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OCC issues Order of Charges to two former chairmen of Texas bank

Edinburg, TX
09/25/2017
Fine Amount: 
Pending
Penalty Type: 
Issued by: 

The OCC issued a Notice of Charges for Orders of Prohibition and Notice of Assessments of a Civil Money Penalty to Saul Ortega and David Rogers Jr., both former chairmen of the board of First National Bank, Edinburg, Texas (closed in September 2013), notifying them that on a date to be determined by the Administrative Law Judge for the OCC, a hearing will start concerning whether Orders should be issued by the Comptroller against them that would ban them from the banking industry and require each of them to pay a proposed civil money penalty of $250,000.

The bank incurred a $174 million loss in 2008 on investments in Fannie Mae and Freddie Mac. At approximately the same time, the bank's OREO increased significantly due to increasing delinquencies and foreclosures, and the OCC imposed an Individual Minimum Capital Ration on the bank in early 2009. The OCC found that, to mask the bank's deteriorating financial condition, Ortega and Rogers engaged in misconduct that inflated earnings and capital and improperly reduced or delayed reported losses. That misconduct included providing unsafe or unsound loans to finance the bank's raising of capital (the bank lost $387,000 on these loans and the FDIC's Deposit Insurance Fund (DIF) lost $3.8 million); improperly including the loan proceeds as capital; providing unsafe or unsound loans to finance the sales of OREO at above-market prices to improperly reduce the bank's nonperforming assets and avoid recording losses on the OREO sales (the bank incurred at least $42 million in losses and the DIF lost at least $103 million); and improperly accruing interest on nonaccrual loans.

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