and two in Manhattan. On June 28, Hudson United Bank, based in Mahwah, New Jersey, assumed the insured deposits of CBC and the insured depositors automatically became depositors of Hudson United Bank.

Links to Orders: Randolph W. Lenz | J. Donald Weand | Marcial Cuevas, Jack W. Dunlap, Steven B. Levine
Brian A. Marks | Marshall C. Asche, Timothy S. Reed

See also: FDIC Order