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Tenn. banker fined and banned

Franklin, TN
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MICHAEL R. SAPP, now or formerly the president and CEO of Tennessee Commerce Bank, was issued an adjudicated decision and order to prohibit him from further participation in the affairs of any financial institution, and an order to pay a $250,000 civil money penalty, following a recommended decision on remand by an administrative law judge (ALJ) The ALJ found Sapp breached his fiduciary duties to the bank and actively participated in the bank's violation of federal law by engaging in multiple acts to conceal the bank's losses on $16 million in commercial loans made to two related companies in 2006 and 2007, which were all guaranteed by the same husband and wife.

The charges focused primarily on:

  • the creation of a subsidiary shell company to house two non-performing loans that should have been charged off
  • the extension of $16 million in credit to the shell company without any meaningful credit analysis or adequate collateral
  • the purchase of a life insurance policy without regulatory approval that effectively wagered on the date a guarantor would die
  • an attempt to avoid seeking regulatory approval by housing the life insurance policy in a subsidiary shell company
  • the failing to investigate and consider the risks posed by acquiring the insurance policy and making the $16 million in loans
  • the failure to disclose material information to the banks board or obtain approval from the bank's board before undertaking these actions.

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