More Minnesota bank directors fined and banned

The OCC issued three more Consent Orders in October banning former directors of Landmark Community Bank, N.A., Isanti, Minnesota, from participating in the affairs of any financial institution, ordering that each of the former directors pay restitution to the bank, and imposing civil money penalties on two of them. An earlier Consent Order against David Johnson, also a former director of the bank, is related.

The bank was under a formal agreement from June 2008 through November 2013, when it was replaced with a consent order that remains in effect. Both orders required that the bank maintain capital minimums and prohibited the bank from declaring a dividend if it failed to do so.

The OCC found that:

• From January 2012 to December 2014, in violation of the Formal Agreement and the Consent Order, the respondent Bank directors diminished the bank’s capital in order to pay loans held by the directors and the Bank’s holding company.
• Directors attempted to conceal from the OCC the fact that Bank capital was being used to pay the directors’ and holding company’s debts.
• Directors disguised the diminutions of Bank capital as board fees, increases to Respondent’s compensation, and a bonus paid to Respondent’s wife, who was also a Bank officer and employee. In this manner, the Respondent and the other directors diverted approximately $269,600 in Bank capital.
• In March 2013, the directors made two submissions to the OCC that contained materially false statements about a quarterly bonus payment to Respondent’s wife and the increases in board fees and Respondent’s compensation.

Other findings varied among the respondents of the three orders, but all were found to have engaged in reckless unsafe or unsound practices, and breaches of fiduciary duty to the bank, as part of a pattern of misconduct which caused or were likely to cause more than a minimal loss to the bank.

• EA 2016-096, 10/26/2016, Craig Bjorklund, CMP $45,000, Restitution $9,390
• EA 2016-097, 10/26/2016, Valerian Kuechle, CMP $45,000, Restitution $9,390
• EA 2016-102, 10/4/2016, Kevin Johnson, Restitution $10,000