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James E. Smith
n
Comptroller of the Currency
before the
Subcommittee on
Commerce, Consumer and
Monetary Affairs
of the
House Committee on Government Operations
June 1, 1976#
î£ t b r a r it
JUN 1 1 1976
FEDERAL DEPOSIT INSURANCE
CORPORATION
I appreciate this opportunity to appear before the
Committee in connection with its inquiry into the Comptroller's regulatory
processes.
In this hearing the Committee is attempting to evaluate
those processes through a study of the Franklin National Bank, which
was placed in receivership on October 8, 1974.
I
believe that we can learn from our past experiences, both
good and bad.
Thus, as the Committee staff testified last week,
I initiated even before the failure of Franklin National Bank a
special study of the events leading to the bank's difficulties.
This Committee's record on Franklin National Bank would be
incomplete, however, without including information on (a) the
behavior of the financial market place during the critical years
1970-1974 and (b) the changes that have occurred in the Comptroller's
Office.
I . The Financial Market Place and Its Effect on Franklin
National banks are privately owned corporations.
The most
important decisions made in each bank are those of the bank's own
board of directors and management, responding to competitive
pressures and opportunities.
Thus no inquiry into the failure of
Franklin National Bank can be complete without an examination of
the decisions made by the Franklin management in the context of
the then existing market place environment.
Inflation during the 1970-1974 period was rampant: because
of the effects of the Vietnam war, an expansionary monetary policy
and other such factors, consumer prices increased by 31.9% from
1970 to 1974.
At the same time, the steepest recession since the
Great Depression of the 1930's had set in.
From the banker's point of view, the greatest problem was the
enormous increase in interest rates: the Federal funds rates during
the summer of 1974 rose to an unprecedented 12.9% and the prime rate
-
was at a staggering 12.1%.
2
-
The basic cost of money to banks
aggressively using liability management during the 1970-1974 period
had increased an incredible 105.3% during this time.
Franklin was
particularly ill-suited to survive these economic pressures.
Franklin was a marginal operation throughout the 1960's, yet
the bank managed to operate and grow to a $3 billion institution by
the end of 1969 without arousing any significant concerns by this
Office or the financial industry.
Despite its apparent progress,
however-particularly in 1968 and 1969-the bank had neither the manage
ment depth and acumen nor the operational systems and controls to
cope with its ambitious expansion program and the financial perils
of the 1970's.
Had the bank curtailed its activities after 1969
and solidified its position in the marketplace, the results may have
been different.
By December 31, 1973, Franklin's resources exceeded $5 billion.
The bank's management proved incapable of developing and handling
the sophisticated asset and liability management techniques necessary
for a bank this size.
During the 1960's and early 1970's, the money market banks,
faced with declining rates of growth in deposits, sought new ways
to meet the heavy credit demands of their customers.
In consequence,
Franklin and other banks placed less and less reliance on the generation
of liquidity through asset composition and cash flow.
Instead,
increasing emphasis was given to acquisition of deposits and the pur
chase of a wide array of borrowed money, including Federal funds,
Eurodollars, negotiable CD's and long-term debt.
Franklin thus was able to buy its liquidity in the marketplace
to support its rapid asset growth. In retrospect, Franklin's
liability structure and asset structure made the bank exceptionally
vulnerable to the confidence of the money markets.
-3Confidence in financial institutions declined significantly
in 1973 and 74 as a result of bank failures, both here and abroad,
significant foreign exchange losses in several major banks and evidence
of deterioration in bank loans to struggling real estate firms, air
lines, public utilities and the like.
This decline in confidence,
coupled with steadily rising interest rates, tight money conditions,
high inflation and the beginnings of a recession led to a rush to
safe havens for funds.
The very largest banks with unquestioned
national and international reputations were the direct beneficiaries,
since the money market participants seemed to be making the judgment
that biggest also meant safest.
Marginally operated and smaller money
center banks like Franklin were often denied funds altogether or were
forced to pay high premiums for a limited amount of funds.
The tiered
markets which developed forced many banks to scramble to avoid nega
tive margins and to assure liquidity adequate to meet the claims
against them.
Franklin had long term, low yielding assets in both
its loan and its investment portfolios, and thus was locked into a
negative margin between the cost of the funds it borrowed and the
uses it made of those funds.
Under these turbulent market conditions, Franklin struggled.
The money market's continuing concern about Franklin was greatly
aggravated in the spring of 1974 when significant problems were dis
closed and market rumors about substantial losses became generally
known.
A loss of confidence occurred and a massive outflow of funds
resulted, from which Franklin never recovered.
The specific actions
taken by the Comptroller's Office during the November 1973 through
-4October 8, 1974 Franklin difficulties are detailed in the Appendix
to my statement.
The lesson that all banks could not always be assured of equal
access to the money markets was a rude awakening for many banks
practicing liability management, and an important lesson for us.
We believe we now have the sophisticated analytical techniques and
a far better understanding of money market banks to take remedial
action early and effectively.
However, because our powers —
by design
fall far short of
actually running a bank, there will always be a limit on our capacity
to insure a fail-safe national banking system.
II.
Changes in the Comptroller's Office
The Committee staff's testimony last week mentioned several
times the year-long study and report on the Comptroller's Office by
the nationally known management consulting firm of Haskins & Sells.
There was apparently no direction to the Committee staff, however,
to evaluate the many changes which have resulted from implementation
of the recommendations in that report.
As the Committee knows, the General Accounting Office is now
undertaking a full scale review of the operations of the Comptroller's
Office.
GAO's report is expected to deal with these changes in our
regulatory and supervisory procedures.
Meanwhile, however, I should review for the Committee some of
these changes in order to dispel the erroneous impression that might
be left in the record from the limited scope of the testimony already
presented to this Committee.
Domestic Examination Procedures
Substantial improvements in national bank examination procedures
now are being adopted.
-5The new procedures will gear examination efforts more precisely
to the needs of the Comptroller's Office and the particular bank
being examined and will stress review of bank internal controls, such
as credit and investment rules, and internal audit procedures.
Examiners
will devote more time to the review and evaluation of the bank's own
policies and procedures, its decision-making process, and its manage
ment information system.
Had these new examination procedures and
processes been in place earlier, they may have enabled the examiners of
the Franklin National Bank to perceive much earlier the inherent weak
nesses in the bank's philosophy, policies, and procedures which
eventually created the problems leading to its demise.
In addition to these new examination processes, major revisions
are being made in the examination report itself.
The primary purpose
of the revised report of examination is to communicate meaningful
information effectively to both the Office of the Comptroller of the
Currency and to bank directors and management.
The report must clearly
identify the problems of special concern to the examiner, the factors
that have caused the problems, and the remedial action that is suggested.
To promote effective communication of these matters to the intended
recipients, the new report of examination is divided into three sections
designed to explain the relative importance of the examiner s findings
of problems and causes and to indicate recommended corrective action
to the applicable recipient.
The first section of the report is designed specifically for the
immediate benefit of the Board of Directors and its Examining Committee,
as well as senior management.
It is to be in letter form and will set
forth the scope of the examination plus a summary of all critical
comments, in narrative form, backed by appendices and schedules that
will support the conclusions in sufficient detail to enable the Board,
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or its representatives, to take specific corrective action.
The
examiner's comments are to include probable problem causes and
recommended actions to assist the Directorate with this aspect of
remedial responsibility.
The second section of the report consists of various schedules,
technical irregularities and deficiencies, and comments by the examiner
relative to the conclusions and evaluation of specific areas.
This
section will be a checklist against which a bank's auditor, cashier,
or other designated officer can effect correction and against which the
bank's Board of Directors and/or senior management can measure the
progress of the corrective action.
The third section of the report is designed specifically for the
Comptroller's Office, although we will receive copies of all three
report sections.
The third section will include confidential information
and a certain amount of additional informative data necessary to the
operation of our Office.
The confidential section will set forth matters
requiring the prompt attention of our senior staff, such as:
-Suspected violations of law uncovered during the course
of the examination reported, or to be reported, to the
appropriate Comptroller officials or other regulatory
an enforcement agencies.
^■Critical comments relating to senior bank officers which
may require official remedial action by the Comptroller s
Office such as the threat of cease and desist orders or
officer removal.
-Subjective comments regarding management or other matters which
have not been factually proven by the examiner but which,
nevertheless, constitute areas of concern.
As is evident, the report of examination and related procedures
have undergone substantial change.
Perhaps the most important change
is that most of the information previously "hidden" in the confidential
section of the report of examination is now presented in the open
section.
Directors and management of the bank will have no excuse for
-7doubt concerning our Office's evaluation of the condition of
the bank.
National Bank Surveillance System
We are also implementing a bank evaluation and monitoring system
called the National Bank Surveillance System (NBSS).
Had this system
been in operation at the time when Franklin's earnings problems were
developing, the system - in coordination with the new examination
procedures -
would have assisted in detecting the detailed causes of
those problems and, more importantly, it could have helped manage
ment to correct those problems in a timely manner.
The NBSS consists of four elements:
a data collection system;
a computerized analysis system which detects unusual or changing con
ditions in any national bank; an analysis of those changes by trained
NBSS specialists; and, of primary importance, an Action Control System.
Rapidly processed reports of condition and income from each
national bank are entered into the system at quarterly intervals.
The
computer calculates fifteen pages of meaningful ratios and percentages
for each bank.
A second computer program summarizes these performance
reports and ranks each bank in an "Anomaly Severity Ranking Report."
This report simply designates those banks in the national banking system
which deserve a priority review.
re-enters the process.
At that point the human element
The trained NBSS specialists review each of
the fifteen page reports and all other relevant data on each bank which
the Anomaly Severity Ranking Report has designated for priority review.
The Anomaly Severity Ranking System covers three basic aspects
of a bank's condition in relation to that of other banks in its peer
group.
It considers the bank's current position in each ratio, its
short term trend in the most recent quarter and its long term trend
over the past five years.
Had the NBSS been in use earlier, it would
have designated Franklin for priority review.
The NBSS specialists
would have noted a number of conditions in the Franklin report,
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including its low and declining earnings; its sources of
those earnings; its inadequate provisions for its reserve for possible loan
losses; and its inability to utilize fully its municipal tax exempt
income.
In view of all of those factors, the hazards involved in its
large, volatile liabilities would have been flagged.
With the Anomaly Severity System having designated Franklin for
priority review, the NBSS specialist would have reviewed the perfor
mance report, noted conditions of concern, and then turned to the
Action Control System.
All banks designated for priority review are placed in the Action
Control System quarterly.
The bank cannot be removed from the
Action Control System until the conditions of concern have been corrected.
While the bank remains in the Action Control System, reports will be
made every two weeks showing the progress or the lack of progress in
correcting conditions of concern.
The conditions of concern must be acknowledged by the Regional
Administrator, who has the responsibility for the initiation of
corrective action.
He must respond to the conditions cited in the
Action Control System.
He can achieve correction at his discretion,
but correction and/or his response must be made within 30 days.
The Action Control Reports will also be utilized by various
functional units of the Washington office.
If those reports show a
bank or a region as delinquent or unsuccessful in its corrective
efforts, they can be assisted by other appropriate units such as our
Special Projects staff or the staff of our Enforcement and Compliance
Division.
The NBSS does exist now to this extent.
is flowing into the system.
Fast and accurate data
The fifteen page performance reports are
being produced and they are being utilized in most of our geographic
-9regions.
Seven trained NBSS specialists are now in regional offices
and all fourteen regional offices will have trained specialists
the end of June,
1976.
The Anomaly Severity Ranking Reports have
been utilized repeatedly and they have proven reliable.
We have used
in the banks the results of the reports and the specialists to cause
the correction of serious problems which would otherwise not have
been detected at an early date.
The Action Control Program is a crucial part of the system.
programming is nearly complete;
Its
its action, condition and response
codes have been tested and, with the input of the next quarter's data,
the Action Control System is to be implemented.
We will then be using a new system of bank supervision.
We know
that system must remain flexible to cope with the rapid changes in
the banking system.
It must also maintain the proper balance between
its machine-operated segments and those involving good human judgment.
Foreign Exchange Procedures
We are in the process of finalizing a new examination procedures
manual which covers every aspect of foreign exchange trading and.
requires written policy goals and guidelines,
segregation of specific
duties by trading and bookkeeping personnel, specific confirmation
requirements, internal controls and audit programs.
Recognizing that with relatively minor changes in our old
techniques we might well have found reason to suspect some less than
prudent action on the part of Franklin's personnel, we now require
that the examiner review, not just the most recent, but all monthly
revaluation worksheets since the last examination to insure that
proper market rates were in fact used.
The new procedures, under
appropriate circumstances, require the examiner to intercept all mail
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to insure that all incoming confirmations can be identified with
contracts on the bank's books.
These new examination procedures are
the most comprehensive guidelines written to date.
We have made other modifications in personnel, training, and
examining procedures and policies.
These are designed to help prevent
the occurrence of similar situations in other banks.
We insist that the Board, through senior management, set up
strict segregation of duties and responsibilities for every function
of this and every other area.
Traders should trade and nothing else.
Accounting personnel should be responsible for all accounting, confir
mation, revaluation, and other recordkeeping functions, completely
independent of all trading functions.
This would include sending
and receiving trade confirmations and checking discrepancies directly
with the counterparties and reporting these activities to the audit
department, obtaining forward rates for revaluations independently
and performing these revaluations without interference from the traders.
Auditors must be truly independent from influence by senior management
or by the personnel they are auditing.
They must feel free to report
their findings to proper Board-level committees.
The Position Clerk
should only keep records for the trader and not prepare reports for
management.
This should be a function of the accounting department.
Examiners are evaluating the organization and effectiveness of
this separation of duties and commenting upon deficiencies or over
lapping of responsibilities.
Critical comments are made directly
to senior management and the Board.
Examiners include in their examina
tion procedures an inspection of internal bank reports from periods
between examinations to insure their accuracy and the correctness of
their content.
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In addition, as part of the "ongoing examination" concept,
while examiners are in the bank they review reports, daily activities,
and similar matters, at least on a test basis, to ascertain if required
procedures are followed as a regular practice and also to determine
any major changes in positions and policies.
The International Banking Group continues its efforts at upgrading
the quality, knowledge, and experience of personnel engaged in examining
international activities.
Examiners-in-Charge of international divisions
are now recommended by the Regional Administrators and final selections
are made by the International Banking Group, based on experience, ability,
and availability.
Additional personnel are participating in quarterly
training sessions on international banking.
This training, both m
general international banking and in foreign exchange, is conducted
by Washington staff personnel, as well as by other authorities from
government agencies such as the Ex-Im Bank and the Federal Reserve,
and by experienced bankers.
An advanced seminar on foreign exchange
trading is also given at least twice annually to help disseminate
knowledge of this subject to as many of our examiners as possible.
In addition,
international examiners travel to other areas of the
country in order to help where experienced support personnel are needed,
and gain experience from this increased exposure.
Branch and Other Approvals
Procedures for actions on corporate activities, such as new
branches, mergers and other applications in the corporate area, are
being developed to examine more closely the expansion policies of
a national bank in light of its historical and current condition.
The comptroller's Office will soon announce policy statements
which will be published for comment by the public prior to their
adoption.
These policies will set forth guidelines under which the
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Comptroller *s Office will either grant or deny branches, mergers and
other applications of a corporate nature.
These guidelines will
specify that, if a Regional Administrator wants to approve a branch
or merger which falls outside the guidelines, the application will
get close scrutiny in Washington.
If a particular bank is subject
to special surveillance, its application will undergo special analysis
by the Bank Organization and Structure Division in consultation with
the special surveillance units in Washington.
In short, our new policies in regard to corporate expansion will
permit closer monitoring, in conjunction with our new examination
and analysis techniques, both at the regional and Washington levels.
Operations Review
Prior to 1976 the Comptroller's Office had no formal process
for reviewing in a systematic way the manner in which national bank
examiners perform their examinations to assure that they are performed
consistently in accordance with established instructions and procedures.
Such a formal operations review process is now in place.
It is headed
by a Deputy Comptroller with 27 years examining experience who reports
directly to me.
He is our own internal inspector general.
Under his supervision, examiners in each of our 14 regions have
been specially trained to review the procedures by which banks in
other regions are examined and supervised.
Any exceptions from
established procedures and instructions are noted and reported to the
Washington Office.
Additionally, our Deputy Comptroller for Operations Review is
the person to whom a banker who is fundamentally aggrieved by any
of our regulatory activities can bring his complaint.
These operations review procedures should lessen the possibility
of examinations being conducted improperly or not in accordance with
-13-
the new procedures which are being established by our Office.
Recommended Enforcement Legislation
Although these changes should make our Office more effective,
there are still more tools we need that only the Congress can provide.
The Congress is currently considering enforcement legislation
recommended jointly by the Comptroller, the Federal Reserve Board,
and the FDIC to enable us better to deal with problem banks.
I
urge prompt consideration and passage of this legislation.
The legislation has several provisions.
The first empowers
the banking agencies to assess civil penalties for violations of
various banking statutes and cease and desist orders.
I endorse
the idea of giving the agencies this authority.
Another provision of the bill which I heartily support would
give the banking agencies power to remove an officer, director,
or other person participating in the affairs of the bank from his
position upon being able to show gross negligence in the operation
or management of the bank, or a willful disregard for the bank's
safety and soundness.
Under the present statute, bank officials
can be removed only if the agency can establish "personal dishonesty."
The judicial review provisions already contained in the statutes
are ample to protect against arbitrary or capricious use of this
power.
The procedures by which an officer or a director of a national
bank can be removed also need amendment.
Under existing law, the
Comptroller lacks power to remove a bank official unless that official
has been indicted.
If he has not been indicted, the Comptroller can
do no more than certify facts to the Federal Reserve Board.
The
Federal Reserve is given the responsibility for issuing a notice
of proposed removal, prosecuting the case, hearing the evidence
-14-
and making the final decision.
The Comptroller cannot even
institute the proceeding.
This procedure is so cumbersome to use that neither the Federal
Reserve Board nor my Office believes that it has been very effective.
We thus have recommended a provision which would empower the
Comptroller to institute and prosecute proceedings.
The Comptroller
also would have the power to suspend a bank official pending comple
tion of the proceedings.
The Federal Reserve Board, however, would
retain its authority to hear the case and make final decisions.
am in complete agreement with this recommendation.
In addition to this general statement on Franklin and the
operations of our Office, responses to specific questions in your
letter of invitation of May 4, 1976 are addressed in the Appendix
to the statement.
I
to Statem ent of
Ja m e s E . Sm ith
June 1, 1976.
SI t b r a r tj
JUN 1 1 1976
federal
d e p o s it in s u r a n c e
CORPORATION
Index to the Appendix
I. Franklin National Bank - November 1973
October 8, 1974
II. Supplementary Responses to the Committee's Questions
III. Special Projects/Bank Review Program Memorandum
j m Franklin Nations! Bank
November, 1973 - October 8, 1974
On November 14, 1973, our Office began a regular examination of
Franklin.
This examination, which was not to conclude until March
8, 1974, disclosed that Franklin had serious financial problems.
These problems included a low-yielding loan portfolio, depreciation
in the muncipal and investment portfolios, heavy reliance by the bank
on short term borrowed funds (so-called hot money) and the bank’s
poor management.
Uncollectable loans totalled $10 million.
The
operating income of the bank was poor, which, being public informa
tion, affected public confidence in the bank.
Total resources of the bank had grown to $4,852,999,972, or
29% higher than the previous December 8, 1972 examination.
The
capital, however, had increased by less than one half of one per
cent; demand and savings deposits actually had declined 5.5%.
The
bank's recent growth had been financed almost entirely by using
short term borrowed funds, including time deposits of other banks and
money market certificates of deposit.
These types of funds totaled
$2.3 billion, or 50% of the ba n k ’s liabilities.
They had increased
dramatically by $984 million, or 76%, since the last examination.
Such borrowed funds are volatile and likely to disappear quickly if
creditors have reason to question a bank's stability or soundness.
I instructed Regional Administrator Van Horn by letter of
February 22, 1974, to meet with the senior management of Franklin in
order to formulate a plan with the bank for remedial action in such
areas as reduction in all forms of borrowings, standards of new loan
extensions and adjustment of the imbalance between the bank’s capital
and the size of its operations.
Mr. Van Horn met with the senior
officers of Franklin on February 28, 1974, and with the Board of
Directors on March 28, 1974.
The bank agreed to reduce its borrowings
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by $500 million through liquidating $260 million carried in its
bond trading account,
selling $100 million of loans to another bank,
r e d u c in g new loan commitments,
increasing compensating deposits
maintained at the bank by borrowers.
On April 18, 1974, Franklin New York Corporation (FNYC) announced
net operating income for the first quarter of two cents per share
or $79,0.00, down from the previous year of sixty-eight cents per share
or $3,123 million.
The holding company release stated that income
was "adversely affected by the sharp rise in the cost of short-term
borrowings needed to carry assets during the 1974 quarter.
On May 1, 1974, the Federal Reserve Board announced its denial
of the holding company's application to acquire Talcott National
Corporation, a business financing and factoring firm.
for this acquisition on August 13, 1973.
FNYC had applied
The Board decided that
this
proposal may constitute an undue drain on Applicant's managerial and
f i n a n c i a l resources."
On May 10, 1974, the Comptroller's Office and the Federal Reserve
Board learned from Franklin that heavy losses in an undetermined amount
had occurred in the bank's foreign exchange department.
ment decided to announce these losses.
Bank manage
It was clear that an announcement
of this kind would dry up the bank's sources of borrowed funds, thereby
creating a severe liquidity crisis.
In anticipation, the bank sought
from the Federal Reserve Bank of New York a huge loan to cover this
expected run-off.
On May 10, 1974, management announced that, in light of the small
profit for the first quarter of 1974 and management's estimate for
the second quarter, it would recommend that Franklin's Board of Directors
not declare the regular dividend on Franklin's common stock and
convertible preferred stock.
-3We advised the FDIC of these events.
Taken together, the bank's April 18 release, the May 1 Talcott
turndown, and the May 10 release caused large scale institutional
withdrawals and forced the bank to the Fed discount window to obtain
the liquidity funds it needed.
At this time, management of the bank and representatives of this
Office began exploring merger possibilities.
The only possible,
immediate merger partner showing serious interest was ManufacturersHanover Trust Company of New York.
Manufacturers-Hanover in April, 1974
had loaned FNYC $30 million on a long term basis.
After intensive
discussions with the officers of Franklin, the management of Manufacturers
Hanover determined on May 12 that an immediate merger was not feasible.
On Friday and Saturday, May 10 and May 11, 1974, an internal review
of the foreign exchange department was taking place and by Saturday
evening, May 11/ 1974, a relatively large loss was estimated.
On
Sunday, May 12, 1974, Franklin issued a press release, which stated
in p a r t :
The bank also reported that its foreign currency exchange
department has realized losses since March 31, 1974, of
approximately $2 million.
In addition, it has recently
been discovered that because of a trader in that department
operating beyond his authority and without the bank s know
ledge, it will have sustained losses, as of May 13, 1974,
of $12 million, and has potential losses of $25 million
at May 10, 1974 rates.
The bank also noted that earlier in the day on May 12, 1974
Vice-Chairman Mitchell of the Federal Reserve Board, after having
been assured by our Office that Franklin was solvent, advised in a
press release that "as with all member ba n k s , the Federal Reserve System
stands prepared to advance funds to this bank as needed.
FNYC asked
the Securities and Exchange Commission to suspend trading in its
securities.
The SEC did suspend trading and conducted an investigation
-4-
into the accuracy of FNYC financial statements.
Ultimately a lawsuit
was instituted by the SEC.
On May 13, 1974, at a special meeting of the bank's Board of
Directors, the President of the bank and the head of its foreign exchange
department were fired.
These events further eroded confidence in the
bank so that by close of business on Wednesday, May 15, 1974, the
bank's loan at the Federal Reserve window reached $780 million.
Much of the public attention at that time was focused on Michele
Sindona, an Italian lawyer and resident of Switzerland, who had purchased
through his holding company, Fasco, 1,000,000 shares of FNYC in July, 1972.
This stock constituted 21.6% of the outstanding shares of the common
stock of FNYC.
Mr. Sindona became a director of FNYC in August 1972.
In view of the public concern over Mr. Sindona's association with
the holding company, Mr. Sindona agreed that he would relinquish for
one year his rights to vote the FNYC stock held by Fasco and give the
s o le voting rights to former Treasury Secretary David Kennedy.
This
was completely agreeable to me and an announcement to this effect
was made by Franklin in a press release dated May 12, 1974.
Franklin
a l s o announced plans to raise additional capital of $50 million, as
well as several major management changes to be put into effect at the
b a n k 's Board meeting the next day.
the resignations of Paul Luftig,
On Monday, May 13, the bank accepted
the President and Chief Executive Officer
of the bank and Peter Shaddick, Vice Chairman of Franklin in charge
of its international department.
On Tuesday, May 14, 1974, a new examination of the bank was
commenced in order to update the value of its loans, its securities
and foreign exchange position.
The May 14 examinations showed large
foreign exchange losses, accelerated depreciation in securities and a
loneral lack of improvement in the bank's condition since November 1973.
-5On May 13, 1974, I requested the member banks of the New York
Clearing House Association to explore Franklin's affairs.
The purpose
of this review was threefold:
1) To advise me and my staff as to how other bankers would
view the condition of Franklin National Bank;
2) To establish a foundation upon which the Clearing House
Association members might act to help with Franklin's
liquidity problems; and
3) To provide information to members of the Clearing House
who might be interested in acquiring Franklin National Bank.
In this regard, it was agreed that any information received
through this processing by members of the Clearing House also
would be made available to any non-Clearing House member
interested in acquiring Franklin National Bank.
On June 11, 1974, with the encouragement of the Federal Reserve
System, an arrangement was reached whereby members of the Clearing
House individually would loan Federal funds to Franklin in an amount
which aggregated $225 million.
Meanwhile, efforts had been made to attract stronger management.
With my assistance, Mr. Edwin Reichers was brought into Franklin on
May 17, 1974, as an Executive Vice President in charge of Franklin's
foreign exchange operations.
He had for 40 years been with First
National City Bank of New York, and headed that bank's foreign exchange
operations.
A long search for a new head of Franklin culminated on June 21,
when Joseph W. Barr was brought into Franklin as its Chief Executive
Officer.
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-
Mr. Barr, who is well known to many members of this Committee
as a former colleague in the House, had a distinguished background
in the fields of government and finance, having served as Chairman
of the FD I C , Under Secretary and Secretary of the Treasury Department,
and as the Chairman and Chief Executive Officer of American Security
and Trust Company of Washington, D.C.
He was well and favorably
known by foreign financial institutions, and a man with whom I was
confident we could work effectively under most demanding conditions.
My confidence in him was fully justified by his performance.
Without
him and the qualities of integrity, courage, and decisiveness which
he brought to bear on the myriad of problems,
I frankly doubt that
the successful result on behalf of Franklin's depositors could have
been achieved.
On July 2, I wrote the FDIC requesting it contact other banking
organizations which were potential purchasers of some or all of the
business assets of Franklin National Bank.
The FDIC developed a
plan to assist a prospective purchaser to assume liabilities and
purchase assets of Franklin and began negotiations with interested
bankers to draft a set of acquisition papers upon which banks could
bid competitively in the event the FDIC became the receiver.
In an effort to alleviate further liquidity problems,
I
requested a meeting of representatives of 17 large U.S. banks to
discuss selling Franklin's portfolio of Euro-currency loans.
meeting took place in Chicago on July 22.
were offered for sale.
The
Some $300 million of loans
This proved to be an unsuccessful effort,
however, because of the interest rates on these credits in comparison
with the then prevailing high interest rates, and because of the liquidity
problems of all large banks at that time.
-7In September, Mr. Barr presented the regulatory agencies a
plan by which, with substantial assistance from the FDIC, Franklin
would retrench, give up most of its national and international
business, and become a Long Island bank.
I requested the investment
banking firm of Blyth Eastman Dillon & Co. to advise us concerning
Mr. Barr's proposal.
On October 3, the firm advised that the prospects
of Franklin's achieving financial viability as an independent banking
institution were bleak.
Mr. Barr also suggested that in the event a takeover of Franklin
became necessary, it would be beneficial to the interests of the
shareholders and to the competitive situation to widen as much as
possible the list of potential purchasers.
The greatest obstacle to
this was the legal situation which limited the list of potential
U.S. buyers to New York State-chartered institutions and national
banks located in New York.
Mr. Barr requested that, not only for this
case, but also for the future, Congress should act quickly on
legislation which would permit the purchase and operation of banks
across state lines where necessary to prevent the probable failure
of a large institution.
Time did not permit the adoption of such
legislation before the end came for Franklin, but I hope that the
Congress will soon provide for such a situation.
As a result of continuing negative publicity, continuing
deposit decline, and management's continued inability to reduce the
loan portfolio, on September 30, Franklin's total borrowings from
the Federal Reserve Bank of New York exceeded $1.7 billion.
By the
end of September, total deposits were rapidly declining to the $1
billion mark and total other liabilities, principally borrowings,
were rising to nearly $2 billion.
The bank was unable to retain
large maturing certificates of deposits or other maturing money market
liabilities.
-
Based on all facts available,
8including Mr. Barr's proposal
which conceded that the bank could not survive without massive
government assistance, the Blyth Eastman Dillon report, and the
negative reports by the New York Clearing House banks, I concluded
that Franklin did not appear to be a viable institution.
On October 4, I wrote to the Federal Reserve bank, briefly
reviewing the situation, and asking for the Federal Reserve Bank's
views with respect to its continued willingness to lend funds to
Franklin.
On October 7, the Federal Reserve Bank replied, stating
that its emergency credit assistance to Franklin was based on public
policy considerations arising from the responsibility of the Federal
Reserve System as a lender of last resort and was designed to give
Franklin and the concerned Federal bank regulatory agencies a sufficient
period to work out a permanent solution to the bank's difficulties.
The Federal Reserve Bank also had concluded that the Franklin proposal
of September 16, to the FDIC did not offer a feasible means of achieving
the continuation of Franklin as an independent, viable bank.
The
Federal Reserve Bank advised that it would not be in the public interest
for that bank to continue its program of credit assistance to Franklin.
It was no longer in the best interest either of Franklin's
depositors and other creditors or of its shareholders to wait for further
deterioration in the bank's condition, especially when the alternative
of the FDIC-assisted purchase of the bank at a price including a
substantial premium for a going concern, became available.
By October
8, Franklin was no longer the 20th largest bank in the country but
had become about the 46th largest bank.
Of the 65 banks in its size
cateogry ($1 to $5 billion in deposits) Franklin had ranked 65th in
earning power.
This lack of ability to generate earnings, combined
with heavy reliance on purchased money, finally created a set of
- S i-
circumstances which the bank could not bear.
On October 8, having
become satisfied that Franklin National Bank was insolvent, and
acting pursuant to 12 U.S.C. 191, I declared the Bank insolvent and
appointed the FDIC as receiver.
In order to protect all of the depositors of Franklin, the FDIC
moved immediately to accept bids from several major New York banks
upon a pre-negotiated contract wich provided full protection for
all Franklin depositors and other normal banking creditors.
All
bids were opened simultaneously in the presence of the entire FDIC
Board of Directors.
The high bidder was the European—American Bank
and Trust Company, a federally insured, New York State chartered
institution owned by six large European banks.
The following day
every banking office of Franklin was opened at the regular banking
hour by the European-American Bank.
All depositors in Franklin,
including holders of certificates of deposit, savings accounts,
time accounts, and checking accounts, automatically became depositors
of the European-American Bank.
The European-American Bank also
assumed all existing liabilities to trade creditors of Franklin.
The approval of the purchase and assumption transaction avoided
any disruption in service for depositors and increased the chances
of subordinate creditors for full repayment of their claims.
In summary, our number one goal was to protect the depositors
and the banking system of this c.ountry, and that goal was achieved.
II. Responses to the Subcommittee1s Questions
The Subcommittee has asked, in Chairman Rosenthal's letter
of May 4, 1976, for responses to a series of specific questions.
Most of the questions have been answered in the earlier portions
of the statement or by making available documents to the Committee
Staff. The remaining questions are answered below:
Questions: For the years 1971 to date, provide the number of parties
to, terms of, and degree of compliance with each (i) agreement
between the Office of the Comptroller of the Currency and a national
bank, and (ii) statement of intent or assurance by the board of directtors and/or officers of a national bank, which was given as a
condition for obtaining approval for a merger, acquisition, new domestic
or foreign branch, expansion of office facilities, an issuance of
equity shares or debentures, or other act requiring the consent of the
Comptroller of the Currency.
(i) Attached as Exhibit A is a summary of the administrative
actions brought pursuant to the Financial Institutions Supervisory
Act of 1966 from 1971 to present. Likewise I am enclosing a copy of
a chart prepared reflecting the number of times specific violations
were addressed in the proceedings.
We have found that the administrative actions taken have proven
successful in the majority of instances. In that regard, we note
that in 29 instances since 1971 this Office has requested banks to
obtain additional capital or to initiate plans to increase capital.
In all but four instances, the banks have complied with those require
ments. In two of the four instances where there was inadequate
compliance with formal written agreements between the bank and this
Office, we resorted to the issuance of a Notice of Charges and a
commencement of a formal Cease and Desist Proceeding. In both of
those instances the bank added additional capital as a direct result
of the proceedings.
Four of the proceedings brought have been formally concluded as
there has been complete compliance with the provisions. Nine
proceedings have been terminated due to the sale, merger or failure
of the banks while under administrative actions. We believe that
in at least 37 instances, proceedings, although still in effect, may
be concluded as the banks have fully complied or are taking adequate
steps to gain compliance.
The remainder of the banks have not yet fully complied and may
require additional administrative action.
-
2
-
(ii) This Office has on several occasions attached conditions to
the approval of branches, mergers, acquisitions and other actions
by banks. The typical situation involves a request for a branch, the
approval of which is conditioned on the bank's increasing its capital
by a specific amount. Neither the files on mergers and branches nor
the files on capital increase are established to reflect after the
event that the raising of new capital was a condition for approval
of a new branch. The information can be developed only by a separate
review of documents associated with each branch, merger, acquisition,
capital issue or expansion.
Question: All approvals and consents given and made by personnel
of the Comptroller of the Currency permitting mergers, the opening
of new domestic or foreign branches, and/or expansion of office
facilities regarding FNB for each year from 1965 through 1974.
Branches, Mergers and Expansion of Facilities of Franklin
Domestic Branches
Final Approvals
Permitting Openings
Rejected
Withdrawn
1965
4
1
2
1966
4
4
0
1967
15*
3
0
1968
1
0
0
1969
3
2
2
1970
3
4
2
1971
7
1
0
1972
5
0
0
1973
1
0
0
1974
0
0
0
*The approvals in 1967 include the main office (retained as a branch)
and 13 operating branches of the Federation Bank and Trust Co.
acquired by merger June 30, 1967.
Mergers, Expansion of Office Facilities, Foreign Branches
The only merger during the period was with Federation Bank and
Trust, referred to above. The New York Regional Office issued two
approvals during 1972 permitting expansion of office space pursuant
to 12 U.S.C. 371d. This Office has no authority to approve or
disapprove foreign branches. Documents in OCC files pertaining to
Franklin foreign branches have been provided to the Committee staff.
-3 Question:
Set forth the number of national banks which were given
composite or group ratings of 3 or 4 continuously from 1971 through
1975, and for each bank the annual number of (i) new domestic branches,
(ii) new foreign branches and (iii) expansions of office space the
Comptroller of the Currency has approved for each year since 1972.
There were five (5) national banks which were given Composite
or Group ratings of 3 or 4 continuously from 12/31/71 through 12/31/75.
i. For these five banks, the following new domestic branch
applications were approved or denied during the 1971 through
1975 period:
1973
1972
Approved
Denied
Approved Denied
1
ink #1
1975
1974
Approved
Denied
Approved
Denied
2
2
Ink #2
ink #3
ink #4
bnk #5
Total for the Period:
Applications - 5
Approved
1
Denied
4
fjl For the same five national banks, the Office received
no applications for new foreign branches.
iii.
Pursuant to 12 U.S.C. 371d, a national bank may invest
in bank premises up to 100% of its capital stock without the
approval of the Comptroller of the Currency.
Bank #2 applied
to the Office for permission to exceed its limitation in 1974.
Permission was granted for the bank to invest in banking
premises in an amount not. to exceed its capital accounts plus
$150,000.
None of the other four banks requested permission
to exceed the limitation during the 1972-1975 period.
-4 Question:
The management, operations and conditions of, and
supervisory recommendations made and actions taken by personnel
of the Comptroller of the Currency with respect to FNBEI for the
years 1971 through 1975, to the extent the same previously has
been made a matter of public record through court records, proxy
statements, press releases and other means.
Copies of the public documents of which we are aware that
relate to the management, operations and conditions of the FNBEI
and the Comptroller's supervisory actions related to that bank
are annexed hereto.
Proceedings Brought by the Comptroller Pursuant to the
Cease and Desist Provisions of the Financial Institutions
Supervisory Act of 1966
12 United States Code §1818 (b)
1971 - to Present
Exhibit A
1971
1.
An Agreement to eliminate self-dealing and self-serving
transactions by directors, officers or shareholders of
more than 2% of the outstanding shares of the bank.
Limitations on the trade area and management contracts
to be made by the bank.
2.
An Agreement to eliminate unreasonable employment
contracts of insiders and eliminate insider dealings.
The bank also was to improve the credit quality of its
loan portfolio and take steps to eliminate general
criticized problems, unsafe and unsound practices and
violations of law.
3.
An Agreement to eliminate extensions of credit to
unqualified borrowers, self-dealing by insiders and
self-serving management contracts. Also provisions to
improve the credit quality of the loan portfolio and to
take steps to eliminate general criticized problems,
unsafe and unsound practices and violations of law.
1972
4.
A Notice of Charges and Permanent Order to Cease and
Desist to eliminate extensions of credit to insiders
and self-dealing transactions. Provisions to eliminate
overdrafts and increase the documentation for f O W j ; -.J*
Elimination of further extensions of credit on classified
loans and the elimination of an unsafe and unsound
correspondent account relationship. _A1®°
of violations of 12 United States Code §84, §375a and
various unsafe and unsound practices.
5.
An Agreement to eliminate loans in violation of 12
United States Code §84 and the indemnification of the
bank for losses.
6.
An Agreement with several banks rectifying problems in
employee benefit trusts and eliminating self-serving
employment and management contracts which were entered
into on behalf of the bank for a controlling owner of
the banks. Elimination of a number of unsafe practices.
7.
AnAgreement to eliminate loans made in excess of the
lending limit and to update the loan portfolio with
credit information and strengthening m the collection
efforts of the bank. Termination of employment of the
bank's president because of self-dealing and illegal
practices.
2
8.
A Notice of Charges and Permanent Order to Cease and^
Desist to strengthen management through the eliminating
problems of an unsafe and unsound nature such as excessive
classified assets, overdrafts, collateral imperfections,^
and the elimination of concentrations of credit.
Provisions
to direct 'the strengthening of the liquidity and capital.
Provisions to cause an outside audit and an effective loan
policy.
Provisions to eliminate a number of unsafe and unsound
ices, as well as violations of law, including 12
United States Code §84.
9.
Ah Agreement to prohibit the extensions of credit to
insiders and to eliminate self-dealing by major share- ,
holders.
Provisions eliminating the extensions of credit
to these insiders and a reduction in excessive compensation
of the insiders.
1973
10.
An Agreement to eliminate insider and self-dealing and
the illegal practice of nominee loans.
The elimination of
excessive extensions of credit to affiliates and affiliated
persons.
Provisions to eliminate unsafe practices
including the handling of criticized loans and the
modification of a self-dealing management contract.
11.
A Notice of Charges and an Agreement to eliminate excessive
directors1 compensation and self-dealing by principal
owners and directors of a bank.
12.
A Notice of Charges and an Order to Cease and Desist to
eliminate extensions of credit to affiliates and substantial self-dealing transactions by a principal officer
and shareholder of the bank.
The appointment of a
committee to eliminate the various violations of law and
.
unsafe and unsound banking practices including the collection
of classified assets and elimination of contingent
liabilities, as well as provisions to help restore the
liquidity and establishing a loan and investment policy.
The removal of the principal officer and controlling person
from positions of authority in the bank.
Indemnification
for losses on the self-dealing transactions.
13.
An Agreement to eliminate various violations qjfatfi m
eluding 12 United States Code §84, and to prohibit general
unsafe and unsound banking practices.
Procedures to effect ^
collection of substantial criticized assets and the obtaining
of current and satisfactory credit information.
Provisions
to help restore the capital position of the bank.
3
14.
A Notice of Charges and a Permanent Order to eliminate
loans of a self-dealing nature to companies closely related
to the controlling owner of the bank and the elimination
of any nominee loans.
The establishment of a committee
and provisions to correct unsafe and unsound banking practices
as well as violations of 12 United States Code §84,
§371, § 371c, §375a, §473, and the Truth in Lending
statute (Regulation Z). Provisions requiring the
indemnification for loss on certain violations of law.
Provisions to help restore the capital and limitations on
dividends.
15.
An Agreement to eliminate insider and self-dealing and
illegal nominee loans.
The elimination of excessive
extensions of credits for the benefit of affiliates and
affiliated persons.
Provisions to eliminate unsafe
practices including the handling of criticized l o a n s ,
executive salaries and modifications of a self-dealing
management contract.
16.
A Notice of Charges and a Permanent Order to enforce an
agreement previously entered for various violations of
law including 12 United States Code §84 and to prohibit
general unsafe and unsound practices.
Procedures to effect
collection of substantial criticized assets.
Provisions
to improve the capital and liquidity positions of the
bank.
17.
An Agreement to eliminate self-dealing and self-serving
loans made for the benefit of the controlling owner of
the bank and to eliminate self-dealing loans to affiliates.
Indemnification for losses on the self-dealing loans.
18.
An Agreement to eliminate abuses by the president and
controlling shareholders.
Provisions to effect collection
of criticized assets and for the elimination of violations
of law, including 12 United States Code §375a.
19.
A Notice of Charges and a Temporary Order to Cease and
Desist from unsafe and unsound practices.
Provisions to
eliminate loans or extensions of credit to related
companies or individuals and to preclude the issuance
of letters of credit, guarantees or endorsements to related
companies or individuals.
The elimination of breaches
of fiduciary relationships.
1974
20.
An Agreement to establish internal controls and eliminate
management problems as well as to rectify violations of
law, including 12 United States Code §1829b, 31 CFR
§103, 12 CFR §217 and Regulations J and Q.
4
2i
qyi Agreement to eliminate
22.
An Agreement to establish internal controls and eliminate
management problems.
Provisions to improve the credit quality
of the investment and loan portfolio and to take steps to
eliminate a number of criticized problems, unsafe and unsound
practices and violations of law, including 12 United States
Code §84.
Provisions for indemnification for losses.
23.
An Agreement to eliminate management and internal^
control problems.
Provisions to upgrade the credit quality
and procedures for handling loans.
Provisions to eliminate
unsafe and unsound practices, criticized problems
violations of law, including 12 United States Code §84
and §375a.
24.
An Agreement to eliminate extensions of credit to affiliates
and to eliminate several problems in the loan portfolio.
Provisions to eliminate unsafe and unsound practices and
criticized problems.
25.
An Agreement to improve the credit quality of the loan
portfolio and to take steps to eliminate various criticized
problems, unsafe and unsound banking practices and v i o
lations of law, including 12 United States Code §84.-
26.
An Agreement eliminating various self-dealing transactions
and excessive concentrations of credit.
Provisions to
eliminate specific management problems, unsafe and unsound
banking practices and violations of law, including 12 United
States Code §84.
27.
An Agreement to correct a number of unsafe and unsound banking
practices including violations of 12 United States Code
§§84, 375a, 24(7).
Provisions to eliminate abuses by
the controlling owner and a requirement to obtain a new
active and capable chief executive officer.
28.
An Agreement to eliminate' insider and self-dealing extensions
of credit to affiliates and controlling persons.
Pro
visions to eliminate unsafe practices including t e
handling of criticized loans.
29
An Agreement to improve the credit quality of the loan
portfolio and to take steps to eliminate a number of criticiz*ed
problems, unsafe and unsound practices, and violations of law.
self—dealings ÎDy an officiât
of thG bank and his rGsignation.
A limitation on loans
to certain individuals.
Provisions to improve the credit
quality of the loan portfolio and to take steps to
eliminate general criticized problems, unsafe and unsound
practices of law, including 12 United States Code §84.
5
30.
An Agreement to establish internal controls and
eliminate management problems.
Provisions to improve
the credit quality of the investment and loan portfolio
and to take steps to eliminate a number of criticized
problems, unsafe and unsound practices and violations
of law, including 12 United States Code §§84, 82, 371c,
375a.
Provisions for indemnification for losses.
31.
A Notice of Charges and a Cease and Desist Order requiring
the bank to comply with a previously issued formal written
agreement and particularly requiring the bank to eliminate
violations of 12 United States Code §§84, 375a, and 24(7).
The Order also required the obtaining of a new and active
chief executive officer.
32.
An Agreement to eliminate various violations of law, in
cluding 12 United States Code §84 and to prohibit
unsafe and unsound banking practices.
Procedures to effect
collection of substantial criticized assets and the obtaining
of current and satisfactory credit information.
Provisions
to help restore the capital position of the bank.
33.
A Letter Agreement dealing with restrictions on the loan
portfolio and a concomitant reduction on the dependency of
volitile money. Limitations on expansion and implementation
of management changes.
34.
A Notice of Charges and an Order to Cease and Desist from
advertising and paying excessive interest rates in violation
of 12 CFR §217.
35.
An Agreement to establish a management committee to ditect
corrective actions to improve the credit quality of the
loan and investment portfolio and to take steps to eliminate
criticized problems including violations of law and
unsafe and unsound practices.
36.
An Agreement to eliminate violations of various statutes
including 12 United States Code §84 and establishment of
procedures of a safe and sound nature to eliminate excessive
criticized assets and unjustified loan participations from
affiliate banks.
37.
An Agreement to eliminate violations of various statutes
including 12 United States Code §§84, 375a, as well as an
indemnification agreement for certain loans made in violation
of law.
The establishment of policies for eliminating
problem credits and establishing guidelines for the
bank's operations.
Provisions to insure that no nominee
loans are made for the benefit of companies or individuals
not primarily obligated on the loans.
Provisions for
the obtaining and employing the services of a new
president and chief executive officer as well as a
review of executive salaries, dividends, and loans to
directors.
6
38.
An Agreement to eliminate transactions between affiliated
corporations and individuals.
1975
39.
An Agreement to eliminate various unsafe and unsound
banking practices including excessive amounts of criticized
assets and the establishment of policies to eliminate unsafe
practices.
Elimination of violations of various statutes
uncluding 12 United States Code §84.
Establishment of pro
cedures to closely evaluate transactions between the directors,
employees and their related interests.
40.
An Agreement to take corrective action relating to criticized
assets.
Establishment of procedures to strengthen
capital.
Removal of bank personnel responsible for the
problems in the bank.
41.
An Agreement to eliminate various unsafe and unsound
banking practices including concentrations of credit as well
as the elimination of violations of law.
The adoption of
a new loan policy as well as the hiring of additional lending
officers.
42.
An Agreement to eliminate self-dealing, insider extensions of
credit to affiliates and closely related individuals.
Various
provisions to eliminate unsafe and unsound practices and
violations of law.
43.
An Agreement to eliminate participation of loans with
affiliates and violations of various law, rules and regulations
including 12 United States Code §§84, 161, 371c and to
eliminate unsafe and unsound banking practices.
44.
A Notice of Charges and a Permanent Cease and Desist Order
for a failure to conform to an agreement which required
compliance with various laws including 12 United States Code
§84 and inadequate and unsafe practices requiring
an independent audit, additional capital and a new chief
executive officer.
45.
An Agreement to eliminate various violations of law including
12 United States Code §84 and to eliminate statutorily
proscribed tying agreements in violation of 12 United
States Code §1972.
The agreement likewise required
compliance with the truth in lending act of 1968 (15
U.S.C. §1601? 12 CFR §226) and required disclosure by
the bank.
Various violations of law also required
corrective action including 12 United States Code
§§371, 2 2 2 , 371c, as well as other unsafe and unsound
banking practices.
7
46.
An Agreement to eliminate self—dealing and insider transactions
and for the termination of certain officials of the bank
responsible for extraordinary extensions of credit to closely
related individuals and companies.
Corrections of various
violations of law including 12 United States Code §84.
Restrictions placed on active officers of the bank.
47.
An Agreement eliminating various violations of the law in
cluding 12 United States Code §84 and procedures to eliminate
various unsafe and unsound banking practices concerning
the elimination of criticized assets and overdue loans.
A
policy to hire additional lending officers and insuring that
internal operations and control were instituted.
48.
An Agreement between several banks and this Office eliminating
loans and participations with affiliates and the elimination
of unsafe and unsound banking practices.
49.
An Agreement to eliminate unsafe and unsound banking
practices and provisions to improve the credit quality of
the loan portfolio and to take steps to eliminate
criticized problems, unsafe and unsound banking practices
and violations of law including 12 United States Code §84
and the Truth-in-Lending Statute (Regulation Z ) .
50.
A Notice of Charges, a Temporary Cease and Desist Order and
a Permanent Order eliminating the extensions of loans of a
self-dealing nature and a prohibition to preclude the purchase
of loans for the benefit of controlling persons or officials
of the bank.
A provision to eliminate a potential misuse
of a correspondent account by the officials of the bank for
their own personal benefit.
51.
An Agreement to eliminate internal controls and management
problems and a provision requiring the hiring of a new executive
officer.
Provisions to improve the credit quality of
the loan portfolio and to take steps to eliminate criticized
problems, unsafe and unsound banking practices and
violations of law including 12 United States Code. §§375a and
463.
52.
An Agreement amending a previous agreement dealing with loans
to affiliates and subsidiaries in violation of 12 United
States Code §371c.
53.
An Agreement to eliminate internal controls and management
problems.
Provisions to improve the credit quality of
the investment and loan portfolio and to take steps to
eliminate criticized problems, unsafe and unsound
banking practices and violations of law including 12
United States Code §§84, 371c, 1829b.
Provisions to
improve the capital position of the bank and the loan
policies of the bank.
8
Provisions to preclude the assumptions of obligations
incurred by affiliated companies or individuals and the
elimination of concentrations of credit to individuals or
to industries.
54.
A Notice of Charges and a Permanent Order to establish
internal controls and eliminate management problems with
provisions to improve the credit quality of the investmen
and loan portfolio and to take steps to eliminate
criticized problems, unsafe and unsound banking practices
and violations of law including 12 United States Code §§
72, 375a and 12 CFR §23.
Procedures to eliminate self
dealing by officials of the bank.
c,
55.
Resolution Agreement to eliminate unsafe and unsound
kt'
and self-dealing practices and relationships with controlling
owner.
Limitations of loans to specified insiders.
Removal
of officers and directors for unsafe and self-dealing practices
56.
Resolution Agreement to eliminate unsafe^and u?sound
.. .
and self-dealing practices and relationships with controlling
owner. Limitations of loans to specified insiders.
57
Resolution Agreements to eliminate unsafe and unsound
and self-dealing practices and relationships with controlling
owner. Limitations of loans to specified insiders.
58
An Agreement to establish internal controls and eliminate
management problems with provisions to improve the
credit quality of the investment and loan portfolio and
to take steps to eliminate criticized problems, unsafe
and unsound banking practices and violations of law including
12 United States Code §84. Provisions to
rs
centrations of credit to single or closely-related borrowers.
59
60
An Agreement to establish internal controls and eliminate
management problems together with provisions to
the
credit quality of the investment and loan portfolio and to
take steps to eliminate criticized problems, unsafe
and unsound banking practices and provisions to
the capital position of the bank. Provisions to eliminate
self-dealing transactions by officials of the bank and
obtain new capable lending officers.
A Notice of Charges, Temporary Cease and Desist Order and
Permanent Order to eliminate management and internal
control problems including provisions to upgrade the credit
states Code §1601. Limitations placed on the Trust Department
Ind a procedure to assist the bank in obtaining additional
capital
Also a provision for the.bank to obtain a new
capable executive officer. Provisions to eliminate self
dealing by officials of the bank.
9
61.
A Notice of Charges and a Permanent Order for a breach
of an agreement entered into to eliminate violations of
12 United States Code §84, Regulation Z (12 C.F.R.
§226) and the Truth-in-Lending Act 15 United States
Code §1601 as well as violations of provisions of the
agreement and substantial management and internal
control problems.
1976
62
An Agreement to eliminate excessive extensions of
credit, in violation of 12 United States Code §84, and
to eliminate various unsafe and unsound banking practices
concerning criticized assets.
Provisions to upgrade
the credit quality and procedures for handling loans
and to improve the capital position of the bank.
63.
A Notice of Charges, a Temporary Cease and Desist Order
and a Permanent Order to eliminate unsafe and unsound
banking practices, criticized assets and violations of
law, including 12 United States Code §84, 31 C.F.R.
§103.33, 12 C.F.R. §221 and 12 C.F.R. §226.
Provisions
to improve the capital position of the bank and the
loan policies of the bank and the elimination of excessive
concentrations of credit.
Provisions to cause the
collection of all debts previously charged off and to
an executive officer and operations officer.
64.
An Agreement to improve the capital position, the
liquidity position and the loan policies of the bank.
Provisions for the elimination of unsafe and unsound
banking practices, criticized assets and violations of
law, including 12 United States Code §84 and the Truth—
in-Lending Statute (Regulation Z ) . A provision to hire
a new executive officer.
65.
An Agreement to eliminate various unsafe and unsound
I
banking practices and to take steps to eliminate criticized
problems, including excessive holdings in real estate.
Provisions requiring the improvement of the capital
position of the bank and the hiring of an executive
officer.
66 .
An Agreement to eliminate excessive extensions of
credit, in violation of 12 United States Code §84, and
to eliminate various unsafe and unsound banking practices
concerning criticized assets.
Provisions to improve
the capital and earnings position of the bank and to
upgrade the credit quality and procedures for handling
loans.
Provisions to hire an executive officer and a
full time auditor.
10
67.
A Notice of Charges and a Temporary Cease and Desist
Order to eliminate extensions of credit of a self
dealing and self-serving nature for the benefit of the
controlling shareholder of the bank and related companies
or individuals.
A provision to eliminate overdrafts.
68.
An Agreement to improve the liquidity position of the
Bank and to upgrade the credit quality and procedures
for handling loans.
Provisions for the elimination of
unsafe and unsound banking practices, criticized problems,
excessive concentrations of credit, and violations of
law, including 12 United States Code §371c, 12 C.F.R.
§23, 12 C.F.R. §11 and 12 C.F.R. §18. Provisions for
the hiring of an operations officer to ensure adequate
internal controls.
UOU'56
7,000
4,000
53,000
6,000
22,000
j
98,000
! h-*
!
»
î
!
jfcjjf.
io
IO
:c
1
'
h-'
I
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1
1
i
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^
=>
o
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00
C\
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j
lljj
■
1
1
X X
X X !
ix
"1
11
<~n
i
Loj
,
jtsj
;C>
o
|o
1
1
1
B
i
L
1
!
X
i1
CORRECTIONS OF LAW
VIOLATIONS
X
CORRESPONDENT BALANCES
X
X X
X
COLLATERAL EXCEPTIONS
X
BONUSES
LI Mi NEW LOANS OR
EXTENSIONS OF CREDIT
X
X
LIMIT CREDIT EXTENSION
ON EXISTING LOANS
MANAGEMENT FEES
X X
X
X
X
—
%
http://fraser.stlouisfed.org/
s.\
Federal Reserve Bank of St. Louis
X
12 USC §371
i
X
X X X
X
X
INDI', j. E X C L U S I O N
AND PROHIBITION
i
-
~
12 USC §375a
X
X
X X
Z
NEW MANAGEMENT AND
DIRECTOR
12 USC §375
X
X
AUDIT - (INTERNAL
CONTROLS)
SATISFACTORY CREDIT
INFORMATION
X
•
LOAN COLLECTIONS AND
LOAN POLICY
TRUTH IN LENDING -
X X
X
LIQUIDITY
X
X X
\*
INCREASE CAPITAL
X
X
X
X X X X X
EXECUTIVE AND DIRECTOR
COMPENSATION
IN DEMNIFICATION
X
X
X X
MANAGEMENT C'GALIFICATIOt
c l a ss if ie d a sse t s
X
X
X
s 12 U .S .C . 524
1
LOANS VMTuIN g .IADS MILA
OVERDRAFTS
X
X
X
X
X
to
1 to
fc
d iv id e n d s
X
X X X
►-1
:3
a
n
i:•3
? t>
;(5 O
1?:
11 M
3■N•-3
OTHER.
VO
oo
ooo'xe
i1
1
Ofct'TS
:o
|o
o
I
Ul
H•Ck
j)-|U)
¡X
¡X
u
Ivo
;V*/
1 ■
:o
i:o
^
|
i
I-j
| cn
|X
IX
11
i
ix
X
NUMBER
Ni
i 2 u .s. c. '4m
!x
X X
LOivNS V,I i!i jlN T¡.“.DE AREA
DIVIDENDS
OVERDRAFTS
CORRECTIONS OF LAW
VIOLATIONS
X X
X
DEPOSITS
(In Thousands)
iX
1
tSJ
O
is
i
!
ip
o
o
•o
1
i
11,000
|X
105,000
. NJ
i *"*
o
o
o
1
1
I
1
w)
1N
17,000
24.000
11.000
-
i
1
MANAGEMENT QUALIFICATION
X
X
X
X
CLASSIFIED ASSETS
X
CORRESPONDENT BALANCES
EXECUTIVE AND DIRECTOR
COMPENSATION
X
X X
X X
X
X
X
A _
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X X
X
X
X
X
X X
X X X
X
X X X
X
X X
X
X
X
1
IX
X X
as i
X
X X
X
X
X
X
X
COLLATERAL EXCEPTIONS
BONUSES
LIMIT CREDIT EXTENSION
ON EXISTING LOANS
MANAGEMENT FEES
LOAN COLLECTIONS AND
LOAN POLICY
AUDIT - (INTERNAL
CONTROLS)
TRUTH IN LENDING - Z
SATISFACTORY CREDIT
INFORMATION
NEW MANAGEMENT AND
DIRECTOR
12 USC §375
12 USC §375a
X
X
LIQUIDITY
LIMIT NEW LOANS OR
EXTENSIONS OF CREDIT
X X
X
X X
X
X
X X
V
mxK
X
INDEMNIFICATION
INCREASE CAPITAL
X
X X X
X
X
X
X
X
lX
INDIVIDUAL EXCLUSION
AND PROHIBITION
12 USC §371
ÜTHER
X
NJ
-J
X X
X X
X
X
jx
DEPOSITS
(In Thousands)
X
to
00
$15,000
X
\x
i Xs
I
1
NJ
VO
o
NJ
<J\
ro
in
i
¡24
u>
o*
►—
14/000
OJ
K*
jo
1*“*
<D'
;o
:o
[1
1
-
;: N
^J
o
: O
o
00
1
lO
!o
29,000
F
i
j
:
28,000
o
i| m
o
U>
1! ui
19,000
j1 O^
31,000
! t-1 f
uj
rsj
iI *U!**:/..;*
....... P
X
S
X
i
j
X
X
x
X
X
X
X
X X
X
LOANS WITHIN TRADE AREA
DIVIDENDS
CORRECTIONS 01' LAW
VIOLATIONS
X X
X
X
U. B. C. §o*i
OVERDRAFTS
X
X
1
X X X X X
X
X
MANAGEMENT QUALIFICATION
CLASSIFIED ASSETS
CORRESPONDENT BALANCES
-
EXECUTIVE AND DIRECTOR
COMPENSATION
X
INDEMNIFICATION
X
X
X X
X
X
X
X X X
X X
X
X X X X
INCREASE CAPITAL
LIQUIDITY
X
COLLATERAL EXCEPTIONS
BONUSES
LIMIT NEW LOANS OR
EXTENSIONS OF CREDIT
X
s
X X X
\ X
LIMIT CREDIT EXTENSION
ON EXISTING LOANS
X
MANAGEMENT FEES
X
V X X X X X X X
X X
X
•
X
X
TRUTH IN LENDING -
X X
X
X X
X
*r
X
V"
y''
x
-—;1
J FRASER
Digitized for
>? i X X X X X X
;x
X
X
X
X
Z
SATISFACTORY CREDIT
INFORMATION
NEW MANAGEMENT AND
DIRECTOR
1
%• X
AUDIT - (INTERNAL
CONTROLS)
X X
V X X X X
X
X
12 USC §375
X
12 USC §375a
INDIVIDUAL EXCLUSION
AND PROHIBITION
12 USC §371
X
X
y* X
LOAN COLLECTIONS AND
LOAN POLICY
OTHER
h-
. NX
; *> 1
•
X
X X
•b»
LJ
CO
V
O
O
O
•£»
.U)
U>
CO
o
|o
_____ 1, .... —
X
000'01
1^
t
LJ
!°
O
O
O .
u>
~J
c*
X
CO
LH
</>
LJ
O
ï
§
O
O
s
m
N
r
X
X
OVERDRAFTS
CORRECTIONS OF LAW
VIOLATIONS
X
MANAGEMENT QUALIFICATIOt
X
x
X
X X
X
X
>r
X L .
X* X
X
X
X
X
X
:*
EXECUTIVE AND DIRECTOR
COMPENSATION
V
X
X
X
X
V
X
CLASSIFIED ASSETS
CORRESPONDENT BALANCES
INDEMNIFICATION
X X
X X
X
INCREASE CAPITAL
LIQUIDITY
COLLATERAL EXCEPTIONS
BONUSES
X X
LIMIT NEW LOANS OR
EXTENSIONS OF CREDIT
MANAGEMENT FEES
• -
X X
X X
X
X
X
X
X X
X
X X
AUDIT - (INTERNAL
CONTROLS
)
X
X
X
X X
LOAN COLLECTIONS AND
LOAN POLICY
TRUTH IN LENDING - Z
X
SATISFACTORY CREDIT
. INFORMATION
NEW MANAGEÎ-IENI AND
DIRECTOR
12 USC §375
12 USC §375a
INDIVIDUAL EXCLUSION
AND PROHIBITION
X X
12 USC §371
X
X
X
'
LIMIT CREDIT EXTENSION
ON EXISTING LOANS
X X X X
X X
X X X* X
X X
X
iS L
X
X
x
12 U .S .C . so4
DIVIDENDS
.
X
NUMBER
LOANS Vil THIN TRADE AREA
X
I
DEPOSITS
(In Thousands)
v'N
237,000
21,000
.
; LJ
11,000
7,000
-1«k
j J*
•U
O
O
O
1
LJ
Ni
O
j! g
X >c
OTHER
1
1o
-t
«b
34.000
■
ro
CO
O
O
O
16,000
o
395,000
37,000
21,000
«-J
CO
O
O
-
1
H*
fO
i£b
O
O
O
i
ï0
-
*
[ ° L
l
o
O
o
"
3
o
3
IC
1
3
n
i *v
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r O
> in
i M
ilA ^
Jw
EL
f
T
ien
J^
en
U)
cp
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x __ _______
! X
>C X
X
i
en
en
en
en
O
1^
00
VJO
X
X X
X
N'UMb-il
n
X
X
X
12 U.S. C .
§84
LOAN’S W I T H I N tiL ÿ A ü ii A R E A
X
X
X
DIVIDENDS
OVERDRAFTS
X
X
-J
t
H9
£»
yv
*
CORRECTIONS OF LAW
VIOLATIONS
X X
X
MANAGEMENT QUALIFICATION
CLASSIFIED ASSETS
X X X
X X
CORRESPONDENT BALANCES
X
EXECUTIVE AND DIRECTOR
COMPENSATION
INDEMNIFICATION
X
X
k X X
X X X X
X
V X X
X
K
*
X
INCREASE CAPITAL
X
X
X X X
X X
X
X X
LIQUIDITY
COLLATERAL EXCEPTIONS
BONUSES
X
X X
LIMIT NEW LOANS OR
EXTENSIONS OF C R E D I T
X
LIMIT CREDIT EXTENSION
ON EXISTING LOANS
X X X
MANAGEMENT FEES
X X X
X X X X
V
P< X X X
X X X
X
X
X
X
X
X
K
X
y
X
X
X
X
\ ^
A
x
X
X
TRUTH
IN L E N D I N G - Z
NEW MANAGEMENT AND
DIRECTOR
12 U S C
§375a
INDIVIDUAL EXCLUSION
AND PROHIBITION
X
X
X
A U D I T - (INTERNAL
CONTROLS)
12 USC" S 3 7 5 “
X
X
LOAN COLLECTIONS AND
LOAN POLICY
SATISFACTORY CREDIT
INFORMATION
X
X
X X X
y’
X
’
X
12 USC §371
OTHER
1
|
1
I
1
NUMBER
cr\
OD
12 U .S .C . §84
H*
M
1
i— '
Ln
1
VO
LOANS WITHIN TRADE ARI.
><
X
DI VIDEI» Do
OVERDRAFTS
CORRECTIONS OF LAW
VIOLATIONS
H*
VO
ui
/
X
X
MANAGEMENT QUALIFICATI
CLASSIFIED ASSETS
U)
. CORRESPONDENT BALANCES
1— 1
NJ
!
• INDEMNIFICATION
H*
M
INCREASE CAPITAL
fO
VO
NJ
U>
NJ
CD
*
LIQUIDITY
X
COLLATERAL EXCEPTIONS
BONUSES
Ln
NJ
LO
X
X
X
XX
X
X
•fe»
Ln
k
1
1
i
!
LIM IT CREDIT EXTENSION
ON EXISTING LOANS
MANAGEMENT FEES
tki
««j
LOAN COLLECTIONS AND
LOAN POLICY
«
LO
AUDIT - (INTERNAL
CONTROLS)
'■J
TRUTH IN LENDING
NJ
SATISFACTORY CREDIT
INFORMATION
12 USC §375
(— *
NJ
12 USC § 3 7 Sa
X
X
-
Z
NEW MANAGEMENT AND
DIRECTOR
NJ
NJ
—
LIMIT NEW LOANS OR
EXTENSIONS OF CREDIT
cn
|
1
1
EXECUTIVE AND DIRECTOR
COMPENSATION
INDIVIDUAL EXCLUSION
AND PROHIBITION
12 USC §371
First National Bank of East
Islip Exhibits
Exhibit B :
Notice of annual meeting and proxy statement for the annual meeting
of shareholders of January 19, 1971.
Exhibit C :
Notice of annual meeting and proxy statement for the annual meeting
of shareholders of March 7, 1972.
Exhibit D :
Notice of special meeting and proxy statement for.special shareholders*
meeting of August 29, 1972.
Exhibit E :
Notice of annual meeting and proxy statement for the annual meeting
of shareholders of March 6 , 1973.
Exhibit F ;
Shareholders* Derivative Suit of Charles H. Wolpert and Martha Wolpert
as stockholders of the First National Bank of East Islip against the
First National Bank of East Islip et al, commenced on or about 2-3-74.
Exhibit G :
Shareholders* Derivative Suit of Charles Housler et al versus the
First National Bank of East Islip et al, commenced on or about
January 21, 1974.
Exhibit H :
Complaint of Joel E. Kastein, John W. McGraine and Crest Affiliates
Inc. against the First National Bank of East Islip et al, commenced
on or about October 22, 1973.
Exhibit I :
The notice of annual meeting and proxy statement for the annual meeting
of shareholders held March 5, 1974.
Exhibit J :
The notice of special meeting of shareholders to be held November
12, 1974.
Exhibit K :
Notice of annual meeting of shareholders and proxy statement of the
annual shareholders* meeting held March 4, 1975.
Exhibit L :
The notice of annual meeting of shareholders and the proxy statement
of annual shareholders* meeting held March 2, 1976.
Exhibit M :
Article, Newsday, dated March 2, 1974.
Exhibit N :
Article, Long Island Press, dated March 2, 1974.
■t •«
'
m
m
•
i
^ c h i- b it B
N ew Yaifc
.:~ •v; ~-\
Nonm &
*
.... ...'
-
JT/.‘
t!
ñmiUM m m t m
To the Holders of Sh ar» of Common Stock;
•■*-«-••
NOTICE IS HEREBY GIVEN dial, pursuant to call of it? D in ara. &n Annas! Meeting
of die shareholder* of H a First National Bank o f East Islip will be held at the hanking bouse,
34S East Main Street, East Islip, NewYork, on Tuesday, Isrmary 19, 1971, s i 3:00 P J,fc for
die purpose o f OM»i<bring and Toting upon the following matte**:
;::r\ r
1* ELECTION OF DIRECTORS, Fixing the number of Directors to be elected st thir
teen (13) and die election of those persons listed In the Proxy Statement sceompanyiiig this
notice of said meeting*
.........
2.
OTHER BUSINESS. Any other business which may lawfully be brought before the
meeting or any adjournment thereof..
Hie management has no knowledge of any matters to come before the meeting other
than she matter* set forth above.
Only those shareholders of record at the close of business onJanuary g, 1971^ shall he
entitled to the Notice of the Meeting and to vote at the meeting.
By Order of the Bo&rdLof.Directors
RÜSSTOL J . WOLPEBT
” Fr&áésm
D A TED : December 18, 1970
Polls wOl remain open for one (1) hour.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY A3 PÛ3»
m\X WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND
THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND CAST YOUR VOTE ¡N PERSON.
THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
I
phoky for m m ai mhiino of shar^moisbis
fisa Pirst NiHaisI Bank of ^
blip
•;JÉsÌtì*®&. New York
sajife■'>%%
Kaow AH M ai By These Presente, T h atJ (wc) thè uiìderajgied akai»holdèf{3) o f Th?
Fi^j Nsliofwd Bank oC Eart Islip, £ast Isiip, New York, é> kfièb? nominate, conilituie ssd
appoini Walter F . Lang* Jr, of Islip, New York, sud Charles J. IsoiB&well ©£ Bay $b©S* New
York, or sny ©oc ©f them my ini« and lawiul aaom ey(s) wìil? i«II power of su M tan es, ior
me alai ¡a my nsme, place and stead to rote all ih© Common Stock ©f said kanl, Manding in
my naine ©n ite» hook* ©a j&miary 8, IOTI, al thè Annua! Meeting «F
^w ^ioldcrs to ho
h £ à al li» Banking linose, Essi Islip, New York, ©n Jarmary 19,1971, et 3:00 o*clo€k P i i ,
« al any adjoorameot? thercof w»th all die power* thè underaigned wosìd possess li person*
.... _
-;
aBy prese©!, a * followà:
_
1, Fiilng the number of Directors to Be elected at 13 (iM rieea) aad the d ectio n o f
13 (thirteen) such persons listed in the Proxy Statement dated December 18,1970,
aOcompanylBg the notice of said m ating .
FOR
□
"
AGAINST
•.
‘"t
--l.-...
□
'■“'V—
; ..
2. Any otber bosmess which may lawfully be brought before the wresting or any ad
journment thereof. Management at present knows of no odiar business to be brought
before the meeting.
SS
Wmzmm_
:rze- H ? 4»
Tbl* Pfcoxy confers authority to vote ‘T O R * ^proposition listed above ********
rsTriei:r
~
“AGAINST** is indicated thereon. If any other business is presented at said meeting, this Proxy
»bail be voted in accordance with die recommendations of raftruwjrant.
V&r
T his
The Board of Directors of the bank recommend* a vote *TOR" d a above proposition.
Proxy i* solicited oil behalf of management and may be revoked p rio r la it* exercise.
DATED: D tc a a iw lS , 1970.
(LS.)
--->7“,.-.-^-.-' ^ .rr-c
{!*&)
Proxies shall be signed exactly a* the name or names appear on the stock certificate,
ALL JOINT OWNERS MUST EACH SIGN. When signing as attorney, executor, trustee, guar. ^ Z!^
ditm or in a corporate capacity, please give full tide.
ift*2£a*3sw*&
___________________ _____
No officer or employee of the bank may be named as prosy.
NUMBER OF SHARES . . ........ ..
■
...
P R O X Y STAYEMeff
Th* M
K^onol
of U
blip
Eaa» bUp, Hem York
The number of share? of Common Stock outstanding end entitled to vote? at lha Annual
Shareholders' Meeting is 203,750 as of this date. Only those shareholders of record at the close
of business January 8,1971, ?h«H he entitled to vote.
gtetfen of Diracto**:
The A rticles of Association o f the bank provide dial the number of Directors to be elect
ed at the Annual Meeting will be determined by vote of ibe shareholder?, A resolution will he
offered at the meeting establishing the number of Director? at thirteen (13);
The persona named below, eleven (11) of whom arc members of the present Board of
piirrtoi?, will bo nominated for election to serve until the 1972 Annual Meeting of Share
holders* Other nominations may be made at the meeting in accordance with th« procedure*
set forth in Section 1 of the By-Laws. U h die intention of the persons named in the Prosy to
vote for tbe resolution establishing the number of Director? at thirteen (13) and for the elec
tion of die following nominee?;
NAME
Unton J , Bueek
Melvin K* Cannon
Andrew M. Gels
Everett Griek
Henry Docker
Hatty R- Howard
Harry Karp
Walter F. Lang, Jr,
John A. Mennella
Charles J . ThomeweU
Alston A* Wever
Russell J . Wolpcrt
Walter W* Wolperi
OCCVPATiON
Banker
Attorney
Banker
Insurance Broker
Industrialist
Retired Contractor
Retailer
Attorney
Wholesale Food Distributor
R eal Estate Broker
Banker
Bank President
Bank Vice President
B«mvMi«tio(t o f Msitagftmftith
The direct aggregate remuneration paid to all principal officers of the bank, as a group,
during the year ending December 31, 1970, will amount to $80,886.00.
The aggregate amount to be paid d u rin g the year ending December 31, 1970, for all
passion or retirement benefits under an existing plan in the event of retirement with respect to
*11 principal officers, as a group, will be $2*477.04,
DATED: December 18, 1970.
By Order of dm Board o f Director?
RU SSELL L W O LPgRT
President
Exhibit C
The First National Bank of East ¡slip
East Islip, New York
NOTICE OF ANNUAL MEETING
To the holders of shares of Common Stock:
NOTICE IS HEREBY GIVEN that, pursuant to a call of its Directors, an ANNUAL
MEETING of the shareholders of The First National Bank of East Islip, East Islip, New
York, will be held at the banking house, 345 East Main Street, East Islip, New York, on
Tuesday, March 7, 1972 at 3 :00 p’clock P. M., for the purpose of considering and voting
upon the following matters:
1. ELECTION OF DIRECTORS.
Fixing the number of Directors to be elected at eleven (11) and the election of those
persons listed in the Proxy Statement accompanying this notice of said Annual
Meeting.
2. CONSULTANT AGREEMENTS.
Approving and ratifying the five (5) Agreements, with former employees of the
bank, as listed in the accompanying Proxy Statement.
3. OTHER BUSINESS.
Any other business which may lawfully be brought before the meeting or any ad
journment thereof.
Thospaanagement has no knowledge of any matters to come before the meeting other
than th^^natters set forth above.
V)
_• Thf|management of the bank recommends a vote “FOR” the above propositions.
Oniyu those shareholders of record at the close of business on February 25, 1972 shall
lgi entitled to the Notice of the Annual Meeting and to vote at said meeting.
4*
Dat^d: February 16, 1972
By order of the Board of Directors.
Russell J. Wolpert
President
POLLS WILL REMAIN OPEN FOR ONE (1) HOUR
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU .DO ATTEND THE
MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND CAST YOUR VOTE IN PERSON. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
The First National Bank of East Islip
East Islip, New York
v
, PROXY STATEMENT
The number of shares of Common Stock outstanding and entitled to vote at the An
nual Meeting of the shareholders of the bank is 213,750 as of this date. Only those share
holders of record at the close of business February 25, 1972 shall be entitled to vote.
Each share shall have one yote, except in the election of Directors when shares may be
accumulated.
' _ ,
‘
.
ELECTION OF DIRECTORS
The Articles of Association of the bank provide that the number of Directors to be
elected at the Annual Meeting will be determined by a vote of the shareholders. A resolu
tion will be offered at the meeting establishing the number of Directors at eleven (11).
The persons named below, all of whom are members of the present Board of Directors
have been nominated for election to serve until the 1973 Annual Meeting of shareholders.
Other nominations may be made at the meeting in accordance with the procedures set
forth in Section 1 of the bank’s By-Laws. It is the intention of the persons named in the
Proxy to vote for the resolution establishing the number of Directors at eleven (11) and
for the election of the following nominees:
OCCUPATION
NAME
NUMBER OF SHARES DIRECTLY
AND BENEFICIALLY OWNED AS
OF FEBRUARY 1/ 1972
Banker, The First Nat’l
Bank of East Islip (retired)
Unton J. Bucek
Melvin R. Cannon
DIRECTOR
SINCE
(
‘ Attorney
Self Employed
700
r ; 1952
385
1969
1949
Andrew M. Geis
Banker, The First Nat’l
Bank of East Islip (retired)
376 .....
Everett Griek
Insurance Broker
Proprietor
887
Henry Hocker
Contractor
President, Stanley Sand
& Gravel Co. Inc.
1100
Merchant, Proprietor of
Karp’s Liquors
2680
1968
513
1970
Harry Karp i j
<■;
John A. Mennella
Wholesale Foods
President, John A. Mennella
Food Corp.
Charles.J, ,Thorne\vell
Real Estate Broker, Proprietor of
Thornewell Realty
•
• 1961
-
1232
f
1
■
♦ 1971
.
1969
Alston A. Wever
Banker, The F i n i Nat’l
Bank of East Islip (retired)
1093
1948
Russell J. Wolpert
President, The First Nat’l
Bank of East Islip
4700
1968
Walter W. Wolpert
Vice-President & Cashier
The First Nat’l Bank of
East Islip
429
1971
CONSULTANT AGREEMENTS
0 « June .26, 1969, August 28, 1969 and July 2, 1970 the Board of Directora of the
bank entered into an agreement with five (5) of its Senior Officers who were to be retained
as consultants after their retirement. The total annual payments for their services was
established at $39,857.28. These individuals have been serving in this capacity since Jan
uary 1, 1971, providing the bank with valuable and important functions of continuing past
and present successful policies of operations.
Accordingly, the following resolution will be presented at the Annual Meeting for stockholder consideration, approval and ratification.
RESOLVED, that the action of the Board of Directors of the bank, relative to the
banks agreements with its five employees, since retired, namely Alston A. Wever, Andrew
M. Geis, Unton J. Bucek, Bertha C. Feil and Radcliff A. Schwab, providing for their ser
vices as consultants be approved and ratified.
REMUNERATION OF MANAGEMENT
The direct aggregate remuneration paid to the principal officers of the bank, as a
group, during the year ended December 31, 1971 is as follows:
NAMES OF INDIVIDUALS
AGGREGATE DIRECT
REMUNERATION
CAPACITY
Russell J. Wolpert
Jay W. Woods
Walter W. Wolpert
Raymond C. Baldwin
William G. Carman
Robert Moneta
President
Executive Vice-President
Vice-President & Cashier
Vice-President & Comptroller
Vice-President
Vice-President & Loan Officer
$87,685.00
The direct aggregate remuneration paid to all Directors of the bank as a group, during the year ended December 31, 1971 is as follows:
CAPACITY
number of persons
in GROUP
------ ---------------------------------
13
CAPACITY
-
Directors
a g g r e g a t e d ir e c t
REMUNERATION
$17,285.00
The aggregate amount paid during the year ended December 31, 1971, for all pension
or retirement benefits under an existing plan, irt the event*-of retirement, with respect to
six principal officers of the bank, as a group, was $4,962.72.
r\xr 3?*^ PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS IS SOLICITED
ON BEHALF OF MANAGEMENT AND MAY BE REVOKED PRIOR TO ITS EXER
CISE. THE COST OF SOLICITATION IS BORNE BY THE BANK.
*
Dated: February 16, 1972
By order of the Board of Directors
Russell J. Wolpert
President
The First National Bank of East Islip
East (slip, New York
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
KNOW ALL MEN BY THESE PRESENTS, that I (we) the undersigned sharehold
e r s ) of The Fu st National Bank of East Islip, East Islip, New York, do hereby nominate,
constitute and appoint Everett Griek of Great River, New York and Charles J. Thornewell
of Bay Shore, New York or either of them my true and lawful attorney (s) with full power
of substitution, for me and in my name, place and stead to vote all the Common Stock of
said bank, standing in my (our) name(s) on its books on February 25, 1972 at the Annual
Meeting of its shareholders to be held at the banking house, East Islip, New York, on
March 7, 1972 at 3.00 o clock P. M., or at any adjournments thereof with all the powers the
undersigned would possess if personally present, as follows:
1. Fixing the number of Directors to be elected at eleven (11) and the .election of the
eleven (11) such persons listed in the Proxy Statement dated February 16, 1972
accompanying the Notice of said Annual Meeting.
FOR
WITHHOLD
□
□
2. Approving and ratifying the five (5) Consultant Agreements with the senior em
ployees of the bank as listed in the Proxy Statement.
FOR
AGAINST
□
□
3. Any other business which may lawfully be brought before the meeting or any ad
journment thereof.
MANAGEMENT OF THE BANK KNOWS OF NO OTHER BUSINESS TO BE
BROUGHT BEFORE THE MEETING.
This Proxy confers authority to vote “ FOR” the propositions listed above unless
WITHHOLD” or “AGAINST” is indicated thereon. This Proxy will be voted as directed
by the shareholder with respect to any matters to be acted upon by the meeting. If any
other business is presented at said meeting, this Proxy shall be voted in accordance with
the recommendations of management.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THÉ COST OF SOLICITATION IS BORNE BY
THE BANK.
MANAGEMENT OF THE BANK RECOMMENDS A VOTE “FOR” THE ABOVE
PROPOSITIONS. EACH SHARE SHALL HAVE ONE VOTE, EXCEPT IN ELECTION
OF DIRECTORS WHEN SHARES MAY BE ACCUMULATED.
Dated:.....-.. |...... 1972
........ ... ............ ... (L.S.)
............ Kt.............. ........................... (L.S.)
Proxies shall be signed exactly as the name or names appear on the stock certificate.
ALL JOINT OWNERS MUST EACH SIGN. When signing as attorney, executor, trustee
guardian or in any corporate capacity, please give full title.
,
No officer or employee of the bank may be named as proxy.
NUMBER OF SHARES
Exhibit D
The First National Bank of East ¡slip
East ¡slip, New York
NOTICE OF SPECIAL MEETING
To the Holders of Shares of Common Stock:
NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, a Special Meeting of.
Shareholders of The First National Bank of East Islip will be held at the banking house, 345
East Main Street, East Islip, New York on Tuesday, August 29, 1972 at 3:00 P.M., for the
purpose of considering and voting upon the following matters:
1. STOCK SPLIT. Increase the number of shares outstanding from 213,750 to 427,500,
par value to be changed from present $5.00 per share to $2.50 per share, and the terms
and conditions thereof, as referred to in the Proxy Statement dated August 9, 1972,
accompanying the notice of said Special Meeting, and appropriate amendments to the
Articles of Association effecting such increase.
2. STOCK DIVIDEND. Increase of the capital stock of the Bank from $1,068,750.00 to
$1,335,937.50 by the issuance of a 25% stock dividend of $267,187.50 representing
106,875 shares of the par value of $2.50 each, if the increase referred to in ITEM 1
is approved, and the terms and conditions thereof, as referred to in the Proxy State
ment dated August 9, 1972, accompanying the notice of said Special Meeting, and
appropriate amendments to the Articles of Association effecting such increase.
3. SALE OF COMMON STOCK. Increase of the capital stock of the Bank from $1,335,937.50 to $1,603,125.00 if the increase referred to in both ITEMS 1 and 2 are ap
proved, by the issuance and sale of 106,875 additional shares of Common Stock, par
value $2.50 each, and the terms and conditions thereof, as referred to in the Proxy State
ment dated August 9, 1972, accompanying the notice of said Special Meeting, and
appropriate amendments to the Articles of Association effecting such increase.
4. AMENDMENT TO ARTICLE 6th of 8 of the ARTICLES OF ASSOCIATION. To
delete that portion of said Article which requires at least one Vice President shall be
a member of the Board of Directors, and the appropriate amendment to the Articles
of Association effecting this change.
5. OTHER BUSINESS. Whatever other business may be brought before the meeting or
any adjournment thereof.
^
Only those shareholders of record at the close of business on August 8, 1972, shall be en
titled to notice of the Special Meeting and to vote at the meeting.
j
By
order of the Board of Directors.
Jay W. Woods
President
Date: August 9, 1972
POLLS WILL BE OPEN FOR ONE (1) HOUR
SINCE APPROVAL OF TWO-THIRDS OF THE OUTSTANDING SHARES IS NECESSARY TO PASS
nr ~
r
p.*rrT*fcfr; \w? ||r*rirr vr\>i to
TMr r»opr>r*o?c pnvT/'iMrp ij>» *rt»r p..?fvrtr*r
The First National Bank of East Islip
PROXY STATEMENT
FOR SPECIAL SHAREHOLDERS MEETING AUGUST 29, 1972
The number of shares of common stock outstanding and entitled to vote at the Special Meet
ing of shareholders is 213,750. Only those shareholders of record at the close of business on
August 8, 1972 shall be entitled to vote.
This proxy is solicited on behalf of Management and may be revoked at any time prior to
the voting by giving notice of revocation to the Bank in writing or at the meeting.
L STOCK SPLIT.
The Board of Directors recommends a Stock Split of two shares for each one held or an
increase of the presently outstanding 213,750 shares to 427,500, par value to be changed from
$5.00 per share to $2.50 per share. This increase will not affect the Capital Account. An af
firmative vote of two-thirds of the outstanding stock is necessary for this change.
2. STOCK DIVIDEND.
The Board of Directors recommends a 25% stock dividend, or one additional share for
each four shares held. The payment is subject to the approval of the Comptroller of the Cur
rency and by the affirmative vote of shareholders owning two-thirds of the outstanding stock.
Your Bank has been growing rapidly making it necessary to retain earnings. In doing so, a
policy of paying stock dividends has been followed.
The stock dividend and the split will be payable September 28, 1972 to shareholders of
record August 8, 1972 thereby increasing the capital stock of the Bank by $267,187.50 as
represented.in the issuance of 106,875 shares of $2.50 par, with appropriate amendments to
the Articles of Association effecting such increase.
3. SALE OF COMMON STOCK. *
There will be submitted to the shareholders at the meeting a proposal to increase the cap
ital stock of the Bank from $1,335,937.50 to $1,603,125-00, if the stock split and stock divi
dend is approved, by the issuance and sale, at a sale price to be fixed by the Board of Directors,
of 106,875 additional shares of Common Stock, par value $2.50 each, subject to the approval
by the Comptroller of the Currency. Shareholders of record on August 8, 1972 will be entitled
to subscribe for shares issued pursuant thereto at the rate of one full share for each five rights
held. Fractional shares will not be issued upon the exercise of Rights. If the number of Rights
issued to a shareholder is not evenly divisible by five, he may round out his subscription. The
shareholders will have the additional privilege of subscribing for any remaining shares not
subscribed for pursuant to the exercise of Rights.
As a result of the reduction in the par value, each shareholder will receive two shares of
new par $2.50 stock and an additional V 2 share in the form of a stock dividend or 2 V 2 shares
<f
nir
50
£>*• onrti
of the nM tv*i r $5.00 «fork. To the extent that shareholders
REASONS FOR THE SALE OF COMMON STOCK.
Capital offers the Bank a prime base for making loans, opening new branches, and making
other sound investments. Because of our rapid growth over the past few years, the Bank should
raise additional capital. This will be accomplished through the sale of additional Common
Stock. It will enable the Bank to continue its growth and maintain a competitive position.
In addition, the Bank experienced loan losses in the first half of 1972 which were unfore
seen. Fortunately, our loan reserve was adequate to cover such losses which totaled $449,114.91.
A loss of this magnitude is unfortunate but a contingency which is sometimes experienced in a
financial institution. However, because of anticipated partial recoveries, excellent current earn
ings, and our favorable tax status, the net loss to the Bank will be substantially below the
amount charged to our loan reserve.
The affirmative vote of shareholders owning two-thirds of the outstanding stock is required
to approve the capital increase.
4. AMENDMENT TO ARTICLE 6th of 8 of the ARTICLES OF ASSOCIATION.
The Board of Directors recommends a change in procedure oudined in this Article. At pres
ent the Article reads as follows in part:
“The Board of Directors shall have the power to appoint one or more Vice Presi
dents, at least one of whom shall also be a member of the Board of Directors, and who
shall be authorized, in the absence of the President, to perform all acts and duties perti
nent to the office of the President, except such as the President only is authorized by law
to perform.”
It is recommended that that portion of the Article be changed to read as follows:
“The Board of Directors shall have the power to appoint one or more Vice Presi
dents, one of whom shall be authorized, in the absence of the President, to perform all acts
and duties pertinent to the office of the President, except such as the President only is
authorized by law to perform.”
The vote of stockholders owning two-thirds of the stock of the Bank is required for the
approval of this change to the Articles of Association.
THE COST OF THIS SOLICITATION IS BORNE BY THE*BANK.
By order of the Board of Directors
Jay W. Woods
President
Dated: August 9,1972
The First National Bank of East Islip
East Islip, New York
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned shareholder of The
first National Bank of East Islip, East Islip, New York, do hereby nominate, constitute, and
appoint Everett Griek of Great River, New York and Charles J. Thomewell of Bay Shore,
New York or either of them with full power to act alone, my true and lawful attorney(s) with
full power of substitution, for me and in my name, place and stead to vote all common stock of
said Bank, standing in my name on its books on February 23, 1973 at the Annual Meeting of
Shareholders to be held at its banking house, 345 East Main Street, East Islip, New York, on
Tuesday, March 6, 1973 at 3:00 P.M. or any adjournments, thereof, with all the powers*the
undersigned would possess if personally present, as follows:
1. ELECTION OF DIRECTORS. Nominees are set forth in the en FOR
closed Proxy Statement.
AGAINST
2.
RATIFICATION OF THE SALE, ISSUANCE AND RETENTION FOR
OF COMMON STOCK. Details are incorporated in the enclosed AGAINST
Proxy Statement.
3. REVISION OF PENSION PLAN.
enclosed Proxy Statement.
(
(
)
)
(
(
)
)
v
Details are incorporated in the
FOR
AGAINST (
'
()
)
4. As of the date of this Proxy, the only business which Management
expects to be considered at the meeting are the three matters listed
above.
« ar
• c° nfers, ^hority to vote “FOR” each proposition listed above unless
A^AlJ\bl v is indicated. If any other business is presented at said meeting, the persons
named m this Proxy are expected to vote the Proxy in accordance with their judgement and
recommendations of management.
The Board of Directors recommends a “ FOR” each of the above listed propositions. This
Proxy is solicited on the BEHALF OF MANAGEMENT and may he revoked prior to its ex
ercise. THE COST OF SOLICITATION IS BORNE BY THE BANK.
Date:
, 1973
L.S.
L.S.
When signing as attorney, executor, administrator, trustee
or guardian, please give full title. If more than one trustee,
all shall sign. All joint owners must sign.
NO OFFICER OR EMPLOYEE OF THE BANK
MAY BE NAMED AS PROXY.
NUMBER OF SHARES
The First National Bank of East (slip
East ¡slip, New York
NOTICE OF ANNUAL MEETING
To the Shareholders:
Notice is hereby given that, pursuant to call of its Directors, the Annual Meeting of the
shareholders of The First National Bank of East Islip will be held at the banking house, 345
East Main Street, East Islip, New York on Tuesday, March 6, 1973 at 3:00 P.M., for the
purpose of considering and voting upon the following matters:
| | ELECTION OF DIRECTORS. Fixing the number of Directors at eleven and the elec
tion of the persons listed in the proxy statement dated February 15,1973, accompanying
the notice of said meeting.
2. RATIFICATION OF THE SALE, ISSUANCE AND RETENTION OF COMMON
STOCK. Ratification of the proposed increase of the capital stock of the Bank from
534,375 to 641,250 shares through the sale of 106,875 additional shares. This is the
same proposed increase which was considered and approved at the Special Meeting
Shareholders on August 29, 1972. We urge you to read the further details regarding
this matter set forth in the accompanying proxy statement.
*L REVISED PENSION PLAN. Because of the unrealistic approach and lackluster per
formance of our present pension plan, approval will be sought for its revision as to
formula and investment procedures of the funds allocated for the pension.
4. OTHER BUSINESS. Any other business that comes before the meeting or adjournment
thereof.
Only those shareholders of record at the close of business on February 23, 1973, shall be
entitled to notice of the Annual Meeting and to vote at said meeting.
By order of the Board of Directors
Jay W. Woods
President
Dated: February 15, 1973 '
POLLS WILL BE OPEN FOR ONE (1) HOUR
SINCE THE ARTICLES OF ASSOCIATION OF THE BANK PROVIDE FOR APPROVAL O F A MA
JORITY VOTE O F ITS SHAREHOLDERS FOR THE ELECTION O F DIRECTORS, AND SINCE A TWO
THIRDS MAJORITY VOTE OF THE SHAREHOLDERS IS REQUIRED FOR THE RATIFICATION O F
THE SALE AND ISSUANCE AND RETENTION OF COMMON STOCK AND ALSO THE REVISION
OF THE PENSION PLAN, WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON
The First National Bank of East Islip
East Islip, New York
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
Dated: February 15, 1973
This proxy statement is furnished in connection with the Annual Meeting of Shareholders
of The First National Bank of East Islip to be held at 3:00 P.M. on Tuesday, March 6, 1973
at the banking house, 345 East Main Street, East Islip, New York.
The Bank’s only class of stock is its common stock, $2.50 par value, of which there are
534,375 shares outstanding. Only those Shareholders of record at the close of business on
February 23, 1973 shall be entitled to vote.
Each shareholder has the right to vote the number of shares owned by him for as many
persons as there are directors to be elected, or to cumulate such shares and give one candidate
the number of votes equal to the number of directors to be elected multiplied by the number of
his shares, or to distribute them on the same principle among as many candidates as he thinks
fit. In the determination of all other matters that may be presented at the meeting, each share
holder is entitled to one vote on each share of stock held by him. The affirmative vote of a
majority of the votes represented at the meeting is necessary to adopt the resolution fixing
the number of directors to be elected for the ensuing year.
This solicitation of proxies is being made by the management of The First National Bank
of East Islip. THE COST OF SOLICITATION WILL BE BORNE BY THE BANK.
A shareholder executing the proxy herewith presented has the power to revoke it at any
time prior to the exercise thereof.
1. ELECTION -OF DIRECTORS: Eleven directors are to be elected at the Annual Meet
ing to hold office until the next Annual Meeting of Shareholders or until their suc
cessors have been elected and have qualified. A shareholder entitled to vote for the
election of directors may make nominations for election to the Board of Directors. How
ever, the shareholder making such nomination must give written notification of such
intent to the President of the Bank and to the Comptroller of .the Currency no later
than seven days after the receipt of this notice.
The proxies named on the enclosed form of proxy will vote in favor of fixing the number
of directors at eleven and for the election of the eleven persons named below as directors un
less contrary instructions are specified on the proxy form. Each person nominated and named
below has consented to being named in the proxy statement and to serve as a director if elected.
The following table sets forth with respect to each nominee for director, his name, the
year in which he first became a director of the Bank, and his principal occupation:
NAME
YEA R E LE C T E D
Unton J. Bucek
1952
Melvin R. Cannon
Andrew M. Geis
1969
1949
Everett Griek
1961
Henry Hocker
1971
Harry Karp
1968
John A. Mennella
1970
Charles J. Thornewell
1969
Alston A. Wever
1948
Russell J. Wolpert
1968
Jay W. Woods
1972
PRINCIPAL O cètlPA TIO N
Retired Banker (The First National Bank of Fast
Islip) Formerly Cashier from 1950 to 1970
Attorney (Practicing since 1939)
Retired Banker (The First National Bank of East
Islip) Executive Vice President from 1950 to 1970
Insurance Broker (since 1950)
Proprietor
Contractor (since 1958)
President, Stanley Sand and Gravel Co., Inc.
Merchant (since 1957)
Proprietor, Karp’s Liquors
Wholesale Foods (since 1959)
President, John A. Mennella Food Corporation
Real Estate Broker (since 1965)
Proprietor, Thornewell Realty
Retired Banker (The First National Bank of East
Islip) Formerly President until 1970
Vice President (The First National Bank of East
Islip since 1962)
President (The First National Bank of East Islip,
employed November 1971) Former Representa
tive of Federal Reserve Bank since 1956.
The following table sets forth, for the
neration of Officers, and Directors. No one
cess of $30,000.00 during the year and are
Directors as a group
Officers as a group (16)
$ 19,385.00
261,521.00
Some of the Bank’s officers and directors, individually or through firms of which the\
n * t mT° VCd’ . haVe • b®frowlnS transactions in the ordinary course of business with th<
Bank. These transactions all were on substantially the same terms as those prevailing at tht
■
f e l P
transactlonswlth ° ,her persons and do not involve more than normal risk
of collectibility or present any other unfavorable features.
The following table sets forth with respect to each nominee for director the number ol
shares of capital stock of the Bank beneficially owned, either directly or indirectly by him 01
his associates as of December 31, 1972:
y
NAME
COMMON STO CK
OF TH E BANK*
Unton J. Bucek
Melvin R. Cannon
Andrew MrGeis
Everett Griek
Henry Hocker
Harry Karp
2750
996
1088
2592
8830
6700
^Includes stock owned by immediate family members
NAME
John A. Mennella
Charles Thornewell
Alston A. Wever
Russell J. Wolpert
Jay Wf Woods
2 ST0CKICATI0N ° F THE SALE’ ISSUANCE. AND RETENTION
COMMON ST O C K
O F TH E BANK*
532
3080
2954 16,372
500
o f com m on
of AuJîilt 2 0 ^ 0 7 9 * ^ ^ ,furnished I connection with the Special Shareholders Meeting
01 August 29, 1972 at which meeting the sale of 106,875 additional shares of the Bank’s stock
was approved referred to the reasons for the sale of die common stock. It pointed out there was
a need for additional capital in order for the Bank to continue its growth and maintain a cornr
11 alsoI N Î S fact that tbe bank bad experienced loan losses in the first half
972 m the amount of $449,114.91 which were covered at the time by adequate reserves It
subsequendy appeared desirable to provide the shareholders with additional information cona f r Annual^Meeüng.'
^
“ dM ^
‘° raÜfy d‘e proposed caPital ¡"«ease
o
During 1971, the Bank favorably entertained a loan application from Crest Affiliates,
Inc. for interim financing of a modular home project in the Township of Brookhaven Perma
nent mortgages were to be placed on these homes by the Farmers Home Administration, a United
States Government agency. Ihe Bank was merely to furnish building loans until each home was
completed. There would be a bona fide contract of sale for each home and an approval of the
Farmers Home Administration before the Bank would make any loan. In addition, the Bank
provided direct working capital loans to the same borrower. Since the modular homes were de
livered to the building site as a complete dwelling, except for utilities hookups, it was es
timated that the banks building loans would not be outstanding for more than four to six
weeks from inception to repayment by the Farmers Home Administration. Late in 1971 the
builder, Crest Affiliates, Inc., began to experience delays in obtaining local town and county
inspections and issuances of certificates of occupancy without which the permanent mortgage
of the Farmers Home Administration could not be made. Acute financial difficulties in meet
ing subcontractor s bills and pay-rolls created the need for additional interim financing, until
Farmers Home Administration mortgage closings could be speeded up. With a record °of one
hundred twenty five homes having been sold and delivered at that time, the Bank’s officers
and directors had reason to believe that the prospects for success were good and that further
interim financing by way of unsecured working capital loans was justified. However, early in
1972, Crest Affiliates, Inc. found that continued delays in closings required more financing
and at this point in time, the Bank refused to grant furdier loans, except to pay subcontract
tors for what was due them to date on their promise to complete the homes already delivered
to the job sites. The Bank allocated §170,000.00 on April 14, 1972 for this purpose, which in
effect were building loans, the proceeds of which were being actually invested in the* construc
tion and completion of the houses. Soon after this last advance to Crest Affiliates, Inc., the Bank
was informed by the borrower that the project could not proceed and that some arrangement
was required to meet outstanding bills and the debt due to the Bank. An arrangement was en
tered into on June 27, 1972, whereby Crest Affiliates, Inc. turned over title to seventy six
parcels of real estate to the Bank with modular homes already on fifty of them in various
stages of completion, having a loan book value of $1,093,473.00. At that time Crest Affiliates,
Inc. had other unsecured working capital loans outstanding of $449,114.91. The loan book
values of $1,093,473.00 which were carried on the bank’s books as “ Building Loans” -were
transferred to the account of “ Other Real Estate” . The outstanding unsecured working capital
loans of $449,114.91 were charged off.
The Comptroller of the Currency, the Federal agency which regulates National Banks,
conducted its review of the Bank’s existing loans, including the Crest Affiliates, Inc. loans*
during its examinations on March 22, 1971 ($445,240.00-building loans) and again on Sep
tember 13, 1971 ($1,333,569.00-building loans). No adverse comment nor criticism was
made by any of the examiners in those reviews at those times. However, in his examination of
May 9, 1972, the Comptroller criticized both the unsecured working capital loans and the
building loans as being in excess of the statutory lending limits to any one borrower
($300,000.00). The Bank was ordered to charge off a portion of these Crest loans which
amounts to all of the unsecured working capital loans outstanding at that time ($449,114.91
of which $170,000.00 was allocated as building loans). These loans were charged off prior
to June 30, 1972.
v
A statute which governs National Banks provides that mortgage loans on real estate which
are guaranteed to be taken or insured by a government agency, are exempt from die Bank’s
lending limitation. The Bank’s general counsel advised the Board of Directors on April 20,
1971 that inasmuch as die Farmers Home Administration»: a Federal agency, liavin" in his
opinion guaranteed diese loans or committed itself to take the building loan portion°of diese
loans, the Bank would not be exceeding its legal loan limit of $300,000.00 with regard to
such building loans ($379,376.00 in amount at that time). The Comptroller of the Currency
having not criticized these loans in two previous examinations, has expressed an opinion on its
latest examinadon that the mortgage dealings with the Farmers Home Administration do not
qualify for an exemption, whereas the Bank, on advise of counsel, contends that they do.
On October 10, 1972 the Board of Directors considered the matter at length, conferred
with the local Regional Administrator of National Banks and resolved on October 17, 1972 as
follows: *
*
Upon motion duly made and seconded it was unanimously resolved
that the minutes of the Discount and Executive Committee meeting of June
6,1972 be clarified and ratified as follows:
It having been brought to the attention of the directors that the Bank
Examiners report dated May 9, 1972 and the covering letter forwarding the
said examination to the Bank, dated June 1, 1972 from the Deputy Regional
Administrator of National Banks, advised the directors to either remove that
portion of the Crest Affiliates Line presently considered loss (S449,114.91)
on or before June 30, 1972, or furnish a director’s guarantee of said loss re
moving the loss within six months. The matter was opened for discussion and
the board made its decision.
It was unanimously decided by the directors that they not guarantee the
loans but authorized and directed with the consent and approval of the Regional •
Administrator of National Banks that the said loans in the amount of •
§449,114.91 be charged to Reserve for Bad Debts” .
The Directors present and voting were Walter Wolpert, Russell J. Wolpert, Charles J.
Thornewell, Melvin R. Cannon, Everett Griek, Henry Hocker, Harry Karp, John A. Mennella,
Andrew M. Geis, Unton J. Bucek and Alston A. Wever.
It must be emphasized that all of the building loans to Crest Affiliates, Inc. were predi
cated on firm Contracts of Sale with permanent mortgage commitments from a U.S. Gov
ernment Agency, subject to completion of each home and search of title. Since the charge-off
date of June 9, 1972, the bank has realized $26,000.00 in recoveries and has instituted legal
actions against the principals of Crest Affiliates, Inc., in which the bank seeks to recover ap
proximately $200,000.00.
When the Bank took over the realty holdings of Crest Affiliates, Inc., it proceeded to com
plete the houses and turn them over to their purchasers and the bank is continuing to do so.
Twenty-four homes out of a total of fifty are completed now and awaiting title closings with
the Farmers Home Administration. The book value of “ Other Real Estate” has been reduced
by reason of closings and land sales from §1,093,473.00 to §501,161.00 as of February 2,
1973. The balance will be reduced practically in its entirety after all remaining properties
are delivered to purchasers. An additional §273,470.00 of the building loans was charged
off as of December 31, 1972. Refer to Annual Report mailed under separate cover.
There is no question but that the Crest Affiliates, Inc. loan loss is a serious one. It has
not, however in the opinion of management, threatened the security nor the liquidity of the
bank. Also, in the opinion of management the bank’s financial position is healthy, and im
proving. With the anticipated rapid growth and expansion, additional capital is desirable. A
new high in assets was reached in 1972. The new programs instituted in 1972 augurs well for
even greater highs in capital structure, profitable business, and concomitant higher dividends
for the stockholders. Specific programs instituted in 1972 and those planned for implementa
tion, are spelled outjn detail in the Annual Report.
To date, approximately 83,000 shares of the new stock issue have been subscribed. It is
recommended these be issued and duly certified and the remaining approximately 23,000
shares be retained by the Bank for future use as stock dividends and various employee in
centive programs.
3. REVISED PENSION PLAN. Because of the unrealistic approach and lackluster per
formance of our present pension plan, approval -will be sought for its revision as to
formula and investment procedures of the funds allocated for the pensions.
4. OTHER MATTERS. As of the date of this proxy statement, the only business which
management expects to be considered at the Annual Meeting are the, three matters
listed above. However, if other matters come before the meeting, the persons named
in the attached form of proxy are expected to vote the proxy in accordance with
their judgement and the recommendations of management on such matters.
By Order of the Board of Directors
Jay W. Woods
President
E x h ib it F
II
;! UNITED STATES DISTRICT COURT
• EASTERN DISTRICT OF NEW YORK
1 ----------------------------------------------------------------- --- x
‘
CHARLES H. WOLPERT and MARTHA WOLPERT.
a s sto c k h o ld e rs o f th e FIRST NATIONAL BANK OF
EAST IS L IP , su in g on b e h a lf o f th em selves and
• a l l o th e r sto c k h o ld e rs o f th e FIRST NATIONAL
• BANK OF EAST ISL IP s im ila r ly s it u a t e d ,
!
P la in tiffs ,
- a g a in s t -
.
.
>
i
;
|
COMPLAINT
FIRST NATIONAL BANK 0 ? EAST IS L IP ; and CHARLES
J . THORNEWELL; ALSTON A, WEVER; RUSSELL J .
WOLPERT; JOHN A. MENNSLLA; UNTON J . BUCEK;
ANDREW M. GEIS; KELVIN
CANNON; JAY W. WOODS;
EVERETT GRIEK; and HENRY HOCKEP., a s members o f
th e Board o f D ir e c to r s o f th e FIRST NATIONAL
BANK OF EAST IS L IP , and in d iv id u a lly .
D efen d an ts.
;;
P l a i n t i f f s , by t h e ir a tt o r n e y s , BONNER, FAGELSON,
•: EARITON & BERKA, P. C ., a s and fo r t h e ir C om plain t, a l l e g e ;
"
JURISDICTION
1.
T hat t h i s a c tio n a r i s e s under th e Laws o f
! U n ited S t a t e s under th e p r o v is io n s o f T i t l e 12 o f th e U n ited
S t a t e s Code in v o lv in g a n a tio n a l bank.
The amount in q u e stio n
ex ce ed s TEN THOUSAND ($10 ,0 0 0 .0 0 ) DOLLARS.
2.
T hat Rule 2 3 .1 o f th e F e d e r a l R u le s o f C
• P rocedure i s in v o lv ed in t h a t i t in v o lv e s d e r i v a t i v e a c t i o n s b y
sh a r e h o ld e r s .
3.
T hat p l a i n t i f f s b r in g t h i s a c tio n on b e h a lf o f
th e m se lv e s and a l l o th er sto c k h o ld e rs o f th e FIRST NATIONAL BANK
OF EAST ISL IP s i m i l a r l y s i t u a t e d . ‘ P l a i n t i f f s f a i r l y and ad eq u ate
l y r e p r e s e n t th e i n t e r e s t s o f th e sh a r e h o ld e rs s i m i l a r l y s i t u a t e d
in e n fo rc in g th e r i g h t s o f th e FIRST NATIONAL BANK OF EAST ISL IP
h e re in a lle g e d .
4.
T hat p l a i n t i f f s a re now and v/ere a t th e t i n e o f
th e t r a n s a c t io n s com plained o f , sh a re h o ld e rs o f th e d e fe n d a n t.
FIRST
NATIONAL BANK OF
5-
E A S T ISLIP.
That th e p l a i n t i f f s d id n o t make any demands
upon th e d efen d an ts through th e in d iv id u a l d e fe n d a n ts above-nam ed
a s i t s o f f i c e r s and b o ard o f d ir e c t o r s to commence an a c t io n
a g a i n s t the s a id in d iv id u a l d efen d an ts f o r th e w ro n g fu l and
''
fr a u d u le n t conduct h e r e in a f t e r a lle g e d f o r th e re a so n t h a t s a i d
d e fe n d a n ts have been d i r e c t l y in volved in th e w ro n g fu l a n d /o r
fr a u d u le n t conduct an d /or have a c q u ie sced o r ap proved th e wrong
f u l and fra u d u le n t conduct which would ren d er any demand upon '.
th e d efen d a n ts t o b r in g an a c tio n f u t i l e .
6..
That t h i s a c tio n i s n o t a c o l l u s i v e one t o
c o n fe r j u r i s d i c t i o n on th e C ourt.
7.
That a t a l l tim es h e r e in a f t e r m en tion ed, th e
d e fe n d a n t, FIRST NATIONAL BANK OF EAST IS L IP , w as and i s a n a tio n a
b an k in g c o rp o ra tio n o rg a n ized and e x i s t i n g under th e law s o f th e
U n ited S t a t e s o f Am erica.
8.
That a t a l l tim es h e r e in a f t e r m entioned,
d e fe n d a n ts, RUSSELL J . ViOLPERT, JAY W. V700DS, ALSTON A. V7EVER,
ANDREV7 M. GEIS, UNTON J . BUCEK, MELVIN R. CANNON, EVERETT GRIEK,
HENRY HOCKER, JOHN A. KENNELLA and CHARLES J . THOSNEV7ELL, w ere '
o f f i c e r s an d /o r d i r e c t o r s o f th e d efen d an t, FIRST NATIONAL BANK
OF EAST ISL IP .
AS AND FOR A FIRST CAUSE OF ACTION
AGAINST DEFENDANT CHARLES J . ' THORNHILL;
9t
T hat upon in form ation and b e l i e f , in o r abo u t
Septem ber o f 1972, BRENTWOOD HOLDING CORPORATION a p p lie d f o r a
lo a n in th e amount o f $ 100, 000. 00.
10.
That upon in form ation and b e l i e f , CHARLES J .
TKORNEV7ELL was and s t i l l i s a m a jo rity sto c k h o ld e r o f th e
BRENTWOOD HOLDING CORPORATION.
11.
That upon in form ation and b e l i e f , in o r ab o u t
March o f 1973, th e d efen d an t, CHARLES J . TH0RNEV7ELL, d id u se h i s
[■ office and in flu e n c e a s d ir e c to r o f th e d efen d an t BANK t o o b ta in
i;
j th e a f o r e s a id lo an fo r th e BRENTWOOD HOLDING CORPORATION i n th e
I:
| sum o f $ 100, 000.00 a t 7- 1/ 2% i n t e r e s t f o r tw enty ( 20) y e a r s .
i:
•
12.
That upon in form ation and b e l i e f , a s u b s t a n t i a l
i!
j p o rtio n o f th e p ro ce ed s o f t h i s loan were u sed f o r th e p e r s o n a l
i
| b e n e f it o f th e d efen d an t, CHARLES J . THORNEWELL.
• 13.
That upon in fo rm atio n and b e l i e f , th e r e were
¡.no o th er in d iv id u a l s o b lig a te d on th e m ortgage n o te o th e r th an
i
‘¡.CHARLES J . THORNEWELL, n o tw ith stan d in g th e f a c t t h a t CHARLES LACE
I i s a sto c k h o ld e r in BRENTWOOD HOLDING CORPORATION.
!
1 4 . That th e a f o r e s a id loan was made in v i o l a t i o n
f
j o f T i t l e 12, C h apter 3 , S e c tio n 375a o f th e U n ited S t a t e s Code.
AS AND FOR A SECOND CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS;
I
1 5 . P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
I
I*
* each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
;■ com plaint marked and d e sig n a te d " 1 . " through "1 4 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth h e r e in .
16.
j
That th e a f o r e s a id loan was made w ith th e
1knowledge and a p p ro v a l o f th e d efen d an ts.
17.
|
j
That th e a f o r e s a id lo an was made n o tw ith stan d in g
the a d v ic e to th e c o n tra ry by cou n sel f o r th e d efen d an t BANK.
;
1 8.
That th e d efen d an ts a r e each j o i n t l y o r
|
' s e v e r a lly in v i o l a t i o n o f T i t l e 12, C hapter 3 , S e c tio n 375a o f
th e U nited S t a t e s Code.
19.
T h at th e d efen d an ts d id c a u se to h av e is s u e d
;
>
1
»
' on or about F e b ru ary 11, 1974, a document e n t i t l e d "N o tic e o f
Annual M eeting and Proxy S ta te m e n t."
20.
T hat th e proxy statem en t f a i l e d t o d i s c l o s e
borrow ing t r a n s a c t io n s o f th e BRENTWOOD HOLDING CORPORATION o f
which CHARLES J . THORNEWELL was th e m a jo r ity sto c k h o ld e r .
—
•
j
•t
.
- 3 '
;
i
I
\
«
»
i
Ij
23-
th e proxy statem en t f a l s e l y and fr a u d
u l e n t l y s t a t e s th a t "some o f th e Bank’ s o f f i c e r s and d i r e c t o r s ,
in d iv id u a l ly or through firm s in which th ey a re in v o lv e d h av e had
['borrow ing tr a n s a c tio n s in th e o rd in a ry co u rse o f b u s in e s s w ith th
\ B a n k .”
{
;•
22* That th e proxy statem en t f r a u d u le n tly o m its
i
’
eren ce to th e . f a c t t h a t th e d efen d an ts were in v i o l a t i o n o f
j T i t l e 12, C hapter 13, S e c tio n 375a o f th e U n ited S t a t e s Code.
I •
;
AS AND FOB A THIRD CAUSE OF ACTION
;
AGAINST DEFENDANT JOHN A. MENNELLAr
23.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n co n tain e d in th e p a ra g ra p h s o f t h i s
| com p lain t marked and d e sig n a te d " 1. ” through " 8 . " , i n c l u s i v e ,
i a s i f th e same were s e t fo r th a t len g th h e r e in .
I
;•
24. That upon in fo rm atio n and b e l i e f , in o r ab o u t
• Septem ber o f 1972, JOHN A. MENNELLA and an o th er, a p p lie d f o r a
; m ortgage loan in th e sum o f $ 200, 000.00 f o r a term o f tw enty ( 20}
y e a r s w ith i n t e r e s t a t th e r a t e o f 7- 1/ 2% p e r annum.
25.
That upon in fo rm atio n and b e l i e f , JOHN A.
KENNELLA u sed c e r t a in r e a l p ro p e rty in Coram, New Y ork, a s
c o l l a t e r a l f o r th e above lo a n .
26.
That upon in fo rm atio n and b e l i e f , in o r ab o u t
‘ F eb ru ary o f 1973, th e d efen d an t, JOHN A. MENNELLA, d id u s e h i s
o f f i c e and in flu e n c e a s d ir e c t o r o f th e d efen d an t BANK t o o b ta in
th e a f o r e s a id lo an fo r h im se lf and f o r h i s own p e r s o n a l b e n e f i t .
27.
That th e a f o r e s a id loan was made in v i o l a t i o n
o f T i t l e 12, C hapter 3, S e c tio n 375a o f th e U n ited S t a t e s Code.
AS AND FOR A FOURTH CAUSE OF ACTION
AGAINST DEFENDANTS CHARLES J .
THORNEWELL AND ALSTON A, V7EVER:
28.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n co n tain ed in p a ra g ra p h s o f t h i s com plain
marked and d e sig n a te d " 1. " through " 8. ” , i n c l u s i v e , and " 2 4 . ”
through " 2 7 . " , in c lu s iv e , a s i f the same were s e t fo r th a t le n g th
h e r e in . .
4
**
29.
That upon in fo rm atio n and b e l i e f , in o r around
i
! September o f 1972, CHARLES J . THORNEWELL and ALSTON A. V7EVER d id ,
!
{•in t h e ir o f f i c i a l c a p a c ity a s d ir e c t o r s o f th e d efen d an t BANK, '
I make an a p p r a i s a l o f c e r t a in r e a l p ro p e rty a t Coram, New Y ork, in
I. con n ection w ith a loan a p p lic a tio n fo r JOHN A. MENNELLA, a s a f o r e »:
•j d e s c r ib e d .
i
i
3 0 . That upon in fo rm atio n and b e l i e f , th e s a i d
l
| a p p r a i s a l was im proper, e x c e s s iv e and d id n o t show th e t r u e v a lu e
r
•' o f th e r e a l p ro p e rty .
31.
That upon in fo rm atio n and b e l i e f , th e con duct
; o f CHARLES J . THORNEWELL and ALSTON A. NEVER was c o l l u s i v e in
r
• n a tu re in t h a t th e s a id a p p r a is a l was made f o r th e p u rp o se o f
.
• b e n e f i t t i n g JOHN A. MENNELLA.
:•
'
|
AS AND FOR A FIFTH CAUSE OF ACTION'
AGAINST EACH OF THE DEFENDANTS;
32.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
I
f'
; each and ev ery a l l e g a t i o n con tain ed in p a ra g ra p h s o f t h i s
com p lain t marked and d e sig n a te d " 1. ” th rough " 8 . ’*, i n c l u s i v e ,
and " 2 4 ." through " 3 1 . " , in c lu s iv e , a s i f th e same were s e t f o r t h j
I
a t le n g th h e r e in .
|
I
3 3 . That th e a f o r e s a id lo a n was made w ith th e
;
I
knowledge and a p p ro v a l o f th e d e fe n d a n ts.
;
34.
That th e a f o r e s a id lo an was made n o tw ith sta n d in g
•th e a d v ic e t o th e c o n tra ry by cou n sel f o r th e d efen d an t BANK.
35.
I
That th e d efen d an ts a r e each j o i n t l y o r
s e v e r a l l y in v i o l a t i o n o f T i t l e 12, C h apter 3 , S e c tio n 375a o f t h e j
U n ited S t a t e s Code.
36.
That th e d efen d an ts d id c a u se to h ave is s u e d
on o r ab o u t F eb ru ary 11, 1974, a document e n t it l e d ,. "N o tic e o f
Annual M eeting and Proxy S ta te m e n t."
37.
That th e proxy statem en t f a i l e d t o d i s c l o s e
borrow in g t r a n s a c t io n s o f JOHN-A. MENNELLA.
•3 8 ,
That th e proxy statem en t f a l s e l y and f r a u d
u len tly - - s t a t e s t h a t "some o f the B an k 's o f f i c e r s and d i r e c t o r s T
•: in d iv id u a l ly or through firm s in which th e y 'a r e in v o lv e d h a v e h ad
i borrow ing tr a n s a c tio n s in th e o rd in a ry co u rse o f b u s in e s s w ith th e
1;
I B an k ."
j
39.
That th e proxy statem en t fr a u d u le n tly o m its
¡ r e fe r e n c e to th e f a c t t h a t th e d efen d an ts were in v io la t io n , o f
i;
!: T i t l e 12, Chapter 3, S e c tio n 375a o f th e U nited S t a t e s Code.
!l
4 0 . That th e proxy statem en t d a te d F e b ru a ry 11,
L
1.1974, f a l s e l y and fra u d u le n tly s t a t e d , "These t r a n s a c t i o n s a l l
¡1
j'w ere s u b s t a n t i a l l y on th e same term s a s th o se p r e v a i l i n g a t th e
j. tim e f o r com parable t r a n s a c tio n s w ith o th e r p e r s o n s . . . . "
!:
4-1 . That upon in fo rm atio n and b e l i e f , an a p p l i c a 1«
iltio n f o r a lo an o f $80,0 0 0 .0 0 was p r e v io u s ly made b y JOHN A.
r
%
i MENNELLA t o an oth er len d in g i n s t i t u t i o n w ith th e same r e a l p ro —
j:
p e r ty a s s e c u r i t y , which a p p lic a tio n was r e je c t e d .
i
j;
i!
r
I
•!
AS AND FOR-A SIXTH CAUSE OF ACTION
AGAINST DEFENDANTS RUSSELL J . ViOLPERT
AND JAY V7. VJOQDS: '
_____________
42.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and ev ery a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
I co m p lain t marked and d e sig n a te d " 1 . " through " 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len g th h e r e in .
43.
That upon in fo rm atio n and b e l i e f , in o r ab o u t
th e F a l l o f 1970, th e defen dan t BANK commenced f i n a n c i a l a r r a n g e
m e n t s w ith CREST AFFILIATES, IN C ., which c o r p o r a tio n was en gaged
i in th e b u s in e s s o f modular home b u ild in g .
44 .
That upon in fo rm atio n and b e l i e f , th e d e fe n d -
i a n t BANK was t o p ro v id e b u ild in g loan monies t o CREST AFFILIATES,
: INC. in th e amount o f $ 1 6 ,8 0 0 .0 0 p er modular home u n i t .
45.
That upon in fo rm atio n and b e l i e f , th e d e fe n d -
! a n t BANK d id make numerous b u ild in g lo an s d u rin g th e y e a r 1971,
o b ta in in g m ortgages on th e modular home and r e a l p r o p e r ty .
46 .
That upon in fo rm atio n and b e l i e f , in o r abo u t
th e F a l l o f 1971, CREST AFFILIATES, INC. was u n a b le to o b ta in
1 permanent fin a n c in g ..and was ex p erien cin g f in a n c r u l d irj.iç u lti€ £ S _ <-
6
I
V
: c a u s in g it. to draw checks in amounts exceedin g th e m on ies d e
p o s it e d in t h e ir account w ith th e defen dan t BANK.
47.
That upon in fo rm atio n and b e l i e f , i n a d d it io n
• to making b u ild in g lo an s to CREST AFFILIATES, INC. th e d efen d an t
t
Ji BANK, upon th e s p e c i f i c in s t r u c t io n o f RUSSELL J . WOLPERT, d id
: honor o v e r d r a f t s o f CREST AFFILIATES, INC.
48.
That upon in fo rm atio n and b e l i e f , t h e d efen d
a n t BANK d id honor o v e r d r a fts o f CREST AFFILIATES, INC. f o r
• amounts in e x c e ss o f $100, 000. 00.
i
49 That upon in fo rm atio n and b e l i e f , in o r a b o u t
I
: 1972, RUSSELL J . WOLPERT an d /o r JAY W. WOODS, d id c h a rg e o f f th e
! o v e r d r a f t s honored by th e d efen d an t BANK a s a f o r e s a id a s a lo a n
Jt
_
! t o CREST AFFILIATES, INC.
50.
That upon in fo rm atio n and b e l i e f , RUSSELL J .
I WOLPERT and JAY W. WOODS exceeded t h e ir c o r p o ra te a u t h o r it y by
-4 a u th o r iz in g employees o f th e d efen d an t BANK to honor o v e r d r a f t s
! o f CREST. AFFILIATES, INC.
51.
That upon in fo rm atio n and b e l i e f , RUSSELL J .
WOLPERT and JAY W. WOODS, in an e f f o r t to c o n c ea l t h e i r im proper
con d u ct, d id , in d iv id u a lly an d /o r c o l l u s i v e l y , ch arg e th e a f o r e
s a i d o v e r d r a f t s on th e books and re c o rd s o f th e d e fe n d a n t BANK a s
" b u i l d i n g lo a n s to CREST AFFILIATES, INC.
AS AND FOR A SEVENTH CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS;______
5 2.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n co n tain e d in th e p a ra g ra p h s o f t h i s
co m p lain t marked and d e sig n a te d ” 1 . “ through " 3 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth h e r e in .
53.
That upon in fo rm atio n and b e l i e f , in o r around
A p r il o f 1972, th e defen dan t BANK p u rp o rte d ly made lo a n s t o CREST
AFFILIATES, INC. which were unsecured in a sura ex ce e d in g
$ 4 4 9 ,0 0 0 .0 0 .
54.
That upon in fo rm atio n and b e l i e f , a t th e tim e
- 7
: th e lo a n s were made th e t o t a l amount o f th e lo a n s exceeded te n
•j ( 10%) p er cen t o f th e amount o f th e c a p i t a l sto c k o f th e d e fe n d a n t
¡ BANK a c t u a l l y p a id in and unim paired, and te n ( 105») p e r c e n t o f
I
I
■ i t s unim paired su r p lu s fu n d s,
i
55.
jj
That upon in form ation and b e l i e f , th e d e fe n d -
j-an ts accruiesced and approved the amounts o f th e lo a n s a s
| d i r e c t o r s o f th e d efen dan t BANK and, a s su ch , a r e in v i o l a t i o n o f
112 U .S .C . 8 4.
I
56.
T h at upon in form ation and b e l i e f , CREST
AFFILIATES, INC. h a s f a i l e d to repay to th e d efen d an t BANK th e
m onies so loan ed and i s now in d e f a u lt w ith r e s p e c t t o s a i d lo a n .
AS AND FOR A EIGHTH CAUSE OF ACTION
AGAINST EACH 0? THE DEFENDANTS;
!
57.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com plain t marked and d e sig n a te d " 5 2 ." through ”5 6 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth h e r e in .
58.
T h at upon in form ation and b e l i e f , in an e f f o r t
to red u ce th e amount o f lo a n s which were in v i o l a t i o n o f 12 U .S .C .
84 o f th e U n ited S t a t e s Code, the d efen d an ts d id c a u se to h ave th e
books and re c o r d s o f th e defendant BANK a l t e r e d in such a manner
so t h a t i t would ap p ear th a t i t t*as n ot in v i o l a t i o n o f 12 U .S .C .
•84.
;
»
t
59.
I
T hat upon in fo rm atio n and b e l i e f , i n o r a b o u t
i
t
A p r il o f 1972, th e C om ptroller o f th e Currency conducted an a u d i t !
o f th e d efen d an t BANK’ S books and re c o rd s and a d v is e d a s f o l l o w s :
"A review o f th e r e p o r t d i s c l o s e s t h a t
t o t a l c r i t i c i z e d lo an s re p r e s e n t 1135» o f
g r o s s c a p i t a l fun ds; p a s t due o b l i g a t i o n s
a r e heavy a t 8. 6%; 13% o f t o t a l lo a n s la c k
ad eq u ate c r e d it d a ta ; th e bank h a s n ot e s
t a b lis h e d l i m i t s or proper c o n tr o ls on i t s
i n d ir e c t l i n e s o f c r e d i t , some o f which h ave
reach ed unwarranted l e v e l s ; th r e e lo a n s in
e x c e ss o f th e b a n k 's l e g a l len d in g l i m i t a re ,
p r e s e n t ly o u tsta n d in g , in clu d in g th e C r e s t
A f f i l i a t e s L in e in which th e re a p p e a rs t o be
s u b s t a n t i a l l o s s e s ; and the b a n k 's c a p i t a l
i s c o n sid e red inadenruate in r e l a t i o n to th e
-
8
-
*
i
t
i
t
f
I
r i s k s talc en and th e volume o f b u s in e s s
t r a n s a c t e d .M
60.
That upon in fo rm atio n and b e l i e f , and i n connec
t io n w ith th e d e fe n d a n ts 1 v io la t io n o f 12 U .3 .C . 84', th e d efen d
a n t s w ere d ir e c te d by th e Deputy R egio n al A d m in istra to r o f
N a tio n a l Banks a s fo llo w s:
,
;
•
wThe D ir e c to r s w i l l e it h e r remove t h a t
p o r tio n o f th e C re st A f f i l i a t e s L in e p r e
s e n t ly co n sid ered l o s s ($464,776) on o r b e Jun e 9, 1972, o r fu r n ish t h i s O ff ic e
w ith a w ritte n gu aran tee o f t h i s p o r tio n
sig n e d j o i n t l y and s e v e r a l l y by th e e n t i r e
Board w ith th e u n d erstan d in g th a t th e l o s s
p o r tio n w i l l be removed w ith in s i x m onths. "
61.
à
That upon in fo rm atio n and b e l i e f , th e a f o r e s a i d
d i r e c t i v e o f th e s a id Deputy R egio n al A d m in istra to r o f N a tio n a l
Banks was d isre g a rd e d by th e d efen d an ts.
62.
That upon* in form ation and b e l i e f , t h e r e a f t e r ,
and on o r ab o u t February 15, 1973, d efen d a n ts i s s u e d a p ro x y
sta te m e n t which a l l e g e s th a t th e R eg io n al A d m in istra to r o f
N a tio n a l Banks consented and approved t h a t lo a n s in t h e amount
o f $ 4 4 9 ,1 1 4 .9 1 b e charged to r e s e r v e f o r bad d e b t s .
63.
That upon in fo rm atio n and b e l i e f , th e R e g io n a l
A d m in istra to r o f N atio n al Banks never con sen ted o r ap p rov ed th e
d e fe n d a n ts* d e c is io n to charge th e lo a n s in th e amount o f
$ 4 4 9 ,1 1 4 .9 1 t o r e s e r v e f o r bad d e b ts.
64.
That upon in fo rm atio n and b e l i e f , th e s a i d
r e p r e s e n t a t io n was made by th e d efen d an ts fo r t h e s o l e p u rp o se
o f m is le a d in g and d efrau d in g th e sto c k h o ld e rs o f th e d e fe n d a n t
BANK.
AS AND FOR A NINTH CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS;
65.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com p lain t marked and d e sig n a te d " 1. " through “a .* * , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth n e r e in .
66.
That on February 15, 1973, th e d e fe n d a n ts
9 -
jJ H
i s s u e d a proxy statem en t which s t a t e d a s f o llo w s :
" I t must b e emphasized th a t a l l o f th e
b u ild in g lo a n s to C re st A f f i l i a t e s , I n c . w ere
p re d ic a te d on firm c o n tr a c ts o f s a l e w ith p e r
manent m ortgage commitments from a U. S . Govern
ment Agency s u b je c t to a com pletion o f each
home and search o f t i t l e . S in ce th e c h a rg e o f f d a te o f June 9, 1972, th e Bank h a s r e a l i z e d
$ 2 6 ,0 0 0 .0 0 in r e c o v e r ie s and h as i n s t i t u t e d
l e g a l a c tio n a g a in s t the p r in c ip a ls o f C r e s t
A f f i l i a t e s , In c . in which th e Bank s e e k s t o
re co v e r ap p roxim ately $ 200, 000. 00. ”
67.
That upon in fo rm atio n and b e l i e f , th e sta te m e n t
d e s c r ib e d in p aragrap h " 66.
above i s f a l s e and m is le a d in g and
w as made s o l e l y w ith th e in te n tio n o f d e fra u d in g th e s t o c k h o ld e r s j
o f th e d efen d an t BANK.
1
68.
T h at upon in fo rm atio n and b e l i e f , th e
.
•
$ 2 6 ,0 0 0 .0 0 which was a lle g e d t o have been a re c o v e ry w as a s a l e
l
•
o f c e r t a i n modular homes, form erly CRt^ST AFFILIATES, Ib.C. p ro
p e r t y , t o an in d iv id u a l named SAGER who, in tu r n , e x e c u te d a
p ro m isso ry n o te fo r th e f u l l amount o f $ 2 6 ,0 0 0 .0 0 .
I
I
AS AND FOR A TENTH CAUSE OF ACTION
AGAINST EACH OF THE DEPENDANTS:
»
69.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
and every a l l e g a t i o n con tain ed in th e p a ra g ra p n s o f t h i s
co m p lain t marked and d e sig n a te d " 1. " through " 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len g th herein»-..:*
70.
That upon in fo rm atio n and b e l i e f , from th e
Summer o f 1971 through th e y e a r 1972, th e d efen d an t BANK made
lo a n s t o one VICAL REALTY CORP. in e x c e ss o f $ 3 2 0 ,0 0 0 .0 0 .
71.
;
i
That upon in fo rm atio n and b e l i e f , s a i d lo a n s
w ere made in v io l a t io n o f 12 U .S .C . 84 in t h a t th e lo a n s exceed ed .
4
te n ( 10%) p er cen t o f th e amount o f c a p i t a l stoc.< o f th e d efen d — :
I
a n t BANK a c t u a lly p a id in and unim paired, and te n (10%) p e r c e n t ;
o f i t s unim paired su rp lu s fu n d s.
72.
;
T hat upon in form ation and b e l i e f , th e d e fe n d a n ts
a c o u ie sc e d and approved th e amounts o f th e lo a n s a s d i r e c t o r s o f f
th e d efen d an t BANK and, a s such, a re in v i o l a t i o n o f 12 U .S .C . 04.
........ 73-
That upon in form ation and b e l i e f , VICAL REALTY —,
CORP. h a s f a i l e d to repay to the defen dan t BANK th e m onies so
10
lo an ed and i s now in d e f a u lt w ith r e s p e c t to s a i d lo a n .
AS AND FOR AN ELEVENTH CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS ? ______ '
74.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e each
and ev ery a l l e g a t i o n o f th e p aragrap h s o f t h i s c o m p la in t marked
and d e sig n a te d M5 2 ." through '*5 6 .", i n c lu s iv e , and **69.'* through
" 73.**, i n c l u s i v e , a s i f th e same were s e t f o r t h a t le n g th h e r e in .
75.
That upon in fo rm atio n and b e l i e f , i n a d d itio n
t o v i o l a t i n g th e law s o f th e U nited S t a t e s o f A m erica, th e défend
a n ts v io la t e d th e d u t ie s imposed upon them in t h a t th e lo a n s made
t o CREST AFFILIATES, INC. and VICAL REALTY. CORP. w ere im p ro v id en t
and d id c o n s t i t u t e a w aste o f th e d efen d an t BANK'S a s s e t s .
AS AND FOR A TWELFTH CAUSE OF ACTION
AGAINST DEFENDANTS UNTON J . 3UCEK AND
ALSTON A. NEVER; ______________________ *
• 76.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com plain t marked and d e sig n a te d " 1. " through " 8 . " , i n c l u s i v e ,
77.
r
T h at upon in fo rm atio n and b e l i e f , i n o r around
Ju n e o f 1969, a m eetin g was h eld o f th e then e x i s t i n g b o a rd o f
d i r e c t o r s o f th e defen d an t BANK, a t which tim e a d i s c u s s i o n was
had con cern in g p en sio n b e n e f it s fo r c e r t a in members o f th e b o ard
o f d i r e c t o r s , t o w it: ALSTON A. NEVER, UNTON J . BUCEK and
RADCLIFFE A. SCEiTAB.
78.
That upon in fo rm atio n and b e l i e f , a R e so lu tio n
was made a t a m eetin g o f th e b o ard on Ju n e 26, 1969, p ro v id in g
t h a t ALSTON A. NEVER and UNTCN J . BUCEK r e c e iv e a d e f e r r e d com
p e n sa tio n p a y a b le upon t h e ir re tire m e n t from th e s a i d BANK o f
f i f t y (50%) p e r c e n t o f t h e ir h ig h e s t f u l l - t i m e s a l a r y .
•
i
I
79.
That upon in form ation and b e l i e f , th e d e fe n d a n ts,
I
ALSTON A. V7EVER and UNTON J . BUCEK, made incruiry co n c ern in g the
p r o p r ie ty o f r e c e iv in g b e n e f it s from a d e fe r r e d com pensation p la n
i
and d id w r ite to th e A d m in istra to r o f N a tio n a l Banks fra m in g th e |
c u e stio n in a manner which they thought would b e fa v o r a b le t o then
80.
That upon in form ation and b e l i e f , th e Admin
i s t r a t o r o f N a tio n a l Banks a d v ise d th a t p en sio n p la n s sh o u ld b e ' !
su b m itted to sh a re h o ld e rs fo r a p p ro v a l.
•
81. That upon in form ation and b e l i e f , a p ro xy
f
;
|; sta te m e n t d ated February 15, 1972, makes r e fe r e n c e t o c o n s u lta n t
?
! agreem en ts d ated Jun e 26, 1969, August 28, 1969, and J u l y 2 , 1 9 7 0 ,!
i.
i
i w ith f i v e
( 5) o f f i c e r s re ta in e d a s c o n su lta n ts a f t e r t h e i r r e t i r e —•
ment.
j
8 2 . That upon in fo rm atio n and b e l i e f , s a i d s t a t e —
i:
; ment a l l e g e s annual payments fo r t h e ir s e r v i c e s a t $ 3 9 ,8 5 7 .2 8 .
h
!
£
jî
83.
That upon in fo rm atio n and b e l i e f , t h e s e
'■ in d iv id u a l s n ever a c te d a s c o n su lta n ts, and th e d e fe n d a n t BANK
i;
j; d id n ot r e c e iv e any s e r v ic e s from th e se i n d iv i d u a l s .
'
I
I
¡;
8 4 . That upon in fo rm atio n and b e l i e f , ALSTON A.
l
;■ V7EVER,- ANDREW GEIS and UNTON J . BUCEK d id a c t a s d i r e c t o r s o f
f
I
V. th e d efen d an t BANK a t th e same tim e a s th e y c la im ed t h a t th e y ••
»
i
•. were e n t i t l e d t o com pensation a s c o n s u lta n t s .
•
'
I
8 5 . That upon in fo rm atio n and b e l i e f , th e con -
i
j
j
j
/ s u l t a n t agreem ents r e f e r r e d to in th e p roxy sta te m e n t d a te d
i F eb ru ary 16, 1972, a r e i l l e g a l , u n e n fo rceab le and c o n s t i t u t e a
\
I
I
I
; w a ste o f c o rp o ra te a s s e t s .
86.
i
That upon in fo rm atio n and b e l i e f ,
th e proxy
. • sta tem en t d ated February 16, 1972, f a i l s and o m its t o s t a t e
j
-
j
th e p u rp o se o f th e d e fe r re d com pensation p la n above r e f e r r e d to
j
4
s u f f i c i e n t l y in ord er th a t th e sh a re h o ld e rs c o u ld ap prove o r d i s - ;
!.
i
ap p ro v e.
*
■;
,
I
87. That upon in fo rm atio n and b e l i e f ,ALSTON A.
j
WEVER, ANDREW GEIS and UNTON J . BUCEK d id r e c e iv e m onies
fo r
:
a l l e g e d l y a c tin g a s c o n su lta n ts in e x c e ss o f $ 7 5 ,0 0 0 .0 0 .
88.
That th e a f o r e s a id m onies w ere g iv e n w ith o u t
c o n s id e r a tio n , c o n s t it u t in g com pensation f o r p a s t s e r v i c e s , which ;
a c t s on th e p a r t o f d efen d an ts a r e u l t r a v i r e s and c o n s t i t u t e s a
I
w aste o f c o rp o ra te a s s e t s .
;
12
î
i!
!
|
AS AND FOR A THIRTEENTH CAUSE OF
ACTION AGAINST EACH OF THE DEFENDANTS:
—-- ■
-- --
't
89.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
, eac ^ and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
| co m p lain t marked and d e sig n a te d " 8 0 ." through ”9 2 . ” , i n c l u s i v e ,
j.a s i f th e same were s e t fo r th a t len g th h e r e in .
8
:
i'
90- T hat upon in fo rm atio n and b e l i e f , th e d e fe n d i
j a n t BANK h a s p a id t o th e d efen d a n ts, ALSTON A. WEVER, ANDREW GEIS
i
j and UNTON J . BUCEK a sura in e x c e ss o f $ 2 5 ,0 0 0 .0 0 a s and f o r con—
: s u l t a n t s * fe e s , d u rin g th e y e a r 1973.
91.
.That upon in fo rm atio n and b e l i e f , th e p ro x y
j s t a te m e n t. d ate d Febru ary 11, 1974, does n ot c o n ta in any i n f o r a a ; t i o n con cern in g th e a f o r e s a id rem uneration p a id to th e d e fe n d a n ts
¡ ALSTON A. NEVER, ANDREW GEIS and UNTON J . BUCEK.
J*
!
92. T hat upon in fo rm atio n and b e l i e f , th e f a i l u r e
. .
and o m issio n on th e p a r t o f th e d efen d an ts t o in c lu d e th e m onies
! p a id t o th e d e fe n d a n ts, ALSTON A. WEVER, ANDREW GEIS and UNTÔN
J . BUCEK, a s and f o r t h e ir a lle g e d c o n s u lta n t s ' f e e s was w i l f u l
and d e lib e r a t e and made s o l e l y w ith th e in te n tio n o f d e fra u d in g
: and d e c e iv in g th e sto c k h o ld e rs o f th e d efen d an t BANK.
AS AND FOR A FOURTEENTH CAUSE OF ACTION
AGAINST DEFENDANTS ALSTON A. WEVER,
UNTON J . BUCEK AND ANDREW GEIS:_______ *
93.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n contained, in th e p a r a g r a p h s o f t h i s
c o m p lain t marked and d e sig n a te d " 1. " through ” 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t le n g th h e r e in .
94-
T h at upon in fo rm atio n and b e l i e f , in o r ab o u t
Septem ber 1972, th e d efen d an ts d ecid ed th a t th e y d e s ir e d l i f e
in su ra n c e a s p a r t o f a group p o lic y .
95.
T hat upon in fo rm atio n and b e l i e f , a r e s o l u t i o n
was p a s s e d by th e d efen d an ts amending th e group l i f e in su ra n c e
th en in e x is te n c e f o r t h e ir employees so th a t th e r e would b e a
- 13 -
| $ 5 0 ,0 0 0 .0 0 l i f e in su ran ce p o lic y fo r each o f th e d i r e c t o r s o f th e
? hank.
;
.96.
That upon in fo rm atio n and b e l i e f , s h o r t l y
i a f t e r . th e a f o r e s a id amendment t o th e group l i f e in su ra n c e p o lic y *
• an oth er amendment was made w ith out a u th o r iz a tio n in c r e a s i n g th e
I fa c e amount o f th e l i f e in su ran ce to $100,(500.00 f o r each o f th e
|?
; d i r e c t o r s o f th e defendant BANK.
'.97.*
That upon in fo rm atio n and b e l i e f , t h e s e th r e e
in d iv id u a ls do n o t pay any p o rtio n o f th e premiums f o r t h e l i f e
i: in su ra n c e ,
i
.98.
That upon in fo rm atio n and b e l i e f , ALSTON A.
j; NEVER i s 74 y e a r s o f ag e, UNTON J . BUCEK i s 73 y e a r s o f a g e , and
1 ANDREW GEIS i s 66 y e a r s o f a g e , and th e premiums which a r e p a id
j b y th e d efen d an t BANK a r e ' s u b s t a n t i a l .
j‘
i
99* That upon in fo rm atio n and b e l i e f , th e d e fe n d . a n t BANK d e r iv e s no b e n e f it s from th e iss u a n c e o f l i f e in su ra n c e
? p o lr c r e s a s a f o r e s a id and th a r th e payment o f premiums b y th e
!
fen d an t BANK c o n s t it u t e s a w aste and m is a p p r o p r ia tio n o f cor*“
p o r a te fun ds f o r th e p e rso n a l b e n e f it s o f th e d e fe n d a n ts , ALSTON
A. NEVER, UNTON J . BUCEK and ANDREW GEIS.
AS AND FOR A FIFTEENTH CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS;________
100.
t
!
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
; each and ev ery a l l e g a t i o n co n tain ed in th e p a ra g ra p h s o f t h i s
;
*
com plain t marked and d e sig n a te d " 9 7 ." through " 1 0 3 . " , i n c l u s i v e ,
f
i
! a s i f th e same were s e t fo r th a t le n g th h e r e in .
101.
1
That upon in fo rm a tio n and b e l i e f , th e d e fe n d - j
an t BANK h a s p a id the premiums on th e l i f e in su ra n c e p o l i c i e s o f
I
a l l th e d e fe n d a n ts, ALSTON A. NEVER, UNTON J . BUCEK and ANDREW
GEIS, and h a s p a id a s u b s t a n t i a l p o r tio n o f th e premiums on th e
l i f e in su ra n c e p o l i c i e s f o r the o th er d efen d an t d i r e c t o r s , which
c o n s t i t u t e s a d d itio n a l rem uneration to th e s a i d d e fe n d a n ts .
14
I
I
!
j
:
I
}•
I
p ro xy
;;
i
• sta te m e n t d ate d February 11, 1974, d oes n ot c o n ta in any in fo rm a
102.
That -upon in fo rm atio n and b e l i e f / th e
!
t io n con cern in g th e rem uneration p a id to th e d i r e c t o r s .a s and f o r ;
in su ra n c e premiums.
103.
j
That upon in fo rm atio n and b e l i e f , th e f a i l u r e
;
and o m issio n on th e p a r t o f th e d efen d an ts to in c lu d e th e in s u r —
t
i
j; an ce premium payments a s rem uneration f o r th e d e fe n d a n ts w as w ilfu l
j
i,
and d e l i b e r a t e and made s o l e l y w ith th e in te n tio n o f d e fra u d in g
j and d e c e iv in g th e sto c k h o ld e rs o f th e d efen dan t BANK.
:j
jl
Ù
,
AS AND FOR A . SIXTEENTH CAUSE OF
ACTION AGAINST DEFENDANT MELVIN R.
CANNON
• .... ï ■
■
■
— '■
■
■"■
--------- ------ 1—
j104. P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
j.
.
!•each and ev ery a l l e g a t i o n con tain ed in p a ra g ra p h s o f t h i s
•
j
,
\ co m p lain t marked and d e sig n a te d " 9 7 ." through " 1 0 3 ." , i n c l u s i v e ,
I*
•
¡ a s i f th e same were s e t fo r th a t len g th h e r e in .
;
105.
That upon in fo rm atio n and b e l i e f , and a t a l l
j
s
!stim e s h e r e in a f t e r m entioned, th e d efen d an t, MELVIN R. CANNON,
rw as, in a d d itio n to b e in g
a d ir e c t o r o f th e d efen d an t BANK, a
d u ly lic e n s e d in su ran ce b ro k e r.
106.
f
*
?
That upon in fo rm atio n and b e l i e f , th e defen d — .
a n t , MELVIN R. CANNON, h a s a c te d a s th e in su ra n c e b ro k e r p r o c u r in g ,
th e group in su ra n c e fo r th e bank em ployees, and p ro cu re d th e com- I
m itm ents to th e s a i d group in su ran c e p o lic y fo r th e b e n e f i t o f
I
th e d i r e c t o r .
. 107.
I
That upon in fo rm atio n and b e l i e f , KELVIN R.
j
CANNON d id r e c e iv e com m issions and com pensation from th e in su ra n c e •
: company f o r h i s s e r v i c e s in p ro cu rin g th e a f o r e s a i d in su r a n c e
:
!
p o lic ie s.
!
108.
;
j
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t , MELVIN R. CANNON, d id u t i l i z e h i s o f f i c e a s d i r e c t o r o f th e
j
d efen d an t BANK f o r h i s own p e rso n a l m onetary g a in and b e n e f i t ,
t
j
s a i d conduct c o n s t it u t in g a c o n f l i c t o f i n t e r e s t .
j
- 15 -
i.
•
1;
‘
109. That upon in form ation and b e l i e f , th e con d u ct
=: on th e p a r t o f th e d efen d an t, MELVIN R. CANNON, d e n ie d t h e defenc
|
a n t BANK th e o p p o rtu n ity o f o b ta in in g in su ra n c e on a c o m p e titiv e
-, b a s i s .
!:•
ji
j!
!•
AS AND FOR A SEVENTEENTH CAUSE OF .
ACTION AGAINST DEFENDANT RUSSELL
J . W O L P E R T : ___________________
110.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
j: each and ev ery a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
■j com plain t marked and d e sig n a te d " 1 ." through " a ." , i n c l u s i v e , *
a s i f th e same were s e t fo r th a t len g th h e r e in .
•-
!»
•
111. That upon in fo rm atio n and b e l i e f , in o r ab o u t
•j th e F a l l o f 1970, th e d efen d an t BANK engaged th e firm o f Touchei:
" R o s s . C .P . A . , t o conduct a d ir e c t o r s exam in ation and a management
¡i
% stu d y to determ ine the e f f i c i e n c y o f th e d efen d a n t RANK f o r th e
| f e e o f $ 1 2 ,5 0 0 .0 0 .
112. That upon in fo rm atio n and b e l i e f , in o r ab o u t
May o f 1971, Touche-Ross. a f t e r com pleting i t s stu d y o f th e
o p e ra tio n and p ro ced u res o f th e bank in d ic a te d in i t s r e o o r t
t h a t th e r e was g r o s s w aste and in e f f ic ie n c y am ounting t o , upon
• in fo rm atio n and b e l i e f , an amount o f ap p ro x im a te ly $ 200, 000 . 00,
and th e firm made s p e c i f i c recommendations f o r im provin g th e
• e f f i c i e n c y and o p e ra tio n o f th e bank and th e e lim in a t io n o f s a i d
w aste and in e f f i c i e n c y .
113. That upon in form ation and b e l i e f , a t a m e e tin g
o f th e b o ard o f d ir e c t o r s wherein th e s a i d r e p o r t and recommenda
t i o n s o f Touche-Ross were d is c u s s e d , RUSSELL J . WOLPERT r e c u e s te d
p e rm issio n and a u th o r ity to c a rry out th e a f o r e s a id recommenda
t i o n s in o rd e r to e lim in a te th e a f o r e s a id w a ste and i n e f f i c i e n c v .
114. That upon in form ation and b e l i e f , d e fe n d a n t,
RUSSELL J . WOLPERT f a i l e d and n e g le c te d t o ta k e a n y ,o f th e s t e p s
d ir e c t e d and recommended by Touche-Ross, and f a i l e d to t a k e anv
o f th e ste p 3 he re p re se n te d he would ta k e in o rd e r t c e lim in a t e .- ,
th e a f o r e s a id w aste, in e f f ic ie n c y and u n n e c e ssa ry e x p e n d itu r e s .
a l l t o th e d etrim e n t o f th e sto c k h o ld e rs o f th e d efen d an t BANK
in th e amount o f approxim ately $ 200, 000. 00.
AS AND FOR A EIGHTEENTH CAUSE OF ACTION
AGAINST EACH OF THE DEFENDANTS:_________
115.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f' t h i s
com plain t marked and d e sig n a te d ” 110 ” through "114 " , i n c l u s i v e ,
a s i f th e same w ere s e t fo r th a t len g th h e r e in .
116.
,
T hat upon in form ation and b e l i e f , th e f a i l u r e
on th e p a r t o f th e d efen d an t, RUSSELL J . WOLPERT, t o comply w ith
th e r e p o r t and recommendations o f Touche—R o ss, C .P .A ., t o
e lim in a te th e w a ste and in e f f ic ie n c y , am ounting to a p p ro x im a te ly
$ 200, 000. 00 , was knovm t o th e o th er d efen d an t d i r e c t o r s , and
v/as condoned b y th e s a i d defen d an t d i r e c t o r s .
11 7 . T h at upon in fo rm atio n and b e l i e f , s a i d i n
a c tio n on th e p a r t o f th e d efen d a n ts, and t h e i r con d o n ation ,
c o n s t i t u t e s a w a ste o f c o rp o ra te a s s e t s and a m is a p p r o p r ia tio n
o f c o r p o ra te fu n d s.
AS AND FOR A NINETEENTH CAUSE 0 ?
ACTION AGAINST EACH O? THE DEFENDANTS;
118. P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com plain t marked and d e sig n a te d " 1. " through " 8 . " , i n c l u s i v e ,
a s i f th e same w ere s e t fo r th a t len gth h e r e in .
119. T hat upon in fo rm atio n and b e l i e f , i n o r ab o u t
1972, th e d efen d an t BANK d id show on i t s an n ual r e p o r t - S t a t e
ment o f Income - a n e t l o s s fo r th e y e a r 1972 in th e amount o f
$ 2 4 1 ,6 6 8 .0 0
- 17 -
r
!
K
!•
120.
■
.
. •
That upon in fo rm atio n and b e l i e f , n o tw ith —
»
• sta n d in g th e a f o r e s a id l o s s , th e d efen d an ts d id ap prov e an d i s s u e
I
,
•
I’, to i t s em ployees y e a r—end bonuses in an-amount e x c e e d in g $ 5 0 ,0 0 0 .0 i
t
.
I*
121. That upon in fo rm atio n and b e l i e f , t h e s a i d
;
i;
i
I payment o f bo n u ses d u rin g th e y e a r 1972 c o n s t itu te d im p ro v id e n t,
J!
.
I
f im proper m isa p p ro p ria tio n and w aste o f c o r p o ra te fu n d s, a l l t o
I
j: th e d e trim e n t o f th e sto c k h o ld e rs o f th e d efen d an t BANK,
i:
iAS AND FOR A TWENTIETH
CAUSE OF
ACTION AGAINST DEFENDANT RUSSELL
’’
J , W O L P E R T : ________________
i!
122.
-
‘
!
. \
;
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
-
i each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
j
Î. com plain t marked and d e sig n a te d "1. " through " a . " , i n c l u s i v e ,
i*
• a s i f th e same were s e t fo r th a t len g th h e r e in .
i
;
i
r
123. That upon in fo rm atio n and b e l i e f , in o r a b o u t
• th e S p rin g o f 1971, th e d efen d an t, RUSSELL J . WQLPERT, w ith o u t
\
th e c o n se n t o r a u th o r iz a tio n o f th e d efen d an t Board o f D i r e c t o r s ,
d id e n te r in to a c o n tr a c t to p u rch ase a computer f o r th e d e fe n d -
.
an t BANK from th e B u rrou gn 's C o rp oration f o r $ 2 4 0 ,0 0 0 .0 0 .
1:24.
That upon in fo rm atio n and b e l i e f , th e s a i d
c o n tr a c t was en tere d in to by RUSSELL J . WOLPERT w ith o u t a p ro p e r
!
»
stu d y t o d eterm ine th e f e a s i b i l i t y o f th e p u rch ase o r l e a s e o f
' computer equipment f o r th e defen d an t BANK.
125-
T hat upon in fo rm atio n and b e l i e f , th e d e fe n d -
. a n t Board o f D ir e c t o r s , in an e f f o r t to sa v e th e bank from
f i n a n c i a l em barrassm ent and to re sc u e RUSSELL J . WOLPERT from
commiting a g r o s s m isa p o ro p n a tio n o r c o r p o ra te fu n d s and a w a ste
o f c o r p o r a te a s s e t s , re n e g o tia te d th e a f o r e s a id c o n tr a c t so t h a t
: th e d efen d an t BANK would e n te r in to a l e a s e w ith System s Equipm ent
L e a sin g Co. w herein and whereby th e d efen d an t BANK would l e a s e
th e a f o r e s a id com puters fo r a p e rio d o f 8 y e a r s au a moriuhly
r e n t a l o f $ 4 ,7 2 5 .0 0
18
I
126.
That upon in fo rm atio n and b e l i e f , i n a d d it io n
t o e n te r in g in to s a id r e n t a l agreem ent w ith Sy stem s Equipm ent
;
’
L e a sin g Co. th e d efen dan t BANK was to lo an t o Sy stem s Equipm ent
L e a s in g Co. th e sum o f $ 2 4 0 ,0 0 0 .0 0 w ith i n t e r e s t a t t h e r a t e o f
j 7-1/2% p e r annum to en able System s Equipment L e a s in g C o. t o p u r ¡:
.
j c h a se th e a f o r e s a id equipment from B u rrough *s C o r p o r a tio n .
»
127*
That upon in fo rm atio n and b e l i e f , t h e a f o r e -
«' s a i d c o n tr a c t and o r l e a s e f o r th e com puters was im p ro v id e n t,
i
••u n n e c e ssa ry , i l l - a d v i s e d , -ill- c o n c e iv e d , w ith o u t a fo r e th o u g h t,
! and c o n s t i t u t e s a g r o s s m isa p p ro p ria tio n o f c o r p o r a te fu n d s and
a w a ste o f c o rp o ra te a s s e t s .
j
. A S AND FOR A TWENTY-FIRST CAUSE
OF ACTION AGAINST DEFENDANT RUSSELL
J . WOLPERTj
_____________________
f
153. P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
j*
1 each and ev ery a l l e g a t i o n co n tain e d in p a ra g ra p n s o f t h i s
i
c o m p lain t marked and d e sig n a te d “ 123. " through '*1 3 3 ." , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth h e r e in .
129«
•
That upon in form ation and b e l i e f , in a d d it io n
th e l e a s i n g o f th e com puters a t an in c r e a se d c o s t t o th e
d e fe n d a n t BANK, th e d efen d an t, RUSSELL J . ViOLPERT, to o k i t upon
h im s e lf and d id engage th e s e r v i c e s o f a sy stem s a n a l y s t f o r th e
p u rp o se o f o p e ra tin g th e com puters a t an a d d i t i o n a l c o s t in ex
p e n se o f $ 20, 000. 00.
13().
That upon in fo rm atio n and b e l i e f , th e p e rso n
en gaged a s th e sy stem s a n a ly s t was the v e ry same p e rso n who was
' th e salesm an f o r Bur rough* s C o rp oration r e s p o n s ib le f o r th e s a l e
o f th e com puters t o th e d efen d an t BANK.
13l .
That upon in fo rm atio n and b e l i e f , su ch con d u ct
w as im p ro v id en t, u n n e ce ssary , i l l - a d v i s e d , i l l —c o n c e iv e d , w ith o u t
a fo r e th o u g h t, and c o n s t i t u t e s a g r o s s m is a p p r o p r ia tio n o r c o r p o ra t*
fu n d s and a w aste o f c o r p o ra te a s s e t s .
19 “
AS AND FOR A TNENTY-SECOND CAUSE OF
ACTION AGAINST DEFENDANT ALSTON A.
VIEVER:____________________
j.
!'
•
132.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s .
i|
i; com p lain t marked and d e sig n a te d **18'" through " 8 . " , i n c l u s i v e ,
!• a s i f th e same were s e t fo r th a t len gth h e r e in .
i
{
133. That upon in fo rm atio n and b e l i e f , th e d e fe n d —
)'■ a n t , ALSTON A. VIEVER, durin g a l l tim es h e re in m entioned, was
l
j n o t a d u ly lic e n s e d r e a l e s t a t e b ro k e r,
i.
Jj
134. That upon in fo rm atio n and b e l i e f , d u rin g th e
| l a s t f i v e y e a r s s a id ALSTON A. VIEVER charged one o r more
f
V b o rro w ers a "com m ission” fo r a s s i s t i n g in th e a r r a n g in g o f lo a n s
made through h i s e f f o r t s and in te r v e n tio n a t th e d efen d an t BANK.
!;
135. That upon in fo rm atio n and b e l i e f , th e d efen d
a n t. ALSTON A. VIEVER, was a d v ise d on a t l e a s t one o r more
f
I
o c c a s io n s th a t th e ta k in g o f such a "com m ission" was i l l e g a l
and im proper.
136. That upon in fo rm atio n and b e l i e f , and n o t -
• w ith sta n d in g th e f a c t th a t s a id ALSTON A. VIEVER was n o t a d u ly
lic e n s e d r e a l e s t a t e b ro k er and V7a s a d v ise d by c o u n se l f o r th e
d efen d an t BANK th a t th e ta k in g o f s a i d "com m ission s" v/as i l l e g a l
and im proper, s a i d ALSTON A. VIEVER. d id w ro n g fu lly , i l l e g a l l y
j and im p ro p erly ta k e com m issions f o r p ro cu rin g lo a n s from th e
d efen d an t BANK w h ile he was an o f f i c e r o f th e s a i d BANK, and
t h a t th e s e a c t io n s were in v i o l a t io n o f 18 U. S .C . 215 and in
v i o l a t i o n o f S e c tio n s 440a and 442e o f th e R eal P ro p erty Law o f
th e S t a t e o f New York.
-
20
-
AS AND FOR A TWENTY-THIRD CAUSE OF
ACTION AGAINST DEFENDANT CHARLES J .
THQRNZWELL z________
137.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
co m p lain t marked and d e sig n a te d " 1. " through *'8 . M, i n c l u s i v e ,
i f th e same w ere s e t fo r th a t len gth h e r e in .
138.
That upon in form ation and b e l i e f , in o r ab o u t
December o f 1973, th e defen dan t BANK was th e owner o f f i v e (5)
p a r c e l s o f r e a l p ro p e rty form erly owned by CREST AFFILIATES,
IN C .,, each w ith a m arket v a lu e o f ap p ro x im ately § 2 1 ,0 0 0 .0 0
each .
139. That upon in form ation and b e l i e f , in o r abo u t
December o f 1973, th e d efen d an t, CHARLES J . THORNEWELL,
n e g o tia te d th e s a l e o f the aforem entioned f i v e ( 5) p a r c e l s on
b e h a l f o f th e d efen d an t BANK to LICARI CONSTRUCTION CO. , INC.
f o r $ 9 0 ,0 0 0 .0 0 , b e in g in e f f e c t $ 1 8 ,0 0 0 .0 0 e a c h .
140. That upon in fo rm atio n and b e l i e f , a s p a r t o f
th e t r a n s a c t io n , d efen d an t, CHARLES J . THORNEWELL, d id n o t
r e o u ir e th e p u rch a se r to pay cash and d id , on b e h a l f o f t h e
d efen d an t BANK, extend a loan to LICARI CONSTRUCTION CO., INC.
f o r th e f u l l amount o f th e pu rch ase p r i c e .
141. That upon in fo rm atio n .and b e l i e f , LICARI
CONSTRUCTION CO., INC. d id s e l l , one p a r c e l f o r a sum in e x c e s s
o f $ 2 6 ,0 0 0 .0 0 , which p r o f i t was r e ta in e d b y LICARI CONSTRUCTION
-
21
-
j: CO. , INC.
I 42 .
That upon in form ation and b e l i e f , CHARLES J .
THORNEWELL, d id r e c e iv e a commission a s b ro k er i n c o n n e c tio n v/ith
• 's a i d s a l e .
143-
i•
That upon in fo rm atio n and b e l i e f , th e con duct
o f CHARLES' J . THORNEWELL in inducing th e d e fe n d a n t BANK t o t r a n s .. f e r th e a f o r e s a id f i v e (5) p a r c e ls o f r e a l p r o p e r ty t o LICARI
;• CONSTRUCTION CO. , INC. below th e m arket v a lu e and w ith o u t r e c e i v —
. in g any cash down payment c o n s t it u t e s m is a p p r o p r ia tio n and w aste
: o f c o r p o ra te a s s e t s in a d d itio n to b e in g an im p ro v id e n t t r a n s —
a c t io n , a l l to th e d etrim en t o f th e sto c k h o ld e rs o f th e d e fe n d a n t.
’ BANK.
{!
j;
144.
That upon in form ation and b e l i e f , th e d e fe n d -
; a n t , CHARLES J . THQRNEWELL, d id w ro n g fu lly u se h i s o f f i c e a s a
d i r e c t o r o f th e d efen d an t BANK, and d id w ro n g fu lly r e c e i v e a
; com m ission in v i o l a t i o n o f 18 U. S .C . 215.
145.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t, CHARLES J . THORNZWELL, was a p e rso n a l f r i e n d o f SALVATORE
;LICARI, a p r i n c i p a l sto c k h o ld e r in LICARI CONSTRUCTION CO., INC.
146.
That upon in fo rm atio n and b e l i e f , a s a r e s u l t
o f th e fr ie n d s h ip between CHARLES J . THORNEWELL and SALVATORE
LICARI, a c o l l u s i v e agreem ent was en tered in to i n c o n n ec tio n w ith
th e p u rch ase and s a l e o f th e a fo r e d e s c r ib e d f i v e
( 5) p a r c e l s o f
r e a l e s t a t e , which agreem ent caused th e d e fe n d a n t EANX t o l o s e
¡ p r o f i t s and se rv ed to red u ce i t s p o t e n t ia l cash p o s i t i o n .
AS AND FOR A TWENTY-FOIRTECAUSE OF
• ACTION AGAINST DEFENDANT CHARLES J .
THQRNEWELL:__________________________
147.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n o f th e p arag rap h s o f t h i s c o m p lain t
marked and d e sig n a te d ” 1 . " through " 8 . ' ' , i n c l u s i v e , a s i f th e
same were s e t f o r th a t len g th h e re in .
22
-
148.
That upon in fo rm atio n and b e l i e f , i n o r about
th e S p r in g o f 1973, the d efen dan t BANK d id f o r e c l o s e i t s m ortgaç
l i e n on a p a r c e l o f r e a l p ro p e rty which had been th e s u b je c t o f
a f i r e and s u b s t a n t i a l l y d e stro y e d .
149.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t BALK d id a c q u ire t i t l e to th e a f o r e s a id p r o p e rty a t th e
r e f e r e e s s a l e and d id r e c e iv e in su ran ce p ro ce ed s in t h e amount
o f a p p ro x im ate ly $ 10, 000. 00.
150.
That upon in fo rm atio n and b e l i e f , CHARLES J .
THORNEWELL, d id ta k e i t upon h im se lf to expend m onies o f th e
d e fe n d a n t BANK to r e b u ild th e p ro p e rty and o f f e r th e same f o r sa:
151.
That upon in fo rm atio n and b e l i e f , CHARLES J .
THORNEWELL, d id en ter in to a c o l l u s i v e agreem ent w ith a t h i r d
p a r t y w herein and whereby he attem pted t o o b l i g a t e t h e d e fe n d a n t
BANK t o pay th e t a x a r r e a r s on th e p ro p e rty which amounted t o
s e v e r a l thousand d o l l a r s and convey th e p ro p e rty to th e t h i r d
p a r t y w ith o u t r e q u ir in g a cash down payment and b y e x te n d in g a
perm anent m ortgage loan in th e amount o f $ 2 5 ,0 0 0 .0 0 .
15 2.
That upon in fo rm atio n and b e l i e f , th e a tto rn e y
f o r th e d efen d an t BANK, upon le a r n in g o f t h i s t r a n s a c t i o n , d id
n o t i f y CHARLES J . THOPsNEWELL. t h a t such a t r a n s a c t io n w as im o ro v id e n t, im proper and c o n s t itu te d a m isa p p ro p r ia tio n and w a ste o f
c o r p o r a te fu n d s.
153.
That upon in fo rm atio n and b e l i e f , t h e d efen d
a n t , CHARLES J . THORNEWELL, d id d is r e g a r d th e a d v ic e o f c o u n se l
and d id p e r s i s t in consummating th e t r a n s a c t io n .
154.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t , CHARLES J . THORNEWELL, d id o b ta in a b ro k e ra g e com m ission a s
a r e s u l t o f th e a f o r e s a id tr a n s a c tio n in v i o l a t i o n o f 18 U .S .C .
215.
15 5.
That upon in fo rm atio n and b e l i e f , th e d e fe n d
a n t, CHARLES J . THORNEWELL, d id w ro n gfu lly and i l l e g a l l y u s e h i s
23 -
o f f i c e a s d i r e c t o r o f th e defen d an t BANK in o rd e r t o o b ta in
com m ission s, a l l fo r h i s own p e rso n a l g a in and b e n e f i t , and t o
th e d etrim e n t o f th e sto c k h o ld e rs o f th e d efen d an t BANK.
AS AND FOR A TWENTY-FIFTH CAUSE OF :
ACTION AGAINST DEFENDANT CHARLES J .
THORNEWELL:__________________________
156.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com p lain t marked and d e sig n a te d " 1. “ through " 8 . M, i n c l u s i v e , a s i f th e same were s e t fo r th a t len g th h e r e in .
157.
:
•»
j
That upon in fo rm atio n and b e l i e f , on o r about
Septem ber 26, 1973, th e d efen d an t BANK d id make a lo a n t o
-
1
4
1
CHARLES J . THORNEWELL and ARTHUR ROSENSTEIN f o r $ 1 8 ,0 0 0 .0 0 f o r
a term o f 20 y e a r s w ith i n t e r e s t a t th e r a t e o f Q% p e r annum.
158.
I
That upon in fo rm atio n and b e l i e f , t h e a f o r e
s a i d lo a n was se cu re d by a -mortgage on r e a l p r o p e r ty owned b y
CHARLES J . THORNEWELL and ARTHUR ROSENSTEIN, n e it h e r o f whom
■
e v e r r e s id e d in th e s a i d r e a l p ro p e rty o r in ten d ed t o so r e s i d e .
;
*
159.
That upon in fo rm atio n and b e l i e f , th e a f o r e - .
s a i d r e a l e s t a t e was ac q u ired by CHARLES J . THORNEWELL and ARTHUR
ROSENSTEIN s o l e l y w ith th e funds procured from th e d e fe n d a n t BANK ;
and w ith o u t any p e rso n a l funds on th e p a r t o f e i t h e r CHARLES J .
THORNEWELL o r ARTHUR ROSENSTEIN.
160.
T hat upon in fo rm atio n and b e l i e f , th e s a i d
r e a l p ro p e rty was purch ased by s a i d CHARLES J . THORNEWELL and
ARTHUR ROSENSTEIN w ith th e s o l e p urpose and in t e n t o f s p e c u la t in g
in th e r e a l e s t a t e m arket.
lg 1.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t, CHARLES J . THORNEWELL, d id u se h i s o f f i c e a s d i r e c t o r o f th e
d efen d an t BANK in o rd er to o b ta in the a f o r e s a id m o rtgage lo a n f o r
th e p u rp o se o f sp e c u la tin g in th e r e a l e s t a t e m ark et, a l l f o r h i s
p e r s o n a l g a in and p r o f i t .
1
AS AND FOR A TWENTY-SIXTH | CAUSE OF
ACTION AGAINST THE DEFENDANT ANDREW
H. GETS:______________
|:
162. P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
N
jj each, and every a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
’ com plain t marked and d e sig n a te d " l . " through H8 . ” , i n c l u s i v e ,
' a s i f th e same were s e t fo r th a t len g th h e r e in .
S:
163.
v■
That upon in fo rm atio n and b e l i e f , d u rin g th e
\ y e a r 1970, th e d efen d an t, ANDREW M. GEIS, d id remove fu n d s from
th e d efen d an t BANK w ithout th e knowledge o r c o n se n t o f th e
d efen d an t d i r e c t o r s .
164.
■
'
That upon in fo rm atio n and b e l i e f , th e d efen d -
m
4
j: a n t , ANDREW M. GEIS, d id co n ceal th e f a c t th a t he had removed
j; th e s a i d fun ds from th e defen dan t BANK, and d id u t i l i z e th e s e
»
i fu n d s f o r h i s own p e rso n a l b e n e f it . .
i!
165.
ij
That upon in fo rm atio n and b e l i e f , th e d efen d —
•
.
j; a n t, ANDRE»*? M. GEIS, d id w ro n gfu lly and im p ro p erly u se h i s
o f f i c e a s e x e c u tiv e v ic e - p r e s id e n t and d i r e c t o r o f th e d efen d an t
BANK in o rd e r to have a c c e s s to th e defen d an t EANK'S fu n d s, a l l
t o th e d etrim e n t o f th e sto c k h o ld e rs o f th e d efen d a n t BANK.
AS AND FOR A TWENTY-SEVENTS CAU3E OF
ACTION AGAINST DEFENDANT EVERETT GREEK;
;
166.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com plain t marked and d e sig n a te d " 1. " through “ 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t le n g th h e r e in .
167.
That upon in fo rm atio n and b e l i e f , in o r ab o u t
1969, when th e d efen d an t, EVERETT GRIEK, became chairm an o f th e
Board o f D ir e c t o r s , ha re c e iv e d an annual sum in e x c e s s o f
$ 2 ,5 0 0 .0 0 from th e defen dan t BANK.
168.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t, EVERETT GRIEK, perform ed no s e r v i c e s j u s t i f y i n g th e r e c e i p t
o f th e a f o r e s a id m onies.
- 25 -
169-
That upon in fo rm atio n and b e l i e f , th e r e c e i p t
and accep tan ce o f s a id monies by the d efen d an t, EVERETT GRIEK,
c o n s t itu te d a w rongful m isa p p ro p ria tio n and w a ste o f c o r p o r a te '
a sse ts.
AS AND FOR A TWENTY-EIGHTH CAUSE OF
ACTION AGAINST DEFENDANT ALSTON AV7EVER:
'
—— ■
170. P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
|
'
!
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
!
com plain t marked and d e sig n a te d " l . " through “a . ’*, in c l u s i v e - *
!
1
j
a s i f th e same were s e t fo r th a t len gth h e r e in .
171.
T hat upon in form ation and b e l i e f , d u rin g th e
y e a r s 1950 through 1972, th e d efen d an t, ALSTON A- NEVER,
u n i l a t e r a l l y and w ith o u t ap p ro v al or a u th o r iz a tio n from th e
:
<
*•
I
b o ard o f d ir e c t o r s o f th e defen dan t BANK would in s p e c t o r r e
in s p e c t c e r t a in r e a l p ro p e rty upon which th e d efen d an t BANK h e ld I
j
m o rtg ag es.
172.
That upon in fo rm atio n and b e l i e f , th e d efen d - [
a n t, ALSTON A. V7EVER, would in h i s own d i s c r e t i o n , make p e r s o n a l '■
I
v i s i t s t o s e l e c t l o c a t i o n s , a lle g e d ly to in s p e c t th e p re m ise s
i
and ren der an a p p r a i s a l o r r e a p p r a is a l t o th e d efen d an t BANK.
:
1 73.
T hat upon in fo rm atio n and b e l i e f , th e d efen d - !
I
*m t, ALSTON A- WEVüR, would submit a b i l l f o r s e r v i c e s ren d ered *
in p ro v id in g a r e a p p r a i s a l to th e d efen d an t BANK, which b i l l s
.!
w ere p a id by th e d efen d an t BANK.
1 74.
j
I
T hat upon in fo rm atio n and b e l i e f , th e d efen d - !
a n t, ALSTON A. NEVER, would in sp e c t th e s a i d p re m ise s in v o lv ed
d u rin g th e hours o f 9 :0 0 A.M. and 5 :0 0 P.M. , a t which tim e he
was employed by th e d efen d an t BANK a s i t s P r e s id e n t.
175.
That upon in form ation and b e l i e f , th e d efen d - ’
a n t, ALSTON A. V7EVER, h a s w ron gfu lly and im p ro p erly u sed h i s
o f f i c e a s P re sid e n t o f th e defen dan t BANK t o p ro v id e h im s e lf with''
p e rso n a l income and monetary g a in , a l l to th e d etrim e n t o f th e
Y
sto c k h o ld e rs o f th e defen d an t BANK.
- 26 -
.
•
176.
That upon in form ation and b e l i e f , th e con duct
o f th e d efen d an t, ALSTON A. V7EVER, in o b ta in in g f e e s f o r r e
a p p r a i s a l s , c o n s titu te d a c o n f l i c t o f i n t e r e s t , a w ro n gfu l
-1
i
. j
a p p r o p r ia tio n o f c o rp o ra te o p p o r tu n itie s , and m is a p p r o p r ia tio n
*
and w aste o f c o rp o ra te fu n d s.
r-
{
•
AS AND FOR A TWENTY-NINTH CAUSE OF
ACTION AGAINST DEFENDANT ALSTON A.
WEVER:___________ ________________ _ _ _
177. P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
j
i |
j
{
.11
each and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s com plain t marked and d e sig n a te d " 1. M through " 8 . " , i n c l u s i v e , a s i f th e same "were s e t fo r th a t len gth h e r e in .
yM •
178. That upon in form ation and h e l i e r , from 1950
;
i u n t i l th e p r e s e n t, th e d efen d an t, ALSTON A. WEVER, would re n d e r
1
' .
: a p p r a i s a l r e p o r t s fo r r e a l p ro p e rty which th e d efen d a n t BANK -•
j
1
|
j
■ would u se a s a b a s i s fo r i t s s e c u r it y in m o rtgage lo a n s .
I
!
>
! ant , ALSTON A. WEVER, in str u c te d th e a tto r n e y s f o r th e d efen d an t* j
179. That upon in fo rm atio n and b e l i e f , th e d e fe n d -
■ BANK t o d ed u ct h i s a p p r a is a l fe e a t th e m o rtgage c lo s in g b y a
1
i
j
•
check .made p a y a b le to th e defen dan t BANK.
180. T hat upon in fo rm atio n and b e l i e f , th e d efen d -
t
a n t, ALSTON A. WEVER, fu r th e r in s tr u c te d t h a t th e check made
p a y a b le t o th e d efen d an t BANK a s and f o r h i s a p p r a i s a l f e e b e
•
• con v erted in to c a sh and t h a t s a id cash b e r e t a in e d in an en velop e :
so th a t th e d efen d an t, ALSTON A. WEVER, c o u ld p e r i o d i c a l l y
I
a c q u ir e th e same.
' \
\
»
!
T hat upon in fo rm atio n and b e l i e f , a s a r e s u l t
!
j
o f t h i s p ro ced u re o f co n v ertin g th e checks p a y a b le to th e bank
Ijito cash and p la c in g th e cash in en v elo p es and p ic k in g up *-he
en v elo p es o f c a sh , no ad eo u ate re c o rd s c o u ld b e k e p t a s t o th e
sums c o lle c t e d and re c e iv e d by s a i d ALSTON A. V7EVER, and t h a t
t h i s c o n s t itu te d an un u su al d ep a rtu re from norm al ban k in g pro
ced ure in re g a rd to payment fo r s e r v i c e s re n d e re d .
27
.
I
l
i
I
»
182.
That upon in fo rm atio n and " b e l i e f , t h i s p r o
ced u re worked to th e d etrim en t o f th e d efen d an t BANK, and s a i d
I
ALSTON A. NEVER should b e com pelled to a c c u r a t e ly a c co u n t f o r
f
a l l o f th e cash he re c e iv e d d urin g th e l a s t s i x y e a r s .
AS AND FOR A THIRTIETH CAUSE OF ACTION
AGAINST DEFENDANT CHARLES J . THQRNEWELL;
183.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and ev ery a l le g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
‘
j
i
•
i
com p lain t marked and d e sig n a te d "1 7 7 " through "1 8 2 **# i n c l u s i v e , .
t
a s i f th e same were s e t fo r th a t len g th h e r e in .
184.
That upon in fo rm atio n and b e l i e f , th e d e fe n d -
|
!
a n t, 'CHARLES J . TKORNEWELL, in c o n sp irac y w ith d e fe n d a n t, ALSTON ]
A. WEVER, d id sh a re th e cash p ro ce ed s d e p o s ite d in th e en v elo p e
a s a lle g e d in p aragraph " 180 •• above.
185.
That upon in fo rm atio n and b e l i e f , th e sh a r in g
I
«
i
o f th e s a i d p ro ceed s by CHARLES J . TKORNENELL c o n s t it u t e d a
c o l l u s i v e d e v ic e betv/een the p a r t i e s in an atte m p t t o f u r t h e r
t h e ir own p e rso n a l g a in , a l l t o th e d etrim en t o f th e sto c k h o ld e r s
l
o f th e defen d an t BANK.
:
AS AND FOR A THIRTY-FIRST CAUSE OF ACTION
AGAINST DEFENDANT CHARLES J . THORNENELL:
186.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com plain t marked and d e sig n a te d " 1. " through " 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len g th h e r e in .
28
187*
That upon in form ation and b e l i e f , in o r ab o u t
1971, th e defen dan t BANK had agreed to extend b u ild in g lo a n s t o
a c o n tr a c to r named STONEWOOD HOMES, INC. f o r th e c o n s t r u c t io n o f
f i v e one—fa m ily homes.
188.
• ■»
That upon in fo rm atio n and b e l i e f , th e a f o r e s a i d
p ro p e rty was in sp e c te d by r e p r e s e n ta tiv e s o f th e F e d e r a l H ousing
A d m in istra tio n and a p p r a is a ls had been re c e iv e d by th e b a n h 's
a tto rn e y s.
.
189.
.
;.
That upon in fo rm atio n and b e l i e f , and su b seq u en t
t o th e m ortgage c lo s in g s , th e d efen d an t, CHARLES J . THORNEWELL,
re o u e ste d h i s a p p r a is a l f e e from th e a tto r n e y f o r the. d e fe n d a n t
BANK.
'
190.
•
That upon in fo rm atio n and b e l i e f , th e a tt o r n e y
f o r th e d efen d an t BANK a d v ise d s a id CHARLES J . THORNEWELL th at*
he was n o t e n t it l e d to an a p p r a is a l f e e a s he had n o t made an
a p p r a i s a l , and th a t an a p p r a is a l had been made by th e F e d e r a l
H ousing A d m in istra tio n r e p r e s e n t a t iv e s .
191.
That upon in fo rm atio n and b e l i e f , and n o t
w ith sta n d in g s a i d a d v ic e , d efen d an t, CHARLES J . THORNEvTELL, d id
subm it a b i l l to th e defen d an t BANK f o r payment o f a p p r a i s a l
f e e s on th e a f o r e s a id p r o p e r t ie s .
192.
That upon in fo rm atio n and b e l i e f , th e con duct
o f d e fe n d a n t, CHARLES J . THORNEWELL, in o b ta in in g a f e e f o r an *
a p p r a i s a l which he d id n ot in f a c t mahe c o n s t i t u t e s a w ron gful
m isa p p ro p r ia tio n and w aste o f c o rp o ra te fu n d s.
193.
That upon in fo rm atio n and b e l i e f , th e d e fe n d a n t,
CHARLES J . THORNEWELL, d id w ro n gfu lly and i l l e g a l l y u se h i s
o f f i c e a s d i r e c t o r o f th e d efen dan t BANK in o rd e r t o o b ta in
w ron gful and i l l e g a l f e e s , a l l fo r h i s own p e r s o n a l g a in and
mM
b e n e f i t , to th e detrim ent o f th e sto c k h o ld e rs o f th e d e fe n d a n t
BANK.
AS AND FOR A THIRTY-SECOND CAUSE OF
ACTION AGAINST DEFENDANT CHARLES J .
THORNEWELL -AND ALSTON A. V7EVBR;
194.
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e
each and every a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s
com p lain t marked and d e sig n a te d " l . " through " 8 . " , i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len g th h e r e in .
195.
. *
That upon in fo rm atio n and b e l i e f , in o r ab o u t
1971, th e defen d an t BANK r e c e iv e d an a p p lic a t io n f o r a lo a n inth e amount o f $90,0 0 0 .0 0 from TRIPLEX PLUMBING SUPPLY CORP.
|
in ten d ed t o re fin a n c e an e x i s t i n g m ortgage on c e r t a i n p ro p e rty :
which i t owned a t Third Avenue, Bay Sh ore, New York.
196.
That upon in fo rm atio n and b e l i e f , th e d e fe n d -
BANK had an a p p r a is a l made o f th e s a i d r e a l p ro p e rty in 1965
a t which tim e th e p ro p erty was v alu ed a t $ 9 0 ,0 0 0 .0 0 .
197.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t s , CHARLES J . THORNEWELL and ALSTON A. WEVER, had d ec id ed
p r i o r t o con du ctin g an a p p r a is a l o f th e p ro p e rty to g r a n t such
a lo a n .
t
198.
That upon in fo rm atio n and b e l i e f , and in
*
a cco rd an ce w ith t h e ir in te n tio n o f g ra n tin g th e a f o r e s a id loan in *
, th e amount o f $ 9 0 ,0 0 0 .0 0 , CHARLES J . THORNEWELL and ALSTON A.
j
I WEV—R, d id in c o n sp ira c y w ith one an oth er re n d e r an a p p r a i s a l o f :
o f p ro p e rty w ith a v a lu e o f $ 1 7 0 ,0 0 0 .0 0 .
199.
1
That upon in fo rm atio n and b e l i e f , th e a tto r n e y s
f o r th e d efen d an t BANK, b e in g concerned about th e a p p r a i s a l v a lu e
su b m itted by CHARLES J . THORNEWELL and ALSTON A . WEVER, d id o b ta in
an independent a p p r a is a l which s t a t e d t h a t th e v a lu e o f th e o r o - ?
p e r t y was between $ 9 0 ,0 0 0 .0 0 t o $ 1 2 5 ,0 0 0 .0 0 .
\
•
200.
That upon in fo rm atio n and b e l i e f , n o tw ith -
sta n d in g th e recommendation and opin ion o f th e in dependent
•
;
a p p r a i s e r ,' CHARLES J . THORNEWELL and ALSTON- -A %WEVER, d id d i s —A -•-t
r e g a r d s a i d a p p r a is a l and d id proceed to make th e lo an t o TRIPLEX
- 30 i
JL
i
i
PLUM3ING SUPPLY COR?, b a se d upon an a p p r a i s a l o f $ 1 7 0 ,0 0 0 .0 0 .
201.
That upon in fo rm atio n and b e l i e f , and ■ within a !
v e ry sh o rt p e rio d a f t e r th e a f o r e s a id lo an was made t o TRIPLEX
PLUM3IKG SUPPLY COR?., th e a fo r e s a id c o r p o ra tio n d id e n t e r in to
j
an arrangem ent f o r th e b e n e f it o f c r e d it o r s p ro v id e d f o r in
C h apter 12 o f th e F e d e ra l Bankruptcy A c t.
.f
I
j
202 4
That upon in form ation and b e l i e f , th e d efen d - !
t
a n t s , CHARLES J . THORNEWELL and ALSTON A. WEVER, w ro n g fu lly and 1
f
im p ro p erly a u th o rized th e defendant BANK t o ex ten d a lo a n in th e P
I
amount o f $ 9 0 ,0 0 0 .0 0 to TRIPLEX PLUMBING SUPPLY C0RP. , and s a i d
•
S
lo a n was im provident and d id c o n s t itu te a m is a p p r o p r ia tio n and- ‘ 1
,
i
w a ste o f th e d efen d an t BANK'S a s s e t s .
AS AND FOR A THIRTY-THIRD CAUSE OF
ACTION AGAINST DEFENDANT CHARLES J .
THORNEWELL:___________________
203.
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e
each and every a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s
com p lain t marked and d e sig n a te d " l . " through " 8 . M, i n c l u s i v e ,
a s i f th e same were s e t fo r th a t len gth h e r e in .
204-.
I
That upon in fo rm atio n and b e l i e f , d u rin g th e
y e a r 1972, two b r o th e r s o p e ra tin g under th e name o f TOUCHI BROS,
c o n ta c te d th e d efen d an t, CHARLES J . THORNEWELL, in an e f f o r t t o
o b ta in a loan in th e amount o f $ 100, 000.00 from t h e -d efen d a n t
BANK f o r th e p urpose o f s t a r t i n g a c o n stru c tio n b u s i n e s s in
S u f f o l k County, New York.
'205-.
That upon in fo rm atio n and b e l i e f , th e d efen d
a n t , CHARLES J . THORNEWELL, d id e n te r in to a c o l l u s i v e a rr a n g e
ment w ith th e a f o r e s a id TCUCHI BROS, wherein and whereby th e y
would r e c e iv e $ 1 0 0 ,0 0 0 .0 0 from th e defen d an t BANK f o r t h e i r
o p e r a tin g c a p i t a l to s t a r t a c o n stru c tio n b u s in e s s in S u f f o l k
Ii
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If
I
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County, New York, and whereby d efen d an t, CHARLES J . THORNEWELL,
I
i
would r e c e iv e p e rso n a l rem uneration f o r h i s e f f o r t i n a u t h o r i z i
th e iss u a n c e o f th e $100,000.00 loan by th e d e fe n d a n t BANK.
206.
That upon in fo rm atio n and b e l i e f , a m o rtgage
• lo an was iss u e d to th e s a id TOUCHI BROS, w herein th e d e fe n d a n t
BANK r e c e iv e d a s s e c u r it y a m ortgage upon th e p e r s o n a l re sid e n c e
o f th e TOUCHI BROS, lo c a te d in Brooklyn, New Y ork.
207.
That upon in fo rm atio n and b e l i e f , th e d efen d an t
BANK h a s never accep ted a s s e c u r it y p ro p e rty lo c a t e d in any
county o th e r than Nassau and S u ffo lk C o u n tie s.
208.
That upon in fo rm atio n and b e l i e f , t h e d e fe n d a n t,
CHARLES J . THORNEWELL, d id e n te r in to a c o l l u s i v e agreem en t
w ith th e TOUCHI BROS, a l l f o r h i s own p e r so n a l g a in and b e n e f i t ,
and t o th e d etrim en t o f th e sto c k h o ld e rs o f th e d e fe n d a n t BANK.
AS AND FOR A THIRTY-FOURTH CAUSE OF
ACTION AGAINST DEFENDANT ALSTON A.
W E V E R :____________________
209*
P l a i n t i f f s r e p e a t, r e i t e r a t e and r e a l l e g e each
and every a lle g a t io n con tain ed in th e p a ra g ra p h s o f t h i s com plaii
marked and d e sig n a te d Ml . ” through " 8 . " , i n c l u s i v e , a s i f th e
same were s e t fo r th a t len gth h e re in .
210.
That upon in fo rm atio n and b e l i e f , in o r ab o u t
1969, th e defen d an t BANK d id a u th o riz e th e is s u a n c e o f 3 0 ,0 0 0
s h a r e s o f common sto c k to be s o ld a t a p r i c e o f $ 3 3 .0 0 p e r sh a re
t o n o n -sto c k h o ld e rs, and $35.00 p er sh a re t o s t o c k h o ld e r s .
211.
That upon in fo rm atio n and b e l i e f , th e s h a r e
h o ld e r s had sto c k w arran ts which th ey cou ld e x e r c i s e b y J u l y 1,
1969.
212.
That upon in fo rm atio n and b e l i e f , th e d e fe n d a n t,
ALSTON A. WEVER, in an attem pt t o c o n tr o l th e common s t o c k o f
th e d efen d an t Bank made p r iv a t e arrangem ents w ith v a r io u s s t o c k
h o ld e r s p ro m isin g to pay them $3.00 per sh a r e f o r t h e i r st o c k
w a rr a n ts.
I
213.
That upon in fo rm atio n and b e l i e f , s e v e r a l o f th e ;
1
sto c k h o ld e r s f a i l e d to p ro p e rly e x e r c is e t h e ir sto c k w a rr a n ts b y *
i
th e d e a d lin e d a te o f J u ly 1, 1969, b u t they s t i l l i n s i s t e d upon •
th e r e c e i p t o f $3.00 p er sh are in accordan ce w ith t h e i r a rr a n g e - ;
inent w ith th e d efen dan t, ALSTON A. WEVER.
214.
That upon in fo rm atio n and b e l i e f , in an e f f o r t to ;t
i
o b ta in fu n d s to pay th e se v a r io u s sto c k h o ld e rs th e sura o f $3.00' ;
p e r sh a r e f o r t h e ir sto ck w a rra n ts, th e d efen d an t, ALSTON A.
|
WEVER, d id s e l l th e common sto c k o f th e d efen d an t BANK t o sto c k — I!
h o ld e r s f o r $33.00 per sh are in s te a d o f $35.00 p e r s h a r e , and
d id a p p r o p r ia te th e b a la n c e o f $3.00 p er sh a re f o r th e u s e o f
p ro v id in g fun d s to th o se sto c k h o ld e rs w ith whom he made p r i v a t e
arrangement: s .
215.
’
*
Ilfi
That upon in fo rm atio n and b e l i e f , th e sum o f
$ 1 5 ,0 0 0 .0 0 was aco u ire d by defen d an t ALSTON A. WEVER, through
;
I
j
th e s a l e o f common sto c k o f the defen d an t BANK, and s a i d monies
j
w ere w ro n g fu lly and im properly p a id to sto c k h o ld e rs who had
;
fI
j
!
|
l
f a i l e d t o e x e r c is e t h e ir r i c h t s under th e sto c k w a rra n t.
216.
That upon in fo rm atio n and b e l i e f , th e a f o r e s a id
sum o f $ 1 5 ,0 0 0 .0 0 was th e law fu l monies o f th e d efen d an t BANK,
and was w ro n g fu lly , i l l e g a l l y and im properly m isa p p ro p r ia te d by
th e d e fe n d a n t, ALSTON A. WEVER.
AS AND FOR A THIRTY-FIFTH CAUSE OF
ACTION AGAINST EACH OF THE DEFENDANTS, EXCEPT THOSE WHO WERE NOT
MEMBERS OF THE BOARD OF DIRECTORS
OF THE DEFENDANT BANK AT THE TIME
OF THE ALLEGED INCIDENT:___________
217.
j
i
j
j
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\
P l a i n t i f f s r e p e a t , r e i t e r a t e and r e a l l e g e each
and ev ery a l l e g a t i o n con tain ed in th e p a ra g ra p h s o f t h i s com plain
marked and d e sig n a te d M1 . M through " a . " , in c l u s i v e , a s i f th e
j
same w ere s e t fo r th a t len gth h e r e in .
t-
- 33 -
•
218.
That upon in fo rm atio n and b e l i e f , in o r ab o u t
1969, th e defen dan t BANK was a u th o rized to i s s u e 3 0 ,0 0 0 sh a r e s
o f common sto c k fo r th e purpose o f r a i s i n g a d d i t i o n a l c a p i t a l ..
219.
That upon in fo rm atio n and b e l i e f , in o r abou t
1969, th e defen d an t 3ANX had 10,000 sh a r e s o f common s t o c k o f
•.
th e o r i g i n a l 30,000 au th o rized sh a r e s a s a f o r e s a i d , w hich rem ainc
u n issu e d .
220.
That upon in fo rm atio n and b e l i e f , t h e d e fe n d a n ts
w ro n g fu lly and im properly iss u e d sto c k d iv id e n d s to i t s sh a r e —•
h o ld e r s d u rin g th e y e a r s 1970 and 1971 from th e 1 0 ,0 0 0 u n issu e d
s h a r e s o f common sto c k .
221.
*
That upon in fo rm atio n and b e l i e f , t h e is s u a n c e
o f th e sto c k d iv id en d s a s a f o r e s a id was n ot in c o n fo rm ity w ith
th e o r i g i n a l purpose o f th e sto c k i s s u e and d id n ot r a i s e any
a d d it io n a l c a p i t a l .
WHEREFORE, P l a i n t i f f s demand judgment a g a i n s t th e
D efendan ts a s fo llo w s:
1.
To en jo in and r e s t r a i n th e D efendan ts from con
tin u in g in t h e ir c a p a c ity a s o f f i c e r s o f th e D efen d an t Bank.
2.
To en jo in the Annual E le c tio n sc h e d u le d f o r March
5 , 1974, w herein and whereby th e D efendants s e e t to h av e them
s e l v e s r e - e le c t e d a s D ir e c to r s o f th e D efendant Bank.
3.
To remove th e in d iv id u a l D efendant D i r e c t o r s .
4.
To compel the D efendan ts t o acco u n t f o r t h e i r
o f f i c i a l conduct in th e management o f th e D efendant Bank.
5.
Com pelling th e in d iv id u a l D efen dan ts t o pay t o th e
D efendant Bank any monies and th e v a lu e o f any p r o p e r t i e s which
th e y a c q u ire d to th em selves o r t r a n s f e r r e d to o th e r s o r l o s t o r
w asted by or through t h e ir im proper conduct and v i o l a t i o n o f
t h e i r d u t ie s .
34
MiraMtwiia
MO iltMiltfy *»'13
STATE OF NEWYORK. COUNTY OF SUFFOLK
**.:
CHARLES H. WOLPERT and MARTHA WOLPERT,
the
p la in tiffs
f T l In4i»t£iul
r w l V tr if c a tia a
the foreo’oin<T
Com plaint
being duly sworn, deposes an d say s: depot
in the within action ; deponent ha
and knows the contents thereof; the sam e is «
deponent’s own knowledge, except as to the matters therein stated to be alleged on information and b e lie f,.
to those matters deponent believes it to be true.
I— I Cor;o.-2 t* t’ne
of
L J v«ft3cit.M
corporation,
hr the within action; deponent h as re
forc^oin"
and knows the contents thereof; and thf
is true to deponent’s own knowledge, except as to the matters therein stated to be alleged upon informatu.
belief, and as to those matters deponent believes it to be true. This venEcation is made by deponent 1.
is a corporation and deponent is an officer tl
The grounds of deponent’s belief as to all matters not stated upon deponent’s knowledge arc as follows:
c
6
.
ao
s e t a sid e any a lie n a t io n o f p r o p e rty b e lo n g in g
to s a i d Defendant Bank made by th e D efendants i n d iv i d u a l l y o r
c o l l e c t i v e l y c o n tra ry to th e law or in v i o l a t i o n o f t h e i r d u tie s
7.
That th e P l a i n t i f f s h e re in b e awarded th e c o s t s o f
p r o s e c u tin g t h i s a c tio n , to g e th e r w ith re a so n a b le c o u n se l f e e s
and such fu r th e r , oth er and d i f f e r e n t r e l i e f a s to t h i s C o u rt '
may seem j u s t and proper in th e p re m ise s.
DONNER, FAGELSON/ HARITON & BERKA, P.C.
By.
A ttorn ey s fo r P l a i n t i f f s
O ffic e and P. 0. A d d ress
2115 Union Boulevard
Bay Sh ore, N.Y. 11706
516—666—7400 •
35
c iv il a c t io n
CHARLES HOUSLER, MURIEL S„ HOOST, ANNA M
WOLPERT, DOROTHY KEPPERT and JOSEPH LITE," as '
sto c k h o ld e rs o f the F i r s t N atio n al Bank o f
j
w s t I s l i p , su in g on b e h a lf o f them selves and;
f i l l o th e r sto c k h o ld e rs o f The F i r s t N atio n al
Bank: o f E a st I s l i p s im ila r ly s it u a t e d ,
4 j
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Plaintiffs
*'
F
il e
no
.
7 3C 112
s
SUMMONS
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**
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THE FIRST NATIONAL "BANK OF EAST ISLIP RUSSEli
J * WOLPERT, JAY W. WOODS, ALSTON A, WEVER,
ANDREIS GEIS, UNTON J , BUCEK, HARRY KARP, JOHN1
MENNELLA, EVERETT GRIEK, CHARLES J . THORNE- :
WELL, HENRY HOCKER and MELVIN R* CANNON,
j
Defendants
|
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To the above named Defendants :
■.V # are.-tere^ summoned and required to serve upon
«}->. *v
. DENNIS: O S T E I N
ESO S
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plaintiff** a tto rn e y s. whose address I s
600
O ld C o u n tr y R o a d , G a rd e n C i c y ,
»«S T
ah answer to £he complaint which Is herewith served upon you, within
20
New Y o r k
*ft ^
d iy i;after serv i» of this
summons upon you, exclusive of the day of service. If you fail to do so, judgement by default will be t?V~en
.
against you for the relief demanded in the complaint
/
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Date: m
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DeputyCitric.
(Seal of Court]
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Not«:—TSU tummoii) in Issued puraoani to Rut« 4 of the Foderai hules of Civil Procedure.
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U 530
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I:UNITED STATES DISTRICT COURT
iEASTERN DISTRICT OF N&i YORK
•;CHARLES HOUSLER, MURIEL S. HOOST, ANNA M. WOLPERT,
'DOROTHY KEPPERT and JOSEPH
|i■
■ LITE,• as stockholders
¡¡of The First National Bank of East Islip, suing on
¡¡behalf of themselves and all other stockholders
i o f The First National Bank of East Islip similarly
;situated,
P la in tiffs ,
jj
COMPLAINT
Index No,
73 Civ,
- against -
¡THE FIRST NATIONAL BANK OF EAST ISLIP, RUSSELL J.
1WOLPERT, JAY W. WOODS, ALSTON A. NEVER, ANDREW
|;GEIS, UNTON J. BUCEK, HARRY KARP, JOHN MENNELLA,
!|EVERETT GRIEK, CHARLES J. THORN£1-7ELL, HENRY
¡¡HOCKER and MELVIN R. CANNON,
¡1
i|
!
Defendants.
Plaintiffs, for their complaint, herein allege
JURISDICTION
FIRST:
This action arises under the
¡•laws of the United States pertaining to national banks, to wit: 12
0-6
:<■ ! USC 84 and 12 USC 93.
The amount in question exceeds the sum of
¡$10,000.
PARTIES AND CLASS ALLEGATIONS
SECOND:
-t
0$-
Plaintiffs are now and were ac
the time of the transactions complained of, shareholders of the de1
*
fendant, The First National Bank of East Islip, holding an aggre-
gate of 34,514 shares of the common stock of said defendant, whict
•said holdings constitute more than five percent (5%) of the aggre
gate authorized and outstanding shares of stock of the said defen•dant.
Plaintiffs bring this action on behalf of themselves and al
| other stockholders of The First National Bank of ¿ast Islip simil
arly situated.
P l a i n t i f f s do f a i r l y and ad e-
THIRD:
;;quately represent the interests of the shareholders similarly
: situated in enforcing the rights of The First National Bank of
.Fast Islip herein alleged.
FOURTH:
At all times herein mentioned,
the defendant, The First National Bank of cast Islip, was and is
a
■'national banking corporation organized and existing under the laws
of the United States of
A m e r ic a .
FIFTH:
At all times herein mentioned
,the defendants, Russell J. Wolpert, Jay W. Woods, Alston A. Wever,
¿Andrew Geis, Unton J. Bucek, Harry Karp, John Mennella, Everett
fj;
•Griek, Charles J. Thornewell, Henry Hocker and Melvin R. Cannon,
'were officers and/or directors of the defendant, The First Na
tional Bank of East Islip.
5
•I
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FIRST CLAIM FOR R£LI£F
SIXTH:
On information and belief du£-
ing the year 1972, the defendant, The First National*Bank of East
Islip, made loans to one Crest Affiliates, Inc., which were un
secured in a sum totaling in excess of $450,000.
That on information and belief
SEVENTH:
that at the time said loans were made the total amount of such
loans exceeded ten percentum of the amount of the capital stock of
K
)
£*e^enc*ant*
First National Bank of cast Islip, actually
paid in and unimpaired, and ten percentum of its unimpaired surplus
funds.
EIGHTH
That on information and belief
the defendants, Russell J. Wolpert, Jay W. Woods, Alston A. Wever,
Andrew Geis, Unton J. Bucek, Harry Karp, John Mennella, Everett
Griek, Charles J. Thornewell, Henry Hockcr and Melvin R. Cannon,
knowingly approved said loans as directors of the defendant, The
First National Bank of East Islip, when they knew or should have
known that the aggregate thereof exceeded ten percent of the amount
of the capital stock of the defendant, The First National Bank of
•East Islip, and ten percent of its unimpaired surplus funds, and
accordingly they are liable to said bank for all damages sustained
by it, pursuant to the statute in such cases made and provided.
That on information and belief
NINTH
failed to repay to The First National
>ys so loaned to it and is now in default
That demand has been made on
The First National Bank of East Islip that it bring,suit against
-
3
-
%
defendants, Russell J. Wolpert, Jay VJ. Woods, Alston A. Wever,
Andrew Geis, Unton J. Bucek, Harry Karp, John Mennella, Everett
Griek, Charles J. Thornewell, Henry Hocker and Melvin R. Cannon,
but that it has failed to do so since said individual defendants
;•comprise its Board of Directors and manage the said bank.
ELEVENTH:
This action is not a collusive
.one to confer on a Court of the United States jurisdiction of any
action of which it would not otherwise have jurisdiction.
SECOND CLAIM FOR RELIEF
TWELFTH:
On information and belief dur-
ing the year 1972, the defendant, The First National Bank of East
Islip, made loans to one Vical Realty Corp. totaling approximately
$320,000.
THIRTEENTH:
That on information and belief
at the time said loans were made the total amount of such loans ex
ceeded ten percentura of the amount of the capital stock of the de
fendant, The First National Bank of East Islip, actually paid in
dnd unimpaired, and ten percentum of its unimpaired surplus funds
•I
FOURTEENTH:
That on information and belief
.the defendants, Russell J. Wolpert, Jay W. Woods, Alston A. Wever,
Andrew Geis, Unton J. Bucek, Harry Karp, John Mennella, Everett
Criek, Charles J. Thornewell, Henry Hocker and Melvin R. Cannon,
knowingly approved said loans as directors of the defendant, The
First National Bank of East Islip, when they did know, or should
have known, that the aggregate thereof exceeded ten percentum of
•¡the amount of the capital stock of the defendant, The First Natior
Bank of East Islip, and ten perccntum of its unimpaired surplus
funds and accordingly they are liable to said bank for all damages
.¡sustained by it, pursuant to the statute, in such case made and
ii
•.provided.
jS^OULaS-i,
Vical Realty Corp. has failed to rep<iy to The First National Bank
of East Islip the moneys so loaned to it and is now in default wit
respect to said loans.
That demand has been made on Th
SIXTEENTH:
First National Bank of East Islip to bring suit against defendants
Russell J. Wolpert, Jay W. Woods, Alston A. Wever, Andrew Geis,
Unton J. Bucek, Harry Karp, John Mennella, Everett Griek, Charles
.J. Thornewell, Henry Hocker and Melvin R. Cannon, but that it has
failed to do so since said individual defendants comprise its
Board of Directors and manage the said Bank.
This action is not a collusive
SEVENTEENTH:
one to confer on a Court of the United States jurisdiction of any
action of which it would not otherwise have jurisdiction.
THIRD CLAIM FOR RELIEF
i>
Plaintiffs repeat and reallege
EIGHTEENTH:
each and every allegation contained in paragraphs SIXTH through
-5-
.•ELEVENTH o f th is com plaint w ith the same fo rc e and e f f e c t a s though
i
.¡f u lly s e t fo rth h erein .
:
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NINETEENTH:
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That in a d d itio n to v i o l a t in g
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t
t
the laws o f the United S t a t e s , the d efen d an ts, R u s s e ll J . W olpert, r
»
'¡Jay W. Woods, A lston A. Wever, Andrew G e is, Unton J . Bucek, Harry
’’ Karp, John
M ennella, E verett G riek , C harles
; Hocker and
Melvin R. Cannon, v io la te d
J . Thornew ell, Henry
the common
law o f the S t a t e
:
:
o f New York, in th at the a fo r e s a id loan s to C rest A f f i l i a t e s , In c.
were im provident when made and in v io la t io n o f the d u t ie s empowered
.upon d ir e c t o r s and o f f i c e r s .
FOURTH CLAIM FOR RELIEF
1
TWENTIETH:
P l a i n t i f f s re p e a t and r e a lle g e
each and every a lle g a t io n contained in paragraphs TWELFTH through
SEVENTEENTH, o f th is com plaint w ith the same fo rc e and e f f e c t a s
though f u ll y s e t fo rth a t len g th h erein .
TWENTY-FIRST:
That in a d d itio n to v io la t in g the
la w s-o f the United S t a t e s , the d efen d an ts, R u sse ll J . W olpert, Ja y
W. Woods, A lston A. Wever, Andrew G e is, Unton J . Bucek, Harry Karp,John M ennella, E v e rett G riek , C h arles J . Thornew ell, Henry Hocker
|and Melvin R. Cannon, v io la te d the d u tie s imposed upon them by the
•common law o f the S ta t e o f New York in th at the lo a n s made to C rest
•R e a lty Corp. were im provident when made and in v io la t io n o f the
.i
.
d u t ie s imposed upon d ir e c to r s and o f f i c e r s .
•I
FIFTH CLAIM FOR RELIEF
j
t
' !
On information and belief that !
TWENTi-SECOND:
*
■on or about the 31st day of July, 1970, the defendants, Russell J. g
•
Wolpert, Alston A. Wever, Andrew Geis, and Unton J. Bucek, entered j
■
i
.
I
into certain agreements in writing with the defendant, The First |
,!
t
"National Bank of East Islip, which agreements in substance provided
. jthat said persons were to resign as officers and directors of said
JU j
Bank, and in consideration therefore they were to receive contin
ued compensation equal to one-half of their then earnings for
which they were to continue to act as consultants to the said Bank.
TWENTY-THIRD;
On information and belief that
the defendants, Alston A. Wever, Andrew Geis and Unton J. Bucek,
breached the said agreements in that said defendants failed and
refused to resign as directors of the said Bank.
TWENTY-FOURTH:
On information and belief that
the defendants, Alston A. Wever, Andrew Geis and Unton J. Bucek,
further breached the said agreements in that after the execution
.¡thereof, they continued to collect their salary and other emolu
ments as directors and also collected compensation for being con
sultants under the said agreements.
TWENTY-FIFTH:
J Og
On information and belief that
.¡the defendants, Alston A. Wever, Andrew Geis, and Unton J . Bucek
ji
•
;!further breached said agreements in that'they were being paid twice
t!
•
for the same services rendered to the defendant, The-First National.
Bank of East Islip.
-7-
TWENTY-SIXTH:
By reason of the foregoing, the
defendants, Alston A. Wever, Andrew Geis and Unton J. Bucek, owe
to The First National Bank of East Islip a sum of money equivalent j
Ito their salaries and other emoluments of office received by them
i
¡for acting as directors of said Bank since July 31, 1970, and the
Jjt-
Jdefendants Jay W. Woods, Harry Karp, John Mennella, Everett Griek,
iiCharles J. Thornewell, Henry Hocker and Melvin R. Cannon are also
!
i
¡liable to said bank for having approved such payments.
j
i
j
i
'SIXTH CLAIM FOR RELIEF
¡1
TWENTY-SEVENTH:
On information and belief that
:|defendants, Jay W. Woods, Alston A. Wever, Andrew Geis* Unton J.
I
¡¡Bucek, Harry Karp, John Mennella, Everett Griek, Charles J. Thorne—
l|
.
.
.
'¡well, Henry Hocker and Melvin R. Cannon, have wasted the assets
J
, ¡Jof the defendant, The First National Bank of East Islip, in that
\J^ £
(t
jjthey caused or allowed the said Bank to pay compensation to two
'^parties to act as President of the said Bank from July 1, 1970,
i:
i
IIto December 30, 1970.
TWENTY-EIGHTH:
j
j
By reason of the foregoing, the
defendants, Jay W. Woods, Alston A. Wever, Andrew Geis, Unton J.
'Bucek, Harry Karp, John Mennella, Everett Griek, Charles J. Thorne-j
well, Henry Hocker and Melvin R. Cannon owe The First National Bank!
of East Islip a sum of money equivalent to the amount of such w aste
SEVENTH CLAIM FOR RELIEF
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8
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TWKNTY-NINTH:
On information and belief that
during the years 1969 to the date of filing of this complaint, the
defendants, Jay W. Woods, Alston A. Wever, Andrew Ceis, Unton J.
Bucek, Harry Karp, John Mennella, Everett Griek, Charles J. Thornewell, Henry Hocker and Melvin R. Cannon, as officers and/or direct
ors of the defendant, The First National Bank of East Islip, caused
said Bank to make loans to themselves or to some of them which were
improvident when made and based upon improper appraisals of property
pledged as collateral and were for rates of interest which were
substantially less than the prevailing rates then being charged by
said Bank.
THIRTIETH:
By reason of the foregoing, The
First National Bank of East Islip, sustained losses for which the
defendants, Jay W. Woods, Alston A. Wevcr, Andrew Geis, Unton J.
Bucek, harry Karp, John Mennella, Everett Griek, Charles J. Thornewell, Henry Hocker and Melvin R. Cannon are liable.
DEMAND FOR RELIEF
WHEREFORE, plaintiffs demand judgment as follows:
1)
That the Court appoint a recei
ver of the assets of the defendant, The First National Bank of
East Islip.
2)
*That the defendants, Jay W.
Woods, Alston A. Wever, Andrew Geis, Unton J. Bucek, Harry Karp,
John Mennella, Everett Griek, Charles J. Thornewell, Henry Hocker
and Melvin R. Cannon be directed to account to the defendant, The
F i r s t N ation al Bank o f East I s l i p , fo r a l l l o s s e s su sta in e d by s a l
Bank a s a r e s u lt of the a c ts h erein before a lle g e d .
.1I
; .
3)
That the d e fe n d a n ts, The F i r s t
N atio n al Bank o f Bast I s l i p , recover o f the d e fe n d a n ts, Ja y W.
Woods, A lston A. Wever, Andrew G e is, Unton J . Bucek, Harry K arp, •
John M ennella, E verett G riek , C harles J . Thornew ell, Henry Hocker
.and Melvin R. Cannon, the amount o f such l o s s e s .
(:
4)
That the d e fe n d a n ts, R u s s e ll J .
W olpert, Ja y W. Woods, A lston A. Wever, Andrew G e is , Unton J . Buce
Harry Karp, John M ennella, E v erett G riek , C h arles J . Thornew ell,
Henry Hocker and Melvin R. Cannon be removed a s o f f i c e r s and d ire c
o rs o f The F i r s t N ation al Bank o f E ast I s l i p and th a t they be en
jo in e d pendente l i t e and permanently from being o f f i c e r s o r d ir e c
to r s o f sa id Bank,
i
5)
That the d efen d an ts and each o f
them be enjoined pendente l i t e and permanently from perform ing any
•»
•a c t s s im ila r to those h erein a lle g e d .
6)
That the p l a i n t i f f h erein be
awarded the c o s ts o f p ro sec u tin g th is a c tio n in c lu d in g re a so n a b le
a tto rn e y s' fe e s.
i
7)
That the plaintiffs have such
other and further relief which as to this Court may secs* just and
proper.
JOSEPH LITE, P. C.
Attorney for Plaintiffs
DENNIS & STEIN, ESQS. OF COUNSi
Office and Post Office Address:
600 Old Country Road
Garden City, New York 11530
(516) 7AQ - 7650
bTAT£ OF & & YORK
COUNTY OF1
)
b:>*:
C11AKLËS HOUSL.1R, being duly sworn, deposes and says
thac deponent is one of the plaintiffs in the within action; that
deponent has read the foregoing Complaint and knows the contents
thereof; that the same is true to deponent's own knowledge, except
as to the matters herein stated to be alleged on information and
belief, and that as to those matters deponent believes it to be
true.
CllARLCS ilOISL.iR
Sworn to before me this
1973.-
E x h ib it H
j! SUPREME COURT : STATE OF NEW YORK .
;! county of Suffolk
------------------------------------------------------
¡;
-X
il JOEL P. KASTEIN, JOHN U. McGRAIME and
|! CREST AFFILIATES, INC.,
Plaintiffs,
- against j FIRST NATIONAL BANK'OF EAST ISLIP, UNTON
J. BUCEK, ANDREW M. GEIS, EVERETT GRIEK,
CHARLES J. THORNEWELL, RUSSELL J. WOLPERT,
JAY W. WOODS and HENRY CANALE,
ifal
COMPLAINT
..
D efen d an ts.
*
jPlaintiffs complaining of the defendants by
i
! attorneys, FLOWER & PLOTKA, allege the following:.
■
their
¡1
fA
1. At all the times hereinafter mentioned thei
! plaintiff, CREST AFFILIATES, INC., is a domestic corporation
¡i
{I duly organized and existing under and by virtue of the laws of
|the State of New York with its principalpplace of business in
¡1
!i th e County o f S u f f o lk , S t a t e o f Net* Y ork.
ii
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2. At all times hereinafter mentioned plaintiffs
JOEL P. KASTEIN and JOHN W. McGRAIME, were residents of the
\) j2ajl>j £
,
o
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\ County of Nassau, State of New York, and officers and directors
i
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. •
!i of the plaintiff corporation, CREST AFFILIATES, INC.
j!
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3. Upon
information and belief, at all I times hereinafte1
If
*
■ *I
ilmentioned, the defendant, the FIRST NATIONAL BANX OF EAST ISLIP
^ l|
"•
'! is a national banking corporation having its principal place of
p
¡j
Ibusiness at 345 East Main Street, East Islip, Suffolk County,
•;
New York.
‘
.
«
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■
Upon information and belief, at all the times
!j
__
i;hereinafter mentioned the defendants, UNTON J. BUCEK,
4.
.
.
!
i
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i
j
. -j
j
ANDREW M. GEIS, EVERETT GRIEK, CHARLES J. THORNEWELL# RUSSELL J. j
*
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. *•* . *> mk . ur..*-
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^
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• WOLPERT and JAY W. WOODS, were members of the Board
t
jf
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! directors of the defendant, FIRST NATIONAL BANK OF EAST”*r<‘¿S&i i *
i
*'* 1
ISL1P, and duly authorized agents thereof*
VV.,*« - j
5.
Upon information and belief that at aili- [
the times hereinafter mentioned the defendant, HARRY CANALE, -’V'*j
was an officer employed by the defendant, FIRST NATIONAL BANK
OF EAST ISLIP, and a duly authorized agent thereof*
6«
( j0 ^
i
"z■' . '*’-*.4'.
Upon information and belief, at all the
times hereinafter mentioned the defendant, JAY W. WOODS was
| an officer of the FIRST NATIONAL BANK OF EAST ISLIP, and a duly
authorized agent thereof,
7.
That all the individual defendants were
known to the plaintiffs to be. members of the Board of Directors
of the defendant bank, and aome officers thereof, responsible
for the policies and decisions of the bank in connection with
the carrying on of their business of lending money.
8.
On or about the 30th day of May, 1972
the plaintiffs and the defendant the FIRST NATIONAL BANK OF EAST
ISLIP entered into a written agreement, copy of which is attache«
hereto and made a part hereof.
9.
On or about the 30th day of May, 1972,
at the time the plaintiffs and the defendant, FIRST NATIONAL
¡1 BANK OF EAST ISLIP, entered into the aforesaid agreement
[i
r.
1 there was in full force and effect an agreement in writing ber
•
j tween plaintiff, CREST AFFILIATES, INC, and said defendant
:
•
i bank dated April 17, 1972, wherein said bank agreed to make
.
building loans to CREST AFFILIATES, INC. for the erection of
1
0»
'
w
. 1
I modular type one family dwellings by plaintiff, CREST AFFILIATES
INC.
A copy of said agreement is attached hereto and made a
part hereof.
..
20.
'
-V*
At all the time3 hereinafter mentioned
and commencing on or about November, 1971, plaintiff, CREST
"
AFFILIATES, INC., carried on a business of purchasing land
and erecting thereon modular type one family dwellings In the
County of Suffolk,- State of New York for resale to the general
public.
11.
At all times hereinafter mentioned the
plaintiff, CREST AFFILIATES, INC. purchased said modular one
family units from Capital Induotries, Inc., a corporation
with its principal place of business in Avis, Pennsylvania.
12.
At all times hereinafter mentioned
Capital Industries, Inc. was a party to said agreement of
April 17, 1972.
v
13.
/
At all the times hereinafter mentioned
and from on or about November 1971, defendant, FIRST NATIONAL
BANK OF EAST ISLIP, advanced substantial suns of money to the
plaintiff, CREST AFFILIATES, INC. secured by mortgages on the
said building plots owned by CREST AFFILIATES, INC. .
14.
':'
At oil the times herein mentioned the
defendant bank advanced substantial sums of money to the
plaintiff, CREST AFFILIATES, INC., secured by mortgages on the
respective residences of the plaintiffs, KASTEIN and McGRAIME, *
and their personal bonds.
•
15.
AC all Che times hereinafter mentioned/*
the plaintiffs duly performed all the terms and conditions of tf
said contract of April 17, 1972.
16.
• .
Vi
On or about May 1972, contrary to all :
prior agreements, the defendants falsely, fraudulently and Y:
maliciously represented to the plaintiffs that the Comptroller
of the Currency of the United States, an agency regulating the
conduct of business of national banks, directed the defendant
bank to cease making any further advances or loans to plaintiff
CREST AFFILIATES, INC.
17.
On or about May, 1972, contrary to all
prior agreements, the defendants falsely, fraudulently and
maliciously represented to the plaintiffs that said Comptroller
of the Currency directed the defendant bank to call in and
demand immediate payment by plaintiff, CREST AFFILIATES, INC.
of all monies due and owing to said bank.
18.
On or about May, 1972, the defendants
falsely, fraudulently and maliciously represented to the
plaintiffs that the Comptroller of the Currency had advised
the defendant bank that pursuant to its aforementioned directive
to call in all advances of money, the defendant bank could
accept from the plaintiffs, as an alternative for cash, assets
owned by the plaintiff, CREST AFFILIATES, INC. in repayment of
8aid outstanding loans.
. 4.
19«
\
iO .
Upon information ond belief, at all tha •
times herein mentioned, the aforesaid representations made by
' p |
the defendants to the plaintiffs, were false and untrue,
20.
Upon information and belief, at the time
such representations were made by the defendants to the plaintiffs
the defendants knew them to be false and untrue.
21.
Upon information and belief that at the
time said representations were made they were made to induce the
plaintiff's to withdraw from the business of assembling real
l estate plots and erecting thereon nodular homes for resale to
!i
j the public.
22.
Upon information and belief at the time
j said representations were made they were made by the defendants
I
•
¡j to induce the plaintiffs to withdraw from said business by
terminating all advances of funds to CREST AFFILIATES, INC.
and by demanding immediate repayment by CREST AFFILIATES, INC.
to defendant bank of all outstanding loans, without lawful
reason therefor, and contrary to the terms of outstanding
agreements.
23.
At or about the time said representations
$
were made by the defendants, the defendant bank actually did
cease advancing any further funds to the plaintiff CREST
FFILIATES, INC. and demanded immediate repayment of all
j
outstanding loans to CREST AFFILIATES, INC., without lawful
reason therefor, and contrary to the terms of pending agreements!
i
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*’
js
m
■. • -.xW
* •S
24.
o S
Upon Information and belief when the ';>j^y
defendants made such representations they made them in order .to
deceive the plaintiffs and induce them to enter into the said V
contract dated May 30, 1972 wherein and whereby, the plaintiffs
actually terminated its business of erecting and selling •••
one family homes and in addition, among other things, agreed
to and did transfer title to all of the real estate owned by
CREST AFFILIATES, INC. to the defendant bank, and forfeited
contracts of sale with prospective purchasers, and in addition
the plaintiffs, KASTEIN and McGRAIME agreed to an did execute
and deliver promissory notes to order of the defendant bank
in the sum of $81,500.00 each.
25.
At the time said representations were
mode by the defendants to the plaintiffs, the plaintiffs did
not know them to be false and relying upon the truth of said
representations the plaintiffs parted with consideration by
executing said agreement of May 30, 1972 with the defendant
bank and performing the terms and provisions thereof by
actually terminating its business and transferring title to
all of the real estate owned by CREST AFFILIATES, INC, to the
defendant bank; forfeiting contracts of sale with, prospective
purchasers, and committing the plaintiff KASTEIN and McGRAIME
to pay large suras of money to said bank, as aforesaid, all to
their damage and expense.
w*** '
.m
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• • * .*.*. i i 11i . .
•* • ■
r |||p wsV^?
26.
Had the plaintiffs known that said
'^
representations were false, they would not have entered
into said contract of May 30, 1972 nor parted with consideration
$ 5 ^
therefor.
•.
27.
Upon information and belief the
representations herein made by the defendants, their agents,
servants and/or employees, in behalf of the bank in the
| regular course of its regular business of dealing in and with
the general public, were of such a malicious nature that the
| defendants ore liable for exemplary and punitive damages.
28.
sustained damages in the sum of TWO MILLION and 00/100,
k
Sm
iJ*< 7
By reason of the foregoing, the plaintiff
[($2,000,000.00) DOLLARS.
WHEREFORE, the plaintiffs demand judgment
* against the defendants in the sum of TWO MILLION and 00/100,
! ($2,000,000.00) DOLLARS for compensatory damages and in the sum
I of ONE MILLION and 0 0 /1 0 0 ,($1,000,000.00) DOLLARS for punitive
itI
|| damages, together with interest and the costs and disbursements
of this action.
!l
FLOWER & PLOTKA, ESQS.
Attorneys for the Plaintiffs
Office and P. 0. Address
One East Main Street
Boy Shore, New York 11706
(516) 665-4600
7-
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§
?;fc
AGBEE?£Ei5T cads cad entered Into this 30th day of v’
H3 7 * 1972, by and between THE FIRST NATIONAL BANE OF EAST ISLIP,
a national banking corporation having its principal place of
baoiness at 345 East Main Street, East Islip, New York, tha
party of tha firefc part (haroinaftcr referred to os the Bosk)
and CREST AFFILIATES, INC«, a dcmastlc corporation having Ita
principal placo of business at 625 Middle Country Road, Coran,
New York (hereinafter referred to ao Crest)# JOEL P. KASTEIN,
raoidiag at 3036 Timothy Lana, Bellcore, New York end JOHN W. [“
McGRAIME, residing at Lewn Lasts, Oyster Bay, Now York, parties
of the eecorsd part#
WHEREAS, tho Bank end Crest had heretofore entered
into agreements wharein the Bank loaned monies to Crest to provid
financing for tha acquisition of lend and the erection of modular
hoses thereon, end whereas Crest executed notes end building loan
mortgages to tha Bank to secure tha monies advanced, -np^ whereas
the principal balance cow owing on said advances is $1,097,473.26which is secured by by building loan mortgages, end
WHEREAS, fren tins to time the
advances other
monies to Croat end Cro3 t executed prreniaoosy notes to
r^-nV|
scan -of Hilch notes ware endorsed for which collateral xaa offeree
ly 'Crsst end accepted by the Bank; that fcfrg balance now owing is
•
in-the 'em of $477,775.77, tha notes and collateral evidencing
•
and securing said e m is as follows*
i
,
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s . (a) Note dated July 16. 1971, in the sum of $25,000.00
^ cade by Crest Affiliates, Inc., endorsed by *
Joel P. Kastcin
•*W*% (b) Note dated July 16* 1971, in tha mra of $95,000.00
«.
made by Great Affiliates, Inc., endorsed by
. Joel P. KastGin, Arnold Ritt and John McGralma
,.• f a ) •Koto dated October 21> 1971, in tha c m of $13,000.00
»'-V -■* cade by Kathrynp Britton
•••v .(d)' Noto dated Itevemhar 9, 1971, in tha cuax of $80,000
‘'made by Crest Affiliates, Inc., endorsed by
.* *.
• • John McGralmo, Joel P. Easttin, Gloria Kastoln m d ’.
Flora McGraica ..
••..
>
V- ' >.•••
•{a)' ’Mota dated Kevenbar 13, 1971, In tha s m of $101,031,00
. l cado by Great Affiliates, I110** tsadojeasd
^
KeCraina, Joel P, Kastcln, Gloria Kastcin and ,¿ora
Eo teTdated April 14, 1972, in the sum of $170,000,00
cado by Croat Affiliates, Ins-« endorsed by
«Tool P, Kaatcin
*
dated February 11, 1971, in tho cun o± $20,000
<S> Mortgaga
made b? Joel P, Kaotain and Gloria Kaatcin, recorded
'•
February 25, 1971, Liber 8732, page 23
■
(h) Mortgage dated March 22, 1971,
cade by Arnold E. Hitt, recorded April 20, 1971,
<f>
1, 1971, ia tha oca o2 $50,000
( 1) KDrtsaso^datS^Septcsbsr
mafio by John V, KcGroins end Flora HeCraims, recorded
September 13, 1971, Liber 6139, page 240
^
Mortgage dated October 21, 1971, in tho cun of $13,000
<J> made
by George F. Britten end Kathryna Britten,
(Ii) • Security Agreement dated July 9, 1971, in tha oun of
$26,000.00 cade by Croat Affiliates, Inc,, filed
' July 22, 1971 (covering model houses)
end
L ■
#
WHEREAS, tha party of tho second part has informed
pr^nte that tharo arc certain mortgages subordinate to the
*
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t
**
or*-”*-"**1mj>d building loan mortgages which arc licna of record- ,
rt-pA held by Capital Industries, Inc. (the supplier of tha modular ‘
h a m ) r*d Mldsboro Associates,Inc.,- end
WHEREAS, tha Vf&k. is unwilling to advance any further
ppn*.»-» to Croat
Crest is unable to pay the indebtedness at
thin time* and
/. L WHEREAS, it is
intention end desire of the partly
to oottlo, adjust and ccmprcraisa tho total outstanding indebted*
C
62 30
V .
in
.'V
of thair mutual benefit, .
HGW, THEREFORE, this AgreementI ^
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4 v* ., , -•
'* i
*.fcV*v !• Crest will* execute and deliver to ths Bash
bargain end cals deeds covering all the properties which ara
subject to tha Bach's building lean mortgages. To indues tho Ben’s
.to accept cuch deeds, Joql P. Kestoin and John U. Kcfiraica
.¿eprteent odd warrant that to tha best of their bwwledgo tha csay
•liens now of record affect!
3
cuch property arc hold ty Capital
Industries, Inc. and Mldohora Associates, Inc. in tha fora of
\e£bordinate mortgages. Tho deed will contain a provision that 5
the cortgega will not cargo tut in any event the Bjwft; will cot **'
cook a deficiency’Judgment nor ara they accountable to Crest for
any overaga. Creof represents that tha aforementioned conveyances
waro authorised by vote of two-thirds of tha ctcckholdem end a
resolution of tha Board cf Directors and that they have ccaplied
with all laws and procedures affecting tha transfer of all or
substantially all of the assets of tha corporation.
2« Crest will execute end deliver to frhg Rm.v
Bills of Sale covering the two codel houses referred to in
paragraph on page 2 . end designated (k). Joel Kastcin and John
KcGraica represent end warrant that
tha hast of their knowledge
the oaid cedal houses oro unencumbered other tb-r^ the chattel
mortgage told by tha Bank*
3. Tho indebtedness of $477,775.77 is settled,
ceaprcaiccd and adjusted by Joel P. Kastein end John W. HC Crains each executing end delivering a prcniccory note in tha cua of
" -
• $81,500.00 payable in equal monthly installments of $500.00 par
• couth ccmxencing Dsccnbor 1, 1072. Sinailtanecusly with the
. execution end dalivory of tha notes, tho Bank will
;
deliver satisfaction of tha following mortgagesi ell of t**»
' mortgages roforred to hereinabove with tha exception of tha
fa mortgage coda by Arnold E. Bitt and tha Security Agreement
covering tha model houses| and will furnish general releases to •.'j
Joal P*.■;astoia, John W. KtGmima, Gloria Kaotoin cud' Flora McGraic
4. That Great, Joal P. Kaatoin and John V{. KcCraioa 1
W ill
•J
D d ji
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tst, settle and ccEprcmioa ell claim of lndebtcdnssa to
.
I exsjy party which cay claim to escort a claim against tha property
<
(
;* *; covered by tha deeds hercinnbcva tngntlcned and will assist, coopasa
j
' under tbs «direction of tho Bank in tha defense or settlement ©£' i
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! c~7 claim or suit brought affecting said property.
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■
/
\d
'i
M yn
».
lyt ** C4fcJ| 5. That Crest, Jcal P. Kastain and John W. HcCradna
» .•**• <#•/.
•"
**
^ili cooperato, assist end in every way help tha Bank, 12 tha Back
chsuld require or^desiro arch assistance in tha sale \csad
^-1
oatiofestioa of cold building lean mortgage3 sad will famish*
pefovido to
Byfo any end all records portainieg to cnstfixsai-
hrwf»nfcat cfce. xdiich nsy assist tha Bank in its terminating
fcha building loan mortgages#
\
. Nothing harain la Intended nor shall It release £ xca
•obligation eny part of tha indebtedness which the Bark may asoert
!|against Arnold Ritfc and tha Bank reserves all rights to proceed
against bin at any tima end for any amount vdiich tha Bank
determines.
IN WITNESS WHEREOF tha parties hereto have executed
thio Agreement the day and year first above written.
THE FI2ST NATIONAL; BANK CP EAST ISLIT
Y iW
/ 'u j f l
CHEST AFFILIATES, INC.
'joeJL ?. Kastain
if
Ia . w ° "■
Jopi w# «¿trains
n
___________ £
K
*. •
„
-vv>
t „ ’* ' • • .
•• Li» v /?"• ••'Vf - *.*VV».W'i*' ^* • ; ■;•• • ” "•
i
v’i'V- ’ ;.'hìV
J l ' ì. V.
STATE 0?$EN YORK
COUNTY OF SUFFOLK
’ C3. ?
/^m^’îAV V
Sînnc2^ 0^ ¿*y of ^
1972, before me paraonally
“S?33 JAY V., V.00DS uo ms known, who, being by ma duly sworn did
Jhat ha resides at 1728 61st Street, Brooklyn! New
.]^Q
the Executive Vice President of THE FIRST
NATIONAL BANK OF EAST ISLIP, the corporation described in and
ÎÜ^? 4 ? CeCUted
foregoing instrument; that he knows the saal
of said corporation; that taa csal affixed to said instrument is
finch corporate seal; that it was so affixed by o r d e ^ f t h T
E°«r^ u f DJrect°ra of said corporation/ end that hgJéigned his
Hama thereto by like order.
/
--- a
If
/
W4Lm /i WK, ja
ShTciSw Yort3
I
.
STATE OF NEW YORK
CCSUNIY OF SUFFOLK
%■ ^ 2243W0, Suilollt County
*«m (i0.rci Mtfcn 30. 19
SO . 3
On the 30th day of Hay, 1972, bafore me D e r a o n a llv
came JOEL P. KASTü IÎ? to ma known, who, being by me du¥y sworn
did depose and say that ha resides at 303S Timothy Lane. B^lliiore
New York; that ha is the Vice President of CREST AFFILIATES INC *
the corporation described in and which executed the foreeoinc
•instrument; that he knows the seal of said corporation, that
■cho seal affixed to cald instrument is such corporata seals that '
-t was so affixed by order of the board?of .directors of oaid
1
corporation and that he signed his naaé-thyrjibo—by like order.
]
•STATE dF NEW YORK
COUNTY OF SUFFOLK
88.3
On the 30th day of May, 1972, before mo personally
cams JOEL P. FASTED!, to me known to be the individual ."'described
-*?
,xdia executed the foregoing instnment ,/Snd. ntknQwledffed
,:thnt ha executed the eame.
/
/
/s'
f:
//
/ s
m
l i
I < \ fy,tun. York
'STATE OP NEW YORK ‘|
s jhh o
CO. I
« '» e f t J o .
|« 7 3
•County of'SUFFOLK 1
•T
'
On the 30th day of May, 1972, before ma personally •
dame JOHN W. HcORAIHE. to ma known to be the individual described
in end who executed tha foregoing- ixist^ument,%and^^knowledged ''
that ho executed the earns.
//, / /
S»
7
AlAlit«¡¡."LMÇ,JU.
lè v
m in ti'
8 t« u
rn.9 ft*jrnmm V w 4
•¿¿¿si'
•£ho Dnnlc will b- th» Mn*l orbitor .«
a a r torainste thl»» arrei.nent without notice
10
t. .v n r c : *n.; * V
: j
raflft -*'-*f-4lt .
in noting tfcua conditi-nti o? thlo ^rm^nent* I- i * *
*
undoratoed tbat thio a r r tto o f'n t will tafc** «f 'aet ii.re liHtniv
«ad will coatisrua for* nt lenat o throo non«.:»
on a triM
baoio* cad ia tho event that tho Bonk 1« a'-ic.’i i, will be
u t v m
«junr-orly baaia tharo^ftar« It i ; further un-er—
oeaabewplnted that thin egroonent n/»y continue for
I £&
fej© yooro or noro%
4;
q q
ill!
A ccep ted :
«»
£23
__
'iro-Tt /? ilint*>c Inc.
fnpitnl In u:i:trie»i Tnt.
•il >?* 197°
C sw it
A f filia t e « .
P . C. t o
C14
H ad
637
& Ond 6
Tue*
W llc u X
itO ftd
C o n ta r h o rlo h a a , r«w York
119*4
¿ttrrypl^q Of flr, Jori »^antelru Vico Vrc.ilfent
Doa? ffr* ¿ran tolai
Tfcw First Rational Eto of Feat lelip hni* ‘.Mr* day a,rro«d
Ito prr^ont r.lotloflliip ^.it.h .-our c ^ p . s f v , - ^
6&® following undo retrading nert arnarfc/utn:
F ^
°*
1* fonr cocpnrvy 1« mthorisod to ordor .xul »«it a* •v e ra r
oT 16 c«dui*r ho\i3o/« ;to be rural'hrd uy *,*pitul
por ucath on which Cho Dnnh Will nnbn tut l- |*»i lcam r ••
aa aoount not to exceed Sl'J^hO.Oo.
* u lud*.i PI
accoan&r/ lnprxnren. etc. )
2«
the next, throe rmrtho, *.h. » »*.r
iaddition to the aforoa.-ntlon-d bull inrnlcr • v r * n*,n' «•* . ,,
OSDO^J the cur Of -1.0/: V j . r o »hia’i i„ I Sr
Yl
, ? *V.e" *
to tlco, but in no event oh. 1* the rov lv'-;
coed the efornrontionod rua of
.»:___5* It ic ucoerotood nn 1 nprerd r.h.-t ni-.j ;
aatre their indoltodccaa for opr roxicMt^l«
>I S
C&9 co$e of 11^00per hou~e an the folio.»ir.r
a*
■?
L
•
•
'7
rimt 10 houaea on >/hi|# the; hnve ».
x»rt*;ago latoreot be releaseJ with no
connidaration*
The «Second 10 houn»« will E
Capital hv l^OO- per houae.
rrio*«od
• Thia errooccaent will continue on t.he cite rote i* h | L '
oKWhseseot cntil Japitol in paid the anovni o . < i n * *
o
ooapeny will >.orfc lr. conjunction with the L#irJc it,
_
caaiSo ^o:coatrnotore rail nub-contr«0tore in order to aiintnln**-n
loaa AdvuiCca on new cnnatruct
with .ora .xucc or other t’Sco-oct npuncicr or in-ti*-v.
fticsaa will be on nr Individual baaie #,n hrrotofor*
• 1 -
•*
SUPREME COURT : STATE OF NEW YORK
COUNTY OF SUFFOLK
JOEL P. KASTEIN, JOHN E. McCRAIME and
CREST AFFILIATES, INC.,
Plaintiffs,
VERIFICATION '
- against FIRST NATIONAL BANK OF EAST ISLIP,
UNTON J. BUCEK, ANDREW M. GEIS,
EVERETT GRIEK, CHARLES J. THORNEWELL,
RUSSELL J. WOLPERT, JAY W. WOODS and
HENRY CANALE,
Defendants.
------------------------------------------------------- X
STATE OF NEW YORK )
COUNTY OF SUFFOLK )
CO •
JOEL P. KASTEIN, and JOHN W. McGRAlME being duly sworn
depose and say that deponents are two of the plaintiffs in the
within action; that deponents have read the foregoing complaint
and know the contents thereof; that the same is true to
deponents' own knowledge, except as to the matters therein
stated to be alleged on information and belief,!and that as to
those matters deponents believe it to be true.
^
___________
JOEL P. KASTEIN
3
/
J oOHN
i W. McGRAlME
Sworn to before me this
> V d a y of October 1973
Exhihit I
East (slip, New York
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
BBO VV
MiL I M B ' ?
K:\uw M
B MEN m
KNOW
ALL
BY THESE PRESENTS THAT I, the undersigned shareholder of The First National Bank of East Tslip,
. iJ j| jyew York do hereby nominate, constitute, and appoint Everett Griek of Great River, New York and Charles J . Thornewell
fllay Shore, New York or either of them with full power to act alone, my true and lawful attorney (s) with full power of substitution,
Irmpand in my name, place and stead to vote all common stock of said Bank, standing in my name on its books on February 22, 197T
.1
Anmial Meeting of Shareholders to be held at its banking house, 315 East Main Street, East Islip, New York on Tuesday, March
menimi“
.1
. r ••1 n .1 ___
.1
__1 __ ; __ J ___ 1,1---r.a«nnillv nrocpnt ac fnllnwsî
r
(C O N T IN U E D A N D T O BE S IG N E D
O N R E V E R S E SID E )
L
"■rry
‘.i. Fixing the number of directors at t'/^XLO) and the election of those ten (10) p c r^ % listed in the Proxy'Statement iiateti
February 11, 1974 accompanying tlWhotice of said meeting.
^
F O R ............................ .......... .. ( )
WITHHOLD ............. . . . . . ( )
2 As of the date of this Proxy, the only business which management expects to be considered is the Election of Directors.
!
This Proxy confers authority to vote “ FOR” the above unless “ WITHHOLD” is indicated. If any other business is presented
mrcting, the persons named in this Proxy are expected to vote the Proxy in accordance with their judgment and recommendations
Imanagement.
The Board of Directors recommends a “ FOR” vote for the election of the named directors. This Proxy is solicited on the BE-
Ll F OF MANAGEMENT and may be revoked prior to its exercise. THE COST OF SOLICITATION IS BORNE BY THE BANK.
A T E:........................ . .................................... . 1974
UMBER OF SHARES ...........................................
0 OFFICER OR EMPLOYEE OF THE BANK
IAY BE NAMED AS PROXY.
......................................................................................... L S .
............................................................. ........................
L3 .
When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one trustee, all shall
sign. All joint owners must sign.
The First National Bank of East Islip
East Islip, New York
NOTICE OF ANNUAL MEETING
To the Shareholders:
Notice is hereby given that, pursuant to call of its Directors, the Annual Meeting of the
shareholders of The First National Bank of East Islip will be held at the banking house, 345
East Main Street, East Islip, New York on Tuesday, March 5, 1974 at 3:00 P.M., for the
purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. Fixing the number of Directors at ten (10) and the
election of the persons listed in the proxy statement dated February 11, 1974 accom
panying the notice of said meeting.
2. OTHER BUSINESS. Any other business that comes before the meeting or adjourn
ment thereof.
Only those shareholders of record at the close of business on February 22, 1974 shall be
entided to notice of the Annual Meeting and to vote at said meeting.
By order of the Board of Directors
Jay W. Woods
President
Dated: February 11, 1974
POLLS WILL BE OPEN FOR ONE (1) HOUR
SINCE THE ARTICLES OF ASSOCIATION OF THE BANK PROVIDE FOR APPROVAL OF A MA
JORITY VOTE OF ITS SHAREHOLDERS FOR THE ELECTION OF DIRECTORS, WE URGE YOU TO
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY WITH
DRAW YOUR PROXY AND VOTE IN PERSON.
The First National Bank of East Islip
East Islip, New York
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
Dated: February 11, 1974
This proxy statement is furnished in connection with the Annual Meeting of Shareholders
of The First National Bank of East Islip to be held at 3:00 P.M. on Tuesday, March 5, 1974
at the banking house, 345 East Main Street, East Islip, New York.
The Bank's only class of stock is its common stock, $2.50 par value, of which there are
616,173 shares outstanding. Only those Shareholders of record at the close of business on
February 22, 1974 shall be entitled to vote.
Each Shareholder has the right to vote die number of shares owned by him for as many
persons as there are directors to be elected, or to cumulate such shares and give one candidate
the number of votes equal to the number of directors to be elected multiplied by the number of
his shares, or to distribute them on the same principle among as many candidates as he thinks
fit. In the determination of all other matters that may be presented at the meeting, each share
holder is entitled to one vote on each share of stock held by him. The affirmative vote of a
majority of the votes represented at the meeting is necessary to adopt die resolution fixing die
number of directors to be elected for the ensuing year.
This solicitation of proxies is being made by management of The First National Bank
of East Islip. THE COST OF SOLICITATION WILL BE BORNE BY THE BANK.
A shareholder executing the proxy herewith presented has die power to revoke it at any
time prior to the exercise thereof.
1. ELECTION OF DIRECTORS: The directors are to be elected at the Annual Meeting
to hold office until die next Annual Meeting of Shareholders or until their successors
have been elected and have qualified. A shareholder entitled to vote for the election
of directors may make nominations for election to the Board of Directors. However,
the shareholder making such nomination must give written notification of such intent
to die President of die Bank and to the Comptroller of die Currency no later than
seven days after the receipt of tliis notice.
The proxies named on the enclosed form of proxy will vote in favor of fixing the number
>f directors at ten (10) and for the election of the ten (10) persons named below as directors
mless contrary instructions are specified on the proxy form. Each person nominated and named
lelow has consented to being named in the proxy statement and to serve as a director if elected.
The following table sets forth with reject to each nominee for director, his name, the year
in which he first became a director of the Bank, W principal occupation, and the number of
shares of capital stock of the Bank beneficially owned, either directly or indirectly, by him
or his associates as of December 31, 19 13.
YEAR
ELECTED
NAME
Unton J. Bucek
1952
s
Melvin R. Cannon
Andrew M. Geis *
1969
1949
Everett Griek £
Henry Hocker
1961
1971
John A. Mennella
Charles J. Thornewell
1970
1969
Alston A. Wever
/
1948
Russell J. Wolpert
1968
Jay W. Woods
1972
PRINCIPAL OCCUPATION
SHARKS OF
COMMON STOCK
OWNED
BENEFICIALLY
AS OF 12/31/73*
Retired Banker (The First National Bank of Fast
Islip) Formerly Cashier from 1950 to 1970
Attorney (Practicing since 1939)
Retired Banker (The First National Bank of Fast
Islip) Executive Vice President from 1950 to 1970
Insurance Broker (Since 1950) Proprietor
Contractor (Since 1958) President, Stanley Sand
and Gravel Co., Inc.
Real Estate
Real Estate Broker (Since 1965)
Proprietor, Thornewell Realty
Retired Banker (The First National Bank of East
Islip) Formerly President until 1970
Vice President (The First National Bank of East
Islip since 1962)
President (The First National Bank of East Islip,
employed November 1971) Former Representative
of Federal ReserveBank since 1956.
3,100
1,562
1,088
2,927
8,830
1,139
4,080
3,054
14,980
1,500
♦ Includes stock owned by immediate family members.
The following table sets forth, for the fiscal year ended December 31, 1973, the remun
eration of Officers and Directors:
Directors as a group
$ 17,010.00
Officers as a group (21)
5325,887.49
Officers or Directors in excess of $30,000. per year
Jay W. Woods, President
$ 31,000.00
Some of the Bank’s officers and directors, individually or through firms of which they are
involved, have had borrowing transactions in the ordinary course of business with the Bank. .
\ These transactions all were substantially on the same terms as those prevailing at the time /
for comparable transactions with other persons and do not involve more than normal risk of
collectibility or. present any other unfavorable features.
2. OTHER MATTERS: As of the date of this proxy statement, the only business which
management expects to be considered at the Annual Meeting is the Election of Direc
tors. However, if other matters come before the meeting, the persons named in the
attached form of proxy are expected to vote the proxy in accordance with their judg
ment and die recommendations of management on such matters.
9
9
• * % ■ ■4
The Bank in 1973 was the subject of two law suits, one of which involved a stockholders
suit against the Bank and some of its directors and officers. The Complaint asks for recovery
of the losses sustained in the Crest Affiliates Inc. and Vical Realty Corporation loan losses
totaling an alleged 8770,000.00. A copy of the complaint is on file at the Bank and is avail
able for inspection. This matter is being defended by the attorneys appointed by the insurers
under the terms of.the bank’s Blanket Bond and is still pending.
In the second matter, the Bank instituted suit against two of the principals of Crest Affili
ates Inc., Joel P. Kastein and John W. McGraime, seeking recovery on two $80,000.00 notes.
In a separate action brought by these defendants, they seek recovery from the Bank and some
of its officers and directors in the amount of $3,000,000.00. A copy of the complaint is also
on file at the Bank and may be inspected by any stockholder. The intention expressed by the
attorneys for Kastein et al is that they will shortly move to consolidate the actions and that the
separate suit was instituted as a matter of defense and counterclaim to the Bank’s action on the
notes. This, too, is being defended by the attorneys appointed by the insurers under the terms
of the bank’s Blanket Bond. This matter is still pending.
The coverage afforded by the bank’s Blanket Bond, in the opinion of the Board of Direc
tors, is deemed adequate to cover these suits.
By order of the Board of Directors
Jay % Woods
President
N O TIC E IS H ER EB Y G IV EN , that pursuant to the call of its Directors, a special
meeting of the shareholders of The First National Bank of East Islip w ill be held at
St. Mary’s R.C. Parish Hall located at 122 West Main Street, East Islip, New York on
Tuesday, November 12,1974 at 1:00 o’clock in the afternoon for the purpose of considering
and voting upon the following matters:
1. Election of Directors. Fixing the number of Directors at ten (10) and the.
election of the ten (10) persons listed in the Proxy Statement dated October 18, 1974
accompanying this notice of the meeting.
2. Amendment of Articles of Association. Amending Article Third of the Articles
of Association to permit the enactment by the Board of Directors of a By-law granting
authority to the Board to increase the number of Directors to a number greater than
last determined by the shareholders.
3.
Whatever other business may be brought before the meeting or any adjourn
ment thereof.
Only those shareholders of record at the close of business on October 1, 1974 shall be
entitled to notice of and to vote at the meeting.
.B Y O RD ER O F T H E BOARD O F D IR EC TO R S,
JOHN A. M EN N ELLA ,
Chairman of the Board
Dated at East Islip, New York
October 22,1974
Shareholders who cannot attend the meeting in person are urged to sign the enclosed
Proxy and return it in the envelope enclosed for that purpose as promptly as possible. The
enclosed P ro w m ay be revoked prior to its exercise.
o
THE FIR ST NATIONAL BANK OF EAST ISLIP
PROXY STATEMENT
(Submitted by Management)
INTRODUCTORY STATEMENT
The accompanying Proxy is solicited by the management of The First National Bank of East Islip
(hereinafter called the “Bank” ) for use at the Special Meeting of Shareholders to be held at St. Marys
R.C. Parish Hall located at 122 West Main Street, East Islip, New York, on Tuesday, November 12,
1974 at 1:00 o’clock in the afternoon, or at any adjournment thereof. When such proxy is properly
executed and returned, the shares it represents w ill be voted at the meeting in accordance with any
instructions noted thereon. In the absence of specific instructions, Proxies received by management
will be voted for the election as Directors of those persons and for the amendment to the Articles of
Association set forth below. If any other matters are properly brought before the meeting, Proxies
will be voted in accordance with the recommendations of the Banks management on such matters.
In February 1974, Charles and Martha Wolpert brought suit, as stockholders of the Bank and on
behalf of all stockholders of the Bank, against the Bank and Charles J. Thomewell, Alston A. Wever,
Bussell J. Wolpert, John A. Mennella, Unton Bucek, Andrew M. Geis, Melvin B. Cannon, Jay W.
Woods, Everett Griek and Henry Hocker, as members of the Board of Directors of the Bank and
individually. The suit was brought in the United States District Court for the Eastern District of
New York and bears file number 74C-333. The complaint in this suit (commonly referred to as a
“stockholders’ derivative suit” ) alleges various acts of negligence, misfeasance and malfeasance by the
individual defendants which resulted in pecuniary loss to the Bank and seeks to hold the individual
defendant? liable therefor.
Simultaneously with bringing the suit, the plaintiffs sought to enjoin the Bank’s annual meeting
scheduled for March 5, 1974. The Court denied plaintiffs’ motion, and the annual meeting was held
as scheduled. At the meeting, the plaintiffs sought to nominate ten candidates for election to the
Board of Directors. The chairman of the meeting rejected the nominations and refused to accept the
proxies and ballots that were proffered in support of plaintiffs’ candidates upon the ground that the
notification permitted by the Comptroller’s Regulations and required by the Bank’s By-Laws had not
been complied with, in that plaintiffs’ had not set forth all of the information required.
A ll of management’s nominees were elected at the March meeting. Plaintiffs then moved to set
the annual meeting aside upon the grounds, among others, that the Bank’s management had improperly
refused to accept plaintiffs’ nominations and the ballots and proxies that plaintiffs sought to cast for
their nominees.
The Court found that management’s rejection of the proposed nominees was arbitrary. The Court
ruled that at least three of the rejected nominees could have been elected. However, as the Court
did not find the facts to clearly suggest how the ballots would have been cast had the opposition
nominees been recognized, and that reconstruction of events was impossible, all circumstances con
sidered, the Court found that the election must be set aside and a new one ordered. Accordingly,
pursuant to the order of the Court dated September 9, 1974, a new election has been scheduled for
Tuesday, November 12, 1974.
1
As of October 1, l$h-i the number of shares of the Bank’s comnlun capital stock outstanding and
entitled to notice of and to vote at the meeting was 616,173. Only those shareholders of record at the
close of business on October 1, 1974 shall be entitled to notice of and to vote at the meeting. In the
election of Directors, shareholders are entitled to vote their shares on a cumulative basis. (See
“Election of Directors” below).
E LE C T IO N O F D IR EC TO R S
The Articles of Association and the By-laws of the Bank provide that the number of Directors
to be elected at the shareholders’ meeting w ill be determined by vote of tire shareholders. A resolution
w ill be offered at the shareholders’ meeting fixing the number of Directors at ten (1 0).
The persons named below w ill be nominated for election as Directors to serve until the 1975
annual meeting of the shareholders and until their successors shall have qualified. Other nominations
may be made in accordance with Section 1.4 of the By-laws of the Bank and relevant Federal law.
It is the intention of the persons named in the Proxy to vote for the resolution establishing the number
of Directors at ten (10) and for the election of the following nominees:
Name and Date
First Became a Director
David S. Augenblick (1 )
Shares
Beneficially
Owned
as of
October 1,
1974
Principal Occupation
or Employment
2,345
Self employed in the general practice
of dentistry for more than the past
five years.
400
President, Cantor Bros. Glass Corp.,
retail floor covering, glazing con
tracting, for more than the past
five years.
2,100
Self employed in the general practice
of medicine for more than the past
five years.
465
Member, Wrenn & Schmid, At
torneys, for more than the past five
years.
Henry Hocker, 1971 ( 2 ) ..............
8,S30
President, Stanley Sand and Gravel
Co., Inc., building supplies.
John A. Mennella, 1970 (2) . . . .
1,300
President and Chairman of the Board
of Directors, The First National
Bank of East Islip.
Charles J. Thornewell, 1969 (2)
4,0S0
President, Brentwood Holding Corp.,
real estate investments.
Robert Rumplik (1 )
1,550
President, Rumplik Chevrolet, Ine.,
retail auto sales, for more than the
p.isl fu'ii years.
Harry Cantor, 1974 (1 )
Morris Chesanow (1 ) ................
John J. Halleron, I I I , 1974 (1 )
1
Name and Date
First Became a Director
Shares
Beneficially
Owned
as of
October 1,
1974
400
President, Griffin-Rutgers Co. Inc.,
industrial machinery imports and
sales, for more than the past five
years
14,769
Vice President, The First National
Bank of East Islip.
Robert Umbdenstock, 1974 (1)
Russell J. Wolpert, 1968 (2 )
Principal Occupation
or Employment
(1) The principal occupation or employment for the past five years is set forth for nominees who
have not previously been elected as Directors by vote of the shareholders.
(2) Is a defendant in the stockholders’ derivative suit brought by Charles and Martha Wolpert.
Section 2.9 of the Bank’s By-laws provides that when any vacancy occurs among the Directors,
the remaining members of the Board, in accordance with the laws of the United States, may appoint a
director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that
purpose.
Federal law provides in relevant part (12 U.S.C. 61):
“In all elections of directors, each shareholder shall have the right to vote the number of
shares owned by him for as many persons as there are directors to be elected, or to cumulate
such shares and give any one candidate as many votes as the number of directors to be elected '
multiplied by the number of his shares shall equal, or to distribute them on the same principle
among as many candidates as he shall think fit; and in deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of stock held by
him ***.”
The procedures whereby nominations for election to the Board may be made by any shareholder
are set forth in Section 1.4 of the Banks by-laws, which provides:
“Nominations for election to the Board of Directors may be made by the Board of Directors or
by any shareholder of any outstanding class of Capital Stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the existing manage
ment of the bank, shall be made in writing and shall be delivered or mailed to the President of the
bank and the Comptroller of the Currency, Washington, D. C., not less than fourteen (14) days
nor more than fifty (50) days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than twenty one (21) days notice of the meeting is given
to shareholders, such nomination shall be mailed or delivered to the President of the bank and to
the Comptroller of the Currency not later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the name and address
of eac h proposed nominee; (b) the principal occupation of each nominee; (c) the total number of
shares of the capital stock of the bank that will be voted for each proposed nominee; (d) the name
and die resident address of the notifying shareholder; and (e) the number of shares of capital stock
I
of the bank ownedv*rfy the notifying shareholder. Nominations not made in accordance herewith
may, in his discretion, be disregarded by the Chairman of the meeting, and upon his instructions,
the vote tellers may disregard all votes cast for each such nominee.”
AM END A R T IC L E TH IR D O F T H E BANK’S A R T IC LES OF ASSOCIATION
TO P ER M IT T H E EN ACTM EN T OF A BY-LAW GRANTING A U TH O RITY TO
T H E BOARD OF D IREC TO RS TO IN C R EA SE T H E M EM BERSH IP O F
T H E BOARD AND TO F IL L T H E VACAN CIES C R EA TED T H E R E B Y
Federal law provides in relevant part (12 U.S.C. 74):
“Any vacancy in the board shall be filled through appointment by a majority of the
remaining directors then in office, and any director so appointed shall hold his place until the
next election.”
Interpretive Ruling 7.4305 of the Comptroller of the Currency states:
“If authorized by the bank’s articles of association or an amendment thereto, a national
bank may properly increase the number of its directors within the limits specified in 12 U.S.C.
71a [which said section states in relevant part that the Board shall be not less than five nor
more than twenty-five members] and appoint persons to fill the resulting vacancies between
meetings of stockholders. Such authorization to increase the number of directors shall be
limited to not more than two where the number of directors last elected by shareholders was
fifteen or less and not more than four where the number of directors last elected by share
holders was sixteen or more.”
To effect the authority stated in the foregoing Comptroller’s Ruling, the Board of Directors pro
poses the following resolution:
“RESO LV ED , that the Bank’s Articles of Association be amended by striking out and deleting the
provisions of Article Third in its entirety, and in lieu thereof said Article Third shall read as
follows:
“The Board of Directors of this Association shall consist of not less than five nor more than twentyfive members, the exact number of Directors within such minimum and maximum limits to be
fixed and determined from time to time by resolution of a majority of the full Board of Directors
or by resolution of the shareholders at any annual or special meeting thereof. Unless otherwise
provided by the laws of the United States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by action of the Board of Directors.”
The vote of shareholders owning a majority of the outstanding stock of the Bank is required for
approval of the foregoing resolution. If such approval is obtained, the Board of Directors w ill imple
ment the Articles ft? Association by enacting a new By-law permitting the Board of Directors to increase
the number of directors by not more than two where the number of directors last elected by share
holders was fifteen or less, and by not more than four where the number of directors last elected by
shareholders was sixteen or more. The Bank’s By-laws, in Section 2.2, presently provided for an increase
in the Board of Directors by resolution of a majority thereof so long as such increase does not add more
than two members -over the number last elected by the shareholders. Such By-law is not effective
because of the lack of authority in the Bank's Articles of Association which the proposed amendment
is intended to cure.
I
o
o
The Board of Directors recommends that the shareholders approve the foregoing resolution to
permit the Bank to have the authority allowed by governing statutes so that the Bank may benefit by
the addition of experienced and qualified bankers, industrialists, professionals and other persons to the
Board from time to time, when circumstances are deemed favorable by the Board.
R E> rC X E B A T lON OF M ANAGEM ENT
‘ .'V'
ev//>/í//í
"Num* \r. 1
hmuirrd'jvii
or Number m J'tnrjzii
_____in Croup_____
Jay W. W oods..................................
Isi.*vr.
W as K*rceiv*:<i
P.+rn ur»«rratio n
President and Chief Executive
Officer
$ 31,920.00
A ll 22 Directors and officers as
a group...........................................
$222,015.99(1)
(1 ) Includes $17,010.00 paid to the 10 directors as a group. Excludes $31,503.2S paid to
retired officers Alston A. Wever, Unton J. Bucek and Andrew M. Geis in accordance with their
Consulting Agreements with the Bank, approved by the shareholders at the March, 1972
Annual Meeting.
The following table shows the aggregate pension or retirement benefits paid during the year
ended December 31, 1973, directly or indirectly, by the Bank to each director and officer whose
aggregate direct remuneration exceeded $30,000;
Name of Individual
Amount Set Aside
or Accrued
Alston A. W e v e r...........................................................
Unton J. B u c e k ...................................................... .. • •
Andrew M. G e is ................................
$12,881.52
10,581.84
8,041.92
Estimated Annual
Benefits Upon
Retirement
$12,881.52
10,581.84
8,041.92
TRANSACTIONS W ITH M ANAGEM ENT
No Director of the Bank has had any transactions with the Bank except in the usual course of
business and except for commercial loans made to certain of the Directors and to companies in which
a Director had an interest. A ll such loans were made in arms’ length transactions upon terms and
conditions not less favorable to the Bank than other loans made contemporaneously to unaffiliated
applicants of comparable economic and financial circumstances.
Federal law (12 U.S.C. 93) provides, in relevant part, that directors of a national bank may
be held liable if they knowingly pennit their bank to engage in certain activities, such as making
loans in amounts exceeding the limit set by pertinent federal law. The stockholders derivative suit
seeks among other things, to hold the individual defendants liable for having made certain loans
in amounts which plaintiffs allege are in excess of the Banks lending limit, and which loans were
not paid by the borrowers and were thereafter charged-off by the National Bank Examiners. The
answer filed by the defendant-directors denied that such loans exceeded the Banks lending limits,
and denied any personal liability'.
5
J
v o t in g s e c u r it ie s a n d p r in c ip a l h o l d e r s t h e r e o f
As of October 1,1974, there were outstanding and entitled to vote 616,173 shares of common capital
stock, such class of stock being the only class issued and outstanding. Each outstanding share entitles
the record holder to one vote on each proposal which w ill be presented to the meeting, except that
shares may be voted cumulatively in the election of directors as described above.
As of October 1, 1974, to the knowledge of management, no person was the beneficial owner of
more than ten percent (10% ) of the Bank’s outstanding common capital stock.
M ISCELLAN EO U S
Management w ill solicit proxies by direct mailing to all shareholders. Management contemplates
that various Directors may, on an ad hoc basis, personally solicit shareholders. It is anticipated that the
cost of solicitation w ill not exceed $2,000 which w ill be expended for the printing costs of the proxy
materials, stationery and postage. No portion of the estimated charge has been billed to the Bank as
of the date of this proxy statement. The cost of the solicitation w ill be borne by the Bank.
At the time of the preparation of this Proxy Statement, the Bank has no notice or information of
any matters to be presented by or on behalf of the Bank or its management for action at the meeting
other than those listed in this Proxy Statement. If any other matters come before the meeting or any
adjournment thereof, it is intended that the Proxies w ill be voted in respect thereof in accordance with
the recommendations of the Bank’s management.
Shareholders who cannot attend the meeting in person are urged to sign the enclosed form of
Proxy and return it at once in the envelope enclosed for that purpose. Shareholders who execute
Proxies retain the right to revoke them at any time before they are voted. Such revocation is effected
without prior notice if the shareholder who has given such Proxy attends the meeting and elects to
vote in person. A Proxy, when executed, and not so revoked, w ill be voted in accordance therewith.
By Order of The Board of Directors,
A. M e n n e l l a ,
__________.. __________ SL—B M l fc- . v .^Chairm an ofthe-B oar d
J ohn
....
East Islip, New York
October 22,1974
Exhibit K
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THE FIRST NATIONAL BANK OF EAST ISLll*
To Be Held March 4, 1975
To the Shareholders:
N O TICE IS H E R E B Y G IV EN , that pursuant to the call of its Directors, the annual
meeting of the shareholders of The First National Bank of East Islip will be held at St. Mary’s
R.C. Parish Hall located at 122 West Main Street, East Islip, New York on Tuesday,
Maich 4, 1975 at 1:00 o’clock in the afternoon for the purpose of considering and voting
upon the following matters:
1. Election o f D irectors. Fixing the number of Directors at eleven (11) and
the election of the eleven r j j ) persons listed in the Proxy Statement dated Febru
ary 10, 1975 accompanying this notice of the meeting.
2. Whatever other business may be brought before the meeting or any
adjournment thereof.
Only those shareholders of record at the dose of business on February 3, 1975 shall be
B\ O rdls. cv: 7 m
J ohn A. M en nella ,
Chairm an of the Board
Dated at East Islip, New York
February 10, 1975
| m i'fiiv.» n
p n ll
ar-
W ty **
u
dope enclosed for that purpose as promptly
THE FIRST NATIONAL BANK OF EAST ISLIP
PROXY STATEMENT
(Submitted by Management)
INTRODUCTORY STATEMENT
The accompanying Proxy is solicited by the management of The First National Bank of East Islip
(hereinafter called the “Bank” for use at the Annual Meeting of Shareholders to be held at St. Mary’s
R.C. Parish Hall located at 122 West Main Street, East Islip, New York, on Tuesday, March 4, 1975
at 1:00 o’clock in the afternoon, or at any adjournment thereof. When such proxy is properly executed
and returned, the shares it represents will be voted at the meeting in accordance with any instructions
noted thereon. In the absence of specific instructions, Proxies received by management w ill be voted
for the election as Directors of those persons set forth below. If any other matters are properly brought
before the meeting, Proxies will be voted in accordance with the recommendations of the Bank’s
management on such matters.
As of February 3, 1975 the number of shares of the Bank’s common capital stock outstanding
and entitled to notice of and to vote at the meeting was 616,173. Only those shareholders of record
at the close of business on February 3, 1975 shall be entitled to notice of and to vote at the meeting.
In the election of Directors, shareholders are entitled to vote their shares on a cumulative basis. (See
“Election of Directors” below).
ELEC TIO N OF D IR EC TO R S
The Articles of Association and the By-laws of the Bank provide that the number of Directors
to be elected at the shareholders’ meeting w ill be determined by vote of the shareholders. A resolution
will be offered at the shareholders’ meeting fixing the number of Directors at eleven (1 1 ).
The persons named below will be nominated for election as Directors to serve until the 1976
annual meeting of the shareholders and until their successors shall have qualified. Other nominations
may be made in accordance with Section 1.4 of the By-laws of the Bank (see page 4) and relevant
Federal law. It is the intention of the persons named in the Proxy to vote for the resolution establishing
the number of Directors at eleven (11) and for the election of the following nominees:
Name and Dale
First Became a Director
Shares
Benchciatly
Owned
as of
February 3,
1975
David S. Augenblick, 1974 ( 1 ) ..........
2,345
Carl S. Bnnno. 1^ 74............ .. . ____
565
Principal Occupation
or Fin ploy incut
Self employed in the general practice of dentistry
for more than the past five years.
Attorney.
Name and Date
First Became a Director
Shares
Beneficially
Owned
as of
February3,
1975*
Principal Occupation
or Employment
John J. Halleron, III, 1974 ....................
465
Henry Hocker, 1971 . . ............................
8,830
President, Stanley Sand and Gravel Co., Inc.,
building supplies.
John A. Mennella, 1970 ...................... .
1,300
President and Chairman of the Board of Direc
tors, The First National Bank of East lslip.
Charles J. Thornewell, 1969 ..................
4,080
President, Brentwood Holding Corp., real estate
investments.
Robert Rumplik, 1974 ..................... . .
1,550
President, Rumplik Chevrolet, Inc., retail auto
sales.
400
President, Griffin-Rutgers Co. Inc., industrial ma
chinery imports and sales.
14,769
Vice President, The First National Bank of East
lslip.
Robert Umbdenstock, 1974 ..................
Russell J. Wolpert, 1968 . . . ____. . . .
Member, Wrenn & Schmid, Attorneys.
(1) The principal occupation or employment for the past five years is set forth for nominees who
have not previously been elected as Directors by vote of the shareholders.
Section 2.9 of the Bank’s By-laws provides that when any vacancy occurs among the Directors,
the remaining members of the Board, in accordance with the laws of the United States, may appoint a
director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that
purpose.
Section 2.2 of the Bank's By-laws provides, in relevant part, that hv resolution of a majority
of the Board of Directors, the number of Directors may be increased by not more than four over the
number of Directors last elected by the shareholders, where such number was sixteen or more, but shall
not be increased by more than two where the number of Directors last elected by the shareholders was
fifteen or less. A ll persons elected to the Board of Directors serve until the next annual meeting of
shareholders and until the successors shall have qualified.
Federal law provides in relevant part (12 U.S.C. 6 1 ):
The procedures whereby nominations for election to the Board may be made by any shareholder
are set forth in Section 1.4 of the Bank’s By-laws, which provides:
“Nominations for election to the Board of Directors may be made by the Board of Directors
or by any shareholder of any outstanding class of Capital Stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the existing manage
ment of the bank, shall be made in writing and shall be delivered or mailed to the President of the
bank and the Comptroller of the Currency, Washington, D. C ., not less than fourteen (14) days
nor more than fifty (50) days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than twenty-one (21) days notice of the meeting is given
to shareholders, such nomination shall be mailed or delivered to the President of the bank and to
the Comptroller of the Currency not later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the name and address
of each proposed nominee; (b) the principal occupation of each nominee; (c ) the total number of
shares of capital stock of the bank that will be voted for each proposed nominee; (d ) the name
and the resident address of the notifying shareholder; and (e) the number of shares of capital stock
of the bank owned by the notifying shareholder. Nominations not made in accordance herewith
may, in his discretion, be disregarded by the Chairman of the meeting, and upon his instructions,
the vote tellers may disregard all votes cast for each such nominee.”
REM UN ERATIO N OF MANAGEMENT
The following table shows the aggregate direct remuneration paid by the Bank during the year
ended December 31, 1974 to each Director and Officer, if any, whose aggregate remuneration exceeded
$30,000, and to all Officers and Directors of the Bank as a group.
Name of Individual
or Number of Persons
in Group
Aggregate
Direct
Remuneration
A ll 29 Directors and officers as
a group........................................
$218,679,441
TRANSACTIONS W ITH MANAGEMENT
No Director of the Bank has had any transactions with the Bank except in the usual course of
business and except for commercial loans made to certain of the Directors and to companies in which
a Director had an interest. A ll such loans were made in arm’s length transactions upon terms and
conditions not less favorable to the Bank than other loans made contemporaneously to unaffiliated
applicants of comparable economic and financial circumstances.
VO TING S E C U R IT IE S AND PR IN C IPA L H O LD ERS T H E R E O F
As of February 3, 1975, there were outstanding and entitled to vote 616,173 shares of common
capital stock, such class of stock being the only class issued and outstanding. Each outstanding share
entitles the record holder to one vote on each proposal which will be presented to the meeting, except
that shares may be voted cumulatively in the election of directors as described above.
4
As of February 3, 1975, to the knowledge of management, no person was the beneficial owner of
more than ten percent (10% ) of the Bank’s outstanding common capital stock.
MISCELLANEOUS
Management will solicit Proxies by direct mailing to all shareholders. Management contemplates
that various Directors may, on an ad hoc basis, personally solicit shareholders. It is anticipated that
the cost of solicitation will not exceed $2,000, which will be expended for the printing costs of the proxy
materials, stationery and postage. No portion of the estimated charge has been billed to the Bank as
of the date of this proxy statement. The cost of the solicitation will be borne by the Bank.
At the time of the preparation of this Proxy Statement, the Bank has no notice or information of
any matters to be presented by or on behalf of the Bank or its management for action at the meeting
other than those listed in this Proxy Statement. If any other matters come before the meeting or any
adjournment thereof, it is intended that the Proxies will be voted in respect thereof in accordance with
the recommendations of the Bank’s management.
Shareholders who cannot attend the meeting in person are urged to sign the enclosed form of
Proxy and return it at once in the envelope enclosed for that purpose. Shareholders who execute
Proxies retain the right to revoke them at any time before they are voted. Such revocation is effected
without prior notice if the shareholder who has given such Proxy attends the meeting and elects to
vote in person. A Proxy, When executed, and not so revoked, will be voted in accordance therewith.
B y Order
of
T he B oard of D irectors,
J ohn A. M en nella ,
Chairman of the Board
East Islip, New York
February 10, 1975
1. Fixing the number of directors to be elected at eleven (1 1 ), and the election of the eleven (11) persons listed in the
Proxy Statement dated February 10, 1975.
W ITHHO LD □
FO R □
2. With respect to whatever other business may be brought before the meeting or any adjournments thereof. Manage
ment at present knows of no other business to be brought before the meeting.
I This Proxv confers authority to vote FO R proposition 1 listed above unless W ITHHO LD is indicated. If any other business
E
«
or*any adjournments thereof, this Proxy shall be voted in accordance with the recommendations of
■ ires«
Ljs management.
he Board of Directors recommends a vote FO R proposition 1.
il
Id:
( S lan atu re o f S h a reh o ld e r Ì
Number of Shares
(Signature of Shareholder)
When signing as attorney, executor, administrator, trustee or guardian, please give full
tille. If there is more than one trustee, all should sign. All joint owners should sign.
EASE F IL L IX T H E NUM BER OF SHARES H ELD . SIGN AND D A TE TH IS SID E, AND RETU RN IM M ED IA T ELY ,
isProxy is solicited on behalf of management and may be revoked prior to its exercise.
P li O X Y
Submitted by The First National Bank of East Islip
East Islip , New Y o rk
This Proxy Is Solicited on Behalf of Management
The undersigned shareholder of The First National Bank of East Islip hereby constitutes and appoints E V E R E T T GRI1
d CHARLES J. TH O RN EW ELL (no officer or employee of the Bank may be named as proxy), and each of them (with ft.
wer to act alone), true and lawful attorneys, agents and proxies, with power of substitution to each, to attend the Annu
fitting of Shareholders of said Bank to be held at St. Mary’s R .C . Parish H all, 122 West Main Street, East Islip, New York o
pday, March 4, 1975 at 1:00 o’clock P.M ., or at any adjournments thereof, and thereat to vote all the shares of commost°ck of said Bank that the undersigned shall be entitled to vote, with all the powers the. undersigned would possess i
"ally present, upon the election of directors and whatever business which may be brought before said meeting or at am
urnment thereof. Without limiting the general authorization hereby given, said attorneys are instructed to vote as follows: "
r
(CO N TIN UED AND TO B E SIGNED
ON R E V E R S E S ID E)
i
^
Exhibit. L
* ; *a# v
NOTICE OF ANNUAL M EETING OF SHAREHOLDERS
of
THE FIRST NATIONAL BANK OF EA ST 1ST IP
To Be Held March 2, 1976
To the Shareholders:
N O TICE IS H E R E B Y G IV EN , that pursuant to the call of its Directors, the annual
meeting of the shareholders of the First National Bank of East Islip will be held at St. Mary’s
R.C. Parish Hall located at 122 West Main Street, East Islip, New York on Tuesday, March 2,
1976 at 1:00 o’clock in the afternoon for the purpose of considering and voting upon the
following matters:
1. Election of D irectors. Fixing the number of Directors at nine (9 ) and the
election of the nine (9 ) persons listed in the Proxy Statement dated February 9,
1976 accompanying this notice of the meeting.
2. Amendment of the Articles of Association; amending Article Eighth of the
Bank's Articles of Association to provide for future amendments by a vote of a
majority of the shares entitled to vote, except as otherwise provided by law.
3. Whatever other business may be brought before the meeting or any
adjournment thereof.
Only those shareholders of record at the close of business on February 2, 1976 shall be
entitled to notice of and to vote at the meeting.
B y O rde
D irectors ,
\ J ohn A. M ennella ,
Chairman of the Board
Dated at East Islip, New Y
February 9, 1976
Shareholders who cannot
person are urged to sign the »"dosed
Proxy and return it in the envelope enclosed" forthat purpose as promptly as possible. The
enclosed Proxy may be revoked prior to its exercise.
/
THE FIRST NATIONAL BANK OF EA ST ISLIP
PROXY STATEM ENT
(Submitted by Management)
INTRODUCTORY STATEM ENT
The accompanying Proxy is solicited by the management of The First National Bank of East Islip
(hereinafter called the “Bank” ) for use at the Annual Meeting of Shareholders to be held at St. Mary’s
R.C. Parish Hall located at 122 West Main Street, East Islip, New York, on Tuesday, March 2, 1976
at 1:00 o’clock in the afternoon, or at any adjournment thereof. When such proxy is properly executed
and returned, the shares it represents will be voted at the meeting in accordance with any instructions
noted thereon. In the absence of specific instructions, Proxies received by management will be voted
for the election as Directors of those persons set forth below. If any other matters are properly brought
before the meeting, Proxies will be voted in accordance with the recommendations of the Bank’s manage-»
ment on such matters.
VO TIN G S EC U R ITIES AND P R IN C IP A L H O LD ERS TH ER EO F
As of February 2, 1976 the number of shares of the Bank’s common capital stock outstanding and
entitled to notice of meeting and to vote at the meeting was 616,173. Only those shareholders of record
at the close of business on February 2, 1976 shall be entitled to notice of meeting and to vote at the
meeting. Each outstanding share entitles the record holder to one vote on each proposal which will
be presented to the meeting, except in the election of directors. In the election of directors, shareholders
are entitled to vote their shares on a cumulative basis. (See “Election of Directors” below).
As of February 2, 1976, to the knowledge of management, no person was the beneficial owner of
more than ten percent (1 0 % ) of the Bank’s outstanding common capital stock.
ELEC TIO N O F D IR EC TO R S
The Articles of Association and the By-Laws of the Bank provide that the number of Directors to
be elected at the shareholders’ meeting will be determined by vote of the shareholders. A resolution w ill
be offered at the shareholders’ meeting fixing the number of Directors at nine (9 ).
The persons named below will be nominated for election as Directors to serve until the 1977 annual
meeting of the shareholders and until their successors shall have qualified. Other nominations may be
made in accordance with Section 1.4 of the By-Laws of the Bank and relevant Federal law. It is the
intention of the persons named in the Proxy to vote for the resolution establishing the number of
Directors at nine (9 ) and for the election of the following nominees:
First Became a Director
Shares
Bcnelicially
Owned as of
February 2,
1976
David S. Augenblick, 1974 .........................
2,345
Harry Cantor, 1974 ........................................
400
Principal Occupation
or Employment
Self employed in the general practice of dentis»
try.
President, Cantor Bros. Glass Corp., retail floor
covering, glazing contracting.
tcrpd
•
t
*
First Became a Director
Shares
Beneficially
Owned as of
February 2,
1976
Principal Occupation
or Employment
Richard J. Gray, 1975(1) ...........................
400
Executive Vice-President of the First National
Bank of East Islip, bank officer for more than
the past five years.
John J. Halleron, I I I , 1974 .........................
465
Member, Wrenn & Schmid, Attorneys.
Henry Hocker, 1971 .....................................
10,070
President, Stanley Sand and Gravel Co., Inc.,
building supplies.
John A . Mennella, 1970 .................................
1,678
President and Chairman of the Board of
Directors, The First National Bank of East
Islip.
Charles J. Thomewell, 1969 .......................
4,085
President, Brentwood Holding Corp., real estate
investments.
Robert Rumplik, 1974 ...................................
1,550
President, Rumplik Chevrolet, Inc., retail auto
sales.
Russell J. Wolpert, 1968 ..............................
18,356
Vice President, The First National Bank of East
Islip.
(1) The principal occupation or employment for the past five years is set forth for nominees who have
not previously been elected as Directors by vote of the shareholders.
Section 2.9 of the Bank’s By-Laws provides that when any vacancy occurs among the Directors, the
remaining members of the Board, in accordance with the laws of the United States, may appoint a
director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for
that purpose.
Section 2.2 of the Bank’s By-Laws provides, in relevant part, that by resolution of a majority of
the Board of Directors, the number of Directors may be increased by not more than four over the
number of Directors last elected by the shareholders, where such number was sixteen or more, but
shall not be increased by more than two where the number of Directors last elected by the shareholders
was fifteen or less. A ll persons elected to the Board of Directors serve until the next annual meeting
of shareholders and until the successors shall have qualified.
Federal law provides in relevant part (12 U .S.C. 6 1 ):
“ In all elections of directors, each shareholder shall have the right to vote the number of
shares owned by him for as many persons as there are directors to be elected, or to cumulate
such shares and give any one candidate as many votes as the number of directors to be elected
multiplied by the number of his shares shall equal, or to distribute them on the same principle
among as many candidates as he shall think fit; and in deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of stock held by him ***.”
3
The procedures whereby dominations for Hâtant (o il.o
are set forth in Section 1.4 of the Bank's By-l.aws, which pmvnlcs;
nmv M nm.l.- by „„y
Nominations for election to the Board of Directors may be mude by the Board of Diicclors
or by any shareholder of any outstanding class of Capital Stock, of the bank entitled to vote for
the election of Directors. Nominations, other than those made by or on behalf of the existing
management of the bank, shall be made in writing and shall be delivered or mailed to the President
of the bank and the Comptroller of the Currency, Washington, D. C , not less than fourteen (14)
days nor more than fifty (50) days prior to any meeting of shareholders called for the election
of directors, provided, however, that if less than twenty-one (21) days notice of the meeting is
given to shareholders, such nomination shall be mailed or delivered to the President of the bank
and to the Comptroller of the Currency not later than the close of business on the seventh (7 )
day following the day on which the notice of meeting was mailed. Such notification shall contain
the following information to the extent known to the notifying shareholder: (a ) the name and
address of each proposed nominee; (b) the principal occupation of each nominee; (c) the total
number of shares of capital stock of the bank that will be voted for each proposed nominee;
(d) the name and the resident address of the notifying shareholder; and (e) the number of shares
of capital stock of the bank owned by the notifying shareholder. Nominations not made in
accordance herewith may, in his discretion, be disregarded by the Chairman of the meeting, and
upon his instructions, the vote tellers may disregard all votes cast for each such nominee.”
REM U N ERATIO N OF M AN AGEM EN T
The following table shows the aggregate direct remuneration paid by the Bank during the year
ended December 31, 1975 to each Officer and Director, if any, whose aggregate remuneration exceeded
$40,000, and to all Officers and Directors of the Bank as a group.
(D)
<E)
Amount set aside
Estimated
(O
(B)
(A)
Name of individuals
or Dumber of persons
in croup
19
Aggregate
direct
remuneration
Capacities in
which remuneration
was received
for Pensions
during Band’s last
fiscal year
$201,419.52
Officers and Directors
as a group
$7,458.76
annual pension
benefits upon
retirement
$58,425.00
TRANSACTIO N S W ITH M ANAGEM ENT
No Director of the Bank has had any transactions with the Bank except in the usual course of
business and except for commercial loans made to certain of the Directors and to companies in which
a Director had an interest. AH such loans were made in arm's length transactions upon terms and
conditions not less favorable to the Bank than other loans made contemporaneously to unaffiliated
applicants of comparable economic and financial circumstances.
AM ENDM ENT OF A R T IC L E EIG H TH OF T H E A R T IC L E S OF ASSOCIATION
The Board of Directors recommends that the stockholders amend Article Eighth of the Bank’s
Articles of Association to provide for future amendments by a vote of a majority of the shares outstanding
entitled to vote, except as otherwise provided by law.
4
Article Eighth of the Bank’s Articles of Association provides, in relevant part:
‘‘These Articles of Association may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the shareholders owning at least two-thirds of the stock
of this Association, subject to the provisions of the banking laws of the United States . . .”
The national banking laws are set forth in Title 12 of the United States Code.
thereunder provides, in relevant part:
Section 21a
“Except as otherwise specifically provided by law, or by the articles of association of the
particular national banking association, the articles of association . . . may be amended with
respect to any lawful matter, and any action requiring the approval of the stockholders of such
association may be had by the approving vote of the holders of a m ajority of the voting shares
of the stock association . .
(Emphasis supplied.)
It will be seen from the foregoing that, except as provided by law or as required by the Bank’s
Articles, the vote of a majority of the shares outstanding is sufficient to amend the Articles. Management
proposes to amend Article Eighth by deleting the above-quoted text thereof and in lieu thereof providing
as follows:
These Articles of Association may be amended at any regular or special meeting of the share
holders by the affirmative vote of the holders of a majority of the stock of this Association, unless
the vote of the holders of a greater amount of stock is required by law, and in that case by the vote
of the holders of such greater amount.
Management believes that such change in Article Eighth will make future amendments to the
Articles of Association amenable to a simple majority of the shareholders (except as otherwise provided
by law ), and thereby diminish the potential veto power now held by the holders of but one-third of
the outstanding shares. National banking law at present requires the affirmative vote of two-thirds of
the shareholders in a number of instances, such as an amendment to create or eliminate the shareholders
pre-emptive rights to purchase additional shares of stock (Interpretive Rulings, Section 7.6050).
A two-thirds vote of the outstanding shares of the Bank is required to approve and enact this
amendment.
M ISCELLAN EO US
Management will solicit Proxies by direct mailing to all shareholders. Management contemplates
that various Directors may, on an ad hoc basis, personally solicit shareholders. It is estimated that the
cost of solicitation wilt not exceed $2,500, which will be expended for the printing costs of the proxy
materials, stationery and postage. No portion of the estimated charge has been billed to the Bank as
of the date of this proxy statement. The cost of the solicitation will be borne by the Bank.
At the time of the preparation of this Proxy Statement, the Bank has no notice or information
of any matters to be presented by or on behalf of the Bank or its management for action at the meeting
5
« %
other than those listed in this Proxy Statement. If any other matters come before the meeting or any
adjournment thereof, it is intended that the Proxies will be voted in respect thereof in accordance with
the recommendations of the Bank’s management.
Shareholders who cannot attend the meeting in person are urged to sign the enclosed form of Proxy
and return it at once in the envelope enclosed for that purpose. Shareholders who execute Proxies retain
the right to revoke them at any time before they are voted. Such revocation is effected without prior
notice if the shareholder who has given such Proxy attends the meeting and elects to vote m person.
A Proxy, when executed, and not so revoked, will be voted in accordance therewith.
B y O rder of
the
B oard of D irectors ,
John A . M ennella,
Chairman of the Board
East Islip, New York
February 9, 1976
6
-i
1. Fixing the number of directors to be elected at nine (9 ), and the election of the nine (9) persons listed in the
Proxy Statement dated February 9th, 1976.
FOR □
WITHHOLD □
2. Amendment of the Articles of Association; amending Article Eighth of the Bank’s Articles of Association to provide
for future amendments by a vote of a majority of the shares entitled to vote, except as otherwise provided bv law
FOR □
AGAINST □
.
3
3. With respect to whatever other business may be brought before the meeting or any adjournments thereof. Manage
ment at present knows of no other business to be brought before the meeting.
This Proxy confers authority to vote FOR propositions 1 and 2 listed above unless WITHHOLD or AGAINST, respectively,
is indicated, if any other business is presented at said meeting or any adjournments thereof, this Proxy shall be voted in
accordance with the recommendations of Bank’s management.
The Board of Directors recommends a vote FOR propositions 1 and 2.
Dated:................................................ 1976
Number of Shares
..................................
(Signature of Shareholder)
(Signature of Shareholder) ’
When signing as attorney, executor, administrator, trustee or guardian, please give full
title. If there is more than one trustee, all should sign. All joint owners should sign
IlEASE F IL L IN TH E NUMBER OF SHARES H ELD , SIGN AND D ATE THIS SIDE, AND RETURN IM M EDIATELY.’
Tmfi Proxy is solicited on behalf of management and may be revoked prior to its exercise.
xrii i
P R O X Y Submitted by The First National Bank of East Islip
East Islip, New York
Tills Proxy is Solicited on Behalf of Management
The undersigned shareholder of the First National Bank of East Islip hereby constitutes and appoints H A RRY CANTOR
ROBERT RUM PLIK (no officer or employee of the Bank may be named as proxy), and each of them (with full power to
idone) true and law ful altornevs, acc r.ts and proxies, w ith power of substitution to cacn, to attend the Annual Meeting of
[rcholdcrs of said B a n k to be held at St. Mary's R.C. Parish Hall, 122 West Main Street, East Islip, New York, on Tuesday, March
11976 at 1:00 o 'c lo c k P.M., or at any adjournments thereof, and thereat to vote all the shares of common capital stock of said
bkthat the undersigned shall be entitled to vote, as of the record date February 2, 1976 with all the powers the undersigned
11 possess if per.-Tonaliy present, upon the election of directors and whatever business which may be brought before said
ling or at anv adjournment thereof. Without limiting the general authorization hereby given, said attorneys are instructed to
fe as follows:
1
r
(CONTINUED AND TO BE SIGNED
ON REVERSE SIDE)
L
J
E x h ib it M
*T
1/-3 T ' A Y
r i
„
y = v ^ ^ -H
«
k J -¿ik v
I“
- m a r c h
¿2, / 9 7 V
0---------------- B
------¿1
; ¡r $ 1 f l h H gH tv ** N
M
\ j l HP !' •' ri [iA\->
V„J> si**/ i.» /
t. <
: 1;\ \ 7 rvr\
1/ ‘w
V1 'v
V
T//t? d ire c to rs, o ffic e r s a n d e m p lo y e s o f
y o u r b o n k e re r.o t d e t r a c t e d lio iv ev er
fro m a g o o ! o f b e in g a p r o fita b le , a g
g re ssiv e , c o m m u n ity o r ie n te d b an k .
T h e First N atio n al B an k of E ast Isiip,
1973 Annual R eport
By Susan Soper
Tvij> stockhokiers of tlic Fir.-»: National Ban!:
of East H i p h.t»e .dec* suit against the bank’s
board of ditectors charging that n has been m is
leading and d e fiiu d irg stockholders by using
bank money iiU-.MlIy and v .iib v t good juJgment lor personol gain an d speculation.
The T^-rs-ig»-. . '.¡nr.l3 *'r.f •••.. ;i!rd *1 ue-^iy/ ■
' U.S. D istrk i ». ;rt in Brooklyn by Chari os H.
and M artha Wo.'pert through their B ay Shore
law linn, Dormer, Fagelson, K ariion tv: Berka.
A similar suit filed I f iive cth «r s-cchhoM rs In
¿(•¡\e; tb-r is s ■ !i1 tK'n.ding m m e iederrtl court,
according -to Aaron Ibonner, one of the law
partners.
•
.
II proxy su avm en : to the hank’s
1 . 3 stock ho! a
sta te s that, “ Som e of rite
bank’s officers and directors, individually or
through firms in which they are involved, have
had borrowing transactions in rhe ordinary
course c»i business with the bunk.” The .s:ateir^ent does not rr.cnt»on. however, some officers
wrio borrowed nrois than .$30,000. which accordI11? to federal la’.v, m ust be r e t r i e d , D crjv»r
said.
, A-l? »; oipt-ri:» attorneys have sougnt an in
junction to delay the ejection «of officers at the
annual me-:ting Tuesday so thai a new proxy
staU<ueni oeuid be issued. But after a four-haur
I :i
; p J f e S # <£«
"it«/ af<*
V^/
h e.rln g irt Brooklyn yesterday, U .S. D i -»L-fitf
Ju d g e Edw ard Id. Neuher denied the request.
i iie directors and their profc.->sions. a.* listed
in the complaint, are Jo h n A. xMenneih. a |m f
e.>4-,:e broiler pfv,,{ D.miocrntic leader o? iha
lyb-J-» who was elected chairman of the hoard
la>t year; real estate broker < h ades J . Thorn-"*wed: retired bankers Unton J . Bnrek. Andrew f;f.
Geis and Alston A. W .ner: bank counsel McdWri
It. Cannon, a • Democratic canrlidafe f>r the
cunr iy !eg-j-f a t : e in lw>9; in.-»ura nee broia-r Ev
erett Griek; contractor Henry Idocker; bank vies
p.o.-n.lenr L it'se a -I. Wolport i cousin or too
p .am :u ,\ Ena; ! vs W oipert/; and J a y \V. W ood*,
ip ? ---amis ;>r--ni-nc.
.
1
•>. .¡,,^2 Kions. t.he suit crurge*!
that a : leas: one or ail of ¿he directors:
• Obtained ‘excessive*’ knii.s at a preferred!
rate ot interest for their com panies or their per
son jd use.
o Received fees and commissions as con.su»tar.u- or appraisers for loans granted—a viola
tion. Donner said , of federal law, punisivab'e by
no mn.e man H p p t or one w a r in ja il, or b-vp.
. t ° J.n o re d overdrafts incurred by Crest A :;ftia.e> luc., a m odular home building firm, au-i
trea.ed^the overdrafts as building loans.
© v« ran tea l-^ans in violation of U.A. is./ in
excess of l i per cent of the am ount of the bank*«
capital stock.
* •
• Adopted a group life insurance policy—
for which tne hank paid nremiunas— increasing
*er,r*i:ts r >
r ap
three o f the direc
tors -are over ->5 years o id .).
T c.e suit asics that the directors be removed.
rr.?.in. 0:'ri— ar^ com.petle-d t-o account for their
OiitOtUt c'>uduot.
—
Exhibit N
Z . Z " 'p /C £ S $
¿ ¿ ¿ " u l i ViU Vi t s )
*
Cc 4
t
*
.
*
-T V
Cs‘?TfF'7!ii7
PI iH'.SFK mm
K JJ
fc£* L
'¿n L i v\ Ll Li \d * i s i i J t 'i M ¿t VLW/
& W La
r
OUST e r o f h o a r d or d ir e c to r s
B y K A R L G R O SSM A N
Bank
d irecto rs
an d
o ffic ia ls
w ere
d is s id e n t g ro u p o f sto c k h o ld e rs o f
ch arged in the s u it w ith u sin g th e ir b a n k
th e F ir s t N atio n al B a n k o f E a s t Is] ip has
p o sitio n s to in flu en ce g ra n tin f o f lo an s,
file d
so m e a t re d u c e d in te re st r a te s , to certain
A
a s u it in B ro o k ly n F e d e ra l C ou rt
a lle g in g a w id e v a r ie ty o f m ism an ag e m e n t
c lie n ts;
b y the b a n k 's b o ard o f d ire c to rs.
p o sitio n s to in flu en ce g ra n tin g o f loan s,
T iie a lle g a tio n s a r e co n ta in e d in a 247.
M ft-R -
p o ’ r.t,
CT-r.tge
le g a l
b r ie f
c la im in g
37
a c c e p tin g
o v e r d r a fts
an d
e x c e e d in g th e b a n k ’s le g a l lim its; alte rin g
bank
r e c o r d s;
“ c a u s e s o f a c tic 'S ."
T h e d issid e n t gr^tTp fc c a llin g fo r tire
h an d lin g so m e
c o u rt to ic m o v e th > d ire c to rs an d to co m
at
p e l th e m to a c c o u n t fo r th e irre g u la r itie s
b o n u se s
w ith w hich they ere ch arg ed .
J o s s e s in 1972.
D o n a ld R ice, e x e c u tiv e v ice p re sid e n t
la rg e
c o n flic ts
of
in te re st
a c c o u n ts; fa ilu re
to
in
act
on a re p o rt c itin g “ 24 u n n e c e ssa ry jo b s ’*
the
The
b an k ;
an d
a p p ro v in g
w hen
th e
b an k
d issid e n t
year-en d
su ffe re d
sto c k h o ld e rs
a re
net!
b e in g
o f th e b a n k , d eclin ed co m m en t y e ste rd a y
re p re se n te d b y th e B a y S h o re la w firm
e x p la in in g th a t the m a tte r is “ b e fo re th e
D on n er, F a g e lso n , H arito n an d B e rk a . T h u t
c o u r t.’*
a tto r n e y s d e c lin e d co m m e n t on the s u i‘ . ;
Part III
Comptroller of the Currency
Administrator of National Banks
Washington, D. C. 20219
Deputy Comptroller
January 27, 1976
TO ALL REGIONAL ADMINISTRATORS AND NATIONAL BANK EXAMINERS
SUBJECT:
Special Projects/Bank Review Program.
The reorganization of the OCC contemplates primary authority and r e s p o n s ib ility
for Lhe supervision o f banks at the regional level through our examiners and
Regional Adm inistrators. This O ffice must, however, retain some overview
re sp o n sib ility of banks, e sp e c ia lly in the capacity of lending technical and
specialized assistan ce to the regions. A revised procedure has been devised
which allow s the Comptroller to be informed and to track movements w ithin the
national banking system at a ll le v e ls.
The d e ta ils of the new program are contained in the attached package. The
Program is e s s e n tia lly designed to provide improved communication and coordi
nation between the National Bank Examiners, the Regional O ffic e s and the
Washington O ffice and, by so doing, to enhance the a b i l it y of the OCC as a
whole to e ffe c tiv e ly discharge i t s supervisory r e s p o n s ib ilit ie s .
Tn,_ Program provides fo r tim ely n o tific a tio n when a bank is being assigned
to the program or when s ig n if ic a n t subsequent events change the sta tu s o f a
bank previously assigned. The Program a lso provides the Washington s t a f f with
he opportunity to d ir e c tly a s s is t the regions in bank supervision v/hen required
The procedures involved in the program are designed to give th is O ffic e a
standardization to insure an informed posture, but are not intended to be
inrlexible.
I t is recognized that circumstances w ill on occasion d ic ta te that
exceptions be made to the p o lic ie s and procedures set forth in the attached
m aterial. However, when such circumstances warrant a departure from
esuaolished procedure, we should be promptly advised.
Examiner's memo, which is to be prepared at each examination, i s a ls o
c “ ? M i Th? a n a ly sis sheet, which is an in te gral part of the memo, should be
umpieted in f u ll at eacn future examination of a bank assigned to the program,
is recognized, however, that certain s t a t i s t i c a l data c a lle d fo r by the
-
2
-
analysis sheet w ill not be re a d ily a v a ila b le from p rio r examination reports.
Therefore, examiners may omit the h is to r ic a l information on certain items i f i t
is not e a s ily obtainable.
The task ot properly c o n tro llin g the problems faced by the National Banking
System i s o bvio u sly one o f the most important we have. We are hopeful that
this program can be su c c e ssfu lly integrated into and compliment other planned
changes under our reorganization e ffo rt. Success in th is regard w ill o f course
continue to depend on your f u ll cooperation, support and advice.
r
rv
>
r
M
H. Joe Selby
j
Fi rst Deputy Comptrol1|r
for operations
SPECIAL PROJECTS/BAMK REVIEW PROGRAM
PARTICIPANTS:
Regional P a rtic ip a n ts w ill include the examiners who conducted the l a s t
examination o f banks subject to the program as v/ell as the Regional Adm inistra
tor, h is Deputies, or other designees.
In Washington, r e s p o n s ib ility fo r banks in the program w ill be divided
into two groups, each with a D irector and a professional s t a f f o f National
Bank Examiners.
One group w ill be known as
Special Projects and w ill have r e s p o n s ib ilit y
for a ll banks in the program with to ta l resources in excess o f $100 m illio n .
Overall supervisory r e s p o n s ib ility fo r the Special Projects group w ill be
vested in H. Joe Selby, F ir s t Deputy Comptroller fo r Operations, with primary
Adm inistration delegated to Paul M. Homan, Associate Deputy Com ptroller.
Bank Review, the other group, w ill handle those banks assign ed to the
program which have to ta l resources below $100 m illio n .
Charles B. H a ll,
Deputy Com ptroller fo r Banking Operations, w ill have o v e rall su pervisory
r e s p o n sib ility fo r t h is group, with primary Adm inistration delegated to
Royal B. Dunham, J r . , Director.
Other Washington O ffic e s t a f f p a r tic ip a tin g in the program on a f u l l or
part-time b a s is include:
1.
The Enforcement and Compliance Group.
2..
A ll Groups o f Bank Operations.
3.
National Bank Su rve illan ce System.
4.
S e c u ritie s D isclo su re Group.
-
2
-
CRITERION
A.
Banks designated by the Regional A d m in istra to r in the exercise of
their best judgement as to q u a lity of a sse ts, adequacy of earnings, a b i l it y
and depth o f management, c ap ital adequacy, and other facto rs which m ilita te
for in clu sio n on the program.
A ll banks having c r it ic iz e d asse ts (100%
substandard, 50% OLEM, 50% Doubtful) aggregating 65% o f adjusted c a p ita l funds
w ill be reviewed by the Regional Adm inistrator for p o ssib le in c lu sio n , as well
as those with separate and d is t in c t d e fic ie n cie s r e la tin g to other than asset
q u a lit y . •
B.
A ll banks with asse ts exceeding $100 m illio n and having c r it ic iz e d
assets (as defined above) aggregating 65% o f adjusted ca p ita l funds, and not
designated by the Regions under A, w ill be reviewed by Special Projects fo r
possible in c lu sio n in the program.
C.
Using the same c r it e r ia or ad d itio n al c r it e r ia as may be developed,
Banking Operations, Special P ro je cts, and/or'the NBSS Group may designate
banks fo r the program a t th e ir d isc re tio n .
D.
A ll banks operating under a formal written agreement or a Cease and
Desist Order.
REMOVAL OF A BANK FROM THE PROGRAM
When a bank no longer meets the c r it e r ia as described above, and/or in
the opinion o f the Regional Adm inistrator the bank no longer requires clo se
supervision under the program, the Regional Adm inistrator should submit a
memorandum to the appropriate Group recommending removal o f the bank from the
program.
The decision on such recommendations w ill be made by the.appropriate
3
Group subject to a review by the F ir s t Deputy Com ptroller fo r Operations and/or
the Deputy Com ptroller fo r Banking Operations.
COMMUNICATIONS:
Written :
A ll reports of examination of banks in th is program w ill be marked with
the word "PRIORITY" (rubber stamps should be ordered by the Regional O ffic e s}.
In addition, le tte rs , memoranda or other data pertaining to problems or the
correction of problems w ill a lso be so marked.
Such reports and correspondence
should receive expeditious processing and be forwarded to the atten tion of
Paul M. Homan, Associate Deputy Com ptroller, Special Projects, or
Royal B. Dunham, J r ., D irector, Bank Review, as appropriate.
Other correspondence re la tiv e to banks in the program should be directed
io the appropriate in d iv id u a l, D iv isio n or Group in the Washington O ffic e
through use of the attention lin e .
Telephone:
Each Regional O ffice should be equipped with speaker telephone equipment.
Sim ilar equipment w ill be a v a ila b le to the Washington groups.
Conferences
w ill be arranged on a case-by-case b asis at the in it ia t io n o f e ith e r Regional
Adm inistrators, th e ir designees or Washington O ffice s t a f f p a r tic ip a tin g in
"O
the program.
ROCEDURES
NATIONAL BANK EXAMTNFRS
The Examiner-in-charge o f each examination w ill communicate with the
regional or Washington o ffic e under the fo llow in g circumstances and in the
follow ing manner:
.
- 4 1.
By telephone to the regional o ffic e , during an examination as_
soon a^ i t becomes apparent that there are s ig n if ic a n t adverse changes in a
bank in the program or there is evidence that a bank should be placed in the
program.
2.
In w ritin g , to be forwarded to h is Regional Adm inistrator as
per Example "A ", no la te r than the time o f concluding h is examination.
The
written communication w ill include b a sic s t a t i s t i c a l inform ation; a concise
narrative o f the bank's s ig n if ic a n t problems, to include causes and a summary
of pertinent subsequent events; and s p e c ific recommendations fo r appropriate
corrective action.
The Regional Adm inistrator w ill mark the examiner's
memorandum with the " P r io r it y " stamp and add h is opinions to those o f the
examiner.
The examiner's memo should be forwarded w ithin two business days a fte r
receipt in the Regional o ffic e .
Completion o f the report o f examination w i l l not
delay the forwarding o f the examiner's memorandum.
3.
When required by the Regional Adm inistrator, the examiner w ill
p articip ate in group telephone conferences between the regional o ffic e s and
the Washington o ffic e concerning banks on the program.
REGIONAL ADMINISTRATORS:
1.
New banks added to the Program are to be reported to the
Washington o ffic e by the Regional Adm inistrator as soon as p o ssib le .
2. . The regional o ffic e w ill continue to review reports o f examination
and rate the banks.
I f by the review and r a tin g , they determine th at a
bank should have been placed in the Program by the examiner but was not, they
- 5 -
will
provide the necessary telephone and written communication as in
Example "A".
3.
The Regional Adm inistrator, or h is designee, and the Exam iner-in
charge must meet with the Board o f D irectors or a Committee thereof, in
conjunction with each examination of a bank in the program.
4.
For banks in the program with assets exceeding $50 m illio n ,
a copy o f the report o f examination w ill be sent to the bank and the appropriate
Washington group at le a s t ten days p rio r to the Board meeting.
5.
A le t t e r w ritten by the Regional Adm inistrator should be
forwarded to the bank's Board of D ire c to rs, together with the tran sm ittal
of the report.
At a minimum th is le t t e r should include:
(a)
A request that each Board member review the rep ort;
(b)
A summary o f the major d e fic ie n cie s d isc lo se d in the
„
report in an objective method;
(c)
A request that the Board prepare a s p e c ific plan o f
corrective action designed to deal with and corre ct the
d e fic ie n c ie s o f the bank as re fle cte d in the examination
report.
The Board should be prepared to d isc u ss t h is plan
at the meeting;
(d)
The le t t e r should include a paragraph th at in d ic a te s:
"This le t t e r i s supplemental to and p art o f the examination
report.
It s purpose i s to h ig h lig h t matters in the
examination report req u irin g the atte n tio n o f the Board
o f D ire cto rs.
The le t t e r and i t s contents should be
-
6
-
treated with the same degree of c o n fid e n tia lity as the
examination report."
As an a lte rn a tiv e , the Regional Adm inistrator may wish to f u lly incorporate
into the examination report h is communication to the Board by commenting bn
Page 2 under the heading, Regional A d m in istrator's Comments.
I f t h is a lte rn a tiv e
is used, the transm ittal le t t e r should in stru c t the Board to re fe r to page 2
of the report o f examination fo r the Regional Adm in istrator’s comments.
6.
P rio r to meetings with the Board o f D ire cto rs, the Regional
Administrator w ill inform the appropriate Washington group o f the date and
objectives o f the Board meetings.
When appropriate, a s t a f f member o f the
group and a representative o f the Enforcement and Compliance group w ill attend
such meetings.
P a rtic ip a tio n in the actual Board meeting by the Washington
s ta ff is d e sirab le to an extent that i s mutually agreeable to the Regional
Administrator and the Washington o ffic e .
7.
The Board or Committee thereof so authorized should present
their plan fo r corrective action at the meeting.
I f these plans are not
considered adequate by the Regional Adm inistrator, h is views should be so
stated to the Board or committee members and s a tis fa c to r y amendments adopted
by reso lu tio n .
I f s a tis fa c to r y plans are not adopted, the Regional A d m in istrator
should advise the group that further ad m inistrative action by the C om ptroller's
Office may be required.
8.
The Regional Adm inistrator should convey in w r itih g the re s u lts
of the Board meetings.
9.
The Regional Adm inistrator should require frequent reports
by the Board as to the progress concerning any agreed corre ctive actio n .
Each
7 -
bank required to send a progress report should be asked to forward the
o rigin a l to the Regional Adm inistrator with a copy to the Com ptroller o f the
Currency, Attention:
10.
Royal B. Dunham, Jr. or Paul M. Homan, as appropriate.
Regional o ffic e s should forward copies o f in tern al analyses
of progress reports to the appropriate Washington group.
11.
Regional Adm inistrators w ill continue to schedule frequent
examinations and v is it a t io n s o f banks assigned to the program as they deem
necessary.
However, an examination projection o f such banks w ill be completed
by each region on a monthly b a sis.
The form (Attachment "8 ") w ill be reproduced
in the region as needed and forwarded to the attention o f the appropriate
Washington Group in s u ffic ie n t time to arriv e no la te r than fiv e working days
prior to the beginning o f the month projected.
Any amendments to the
projection a fte r i t has been submitted, w ill be conveyed to the group via
telephone communication.
For your inform ation, the names o f the Washington s t a f f members assigned
to the program are as fo llow s:
Bank Review - Banks with Assets le ss than $100 M illio n
D irecto r - Royal B. Dunham, Jr.
Professional S t a f f
- National Bank Examiner
- National Bank Examiner
*
- National Bank Examiner
Special Projects - Banks with Assets $100 M illio n or more
*
*
D irecto r - Paul M. Homan
Profession al S t a f f
*
*
*
*
*
*names deleted
-
National
National
National
National
National
Bank
Bank
Bank
Bank
Bank
Examiner
Examiner
Examiner
Examiner
Examiner
EXHIBIT "A
EXAMINER'S MEMO
Summary o f Problems
Summarize your views o f the bank's problems, taking into account a ll
s ig n if ic a n t fa c to rs. S p e c ific problems should be id e n tifie d . Your
recommendation as to p o ssib le so lu tio n s to the s ig n if ic a n t problems should
be included in the n arrative .
Subsequent Events
, Summarize any pertinent changes since the date o f your examination.
This would include the re sign atio n o f key o ffic e r s or d ire c to rs; declines
in d e p o sits; increases in loans or commitments to lend; proposed mergers, etc.
Recommended Corrective Actions
Your p o s itiv e , open views are needed in t h is section . You can be the
most knowledgeable as to the causes o f the bank's problems. Please sta te
your views without reservation.
s/
National Bank Examiner
Regional A d m in istra to r's Opinion
Statements concurring or d if fe r in g with those o f the examiner should
be made in t h is section .
s/
Regional Adm inistrator
EXHIBIT "B"
(MONTH)
PRIORITY BANKS
EXAMINATION PROJECTION
,
Name of Bank & Location
(Include a ll such banks under examination)
Projected Startin g Date
( i f under examination
indicate sta rtin g date.)
Projected
Completion
Date
Examiner-inCharge
lype Examination
Regular Examination
Vi si ta ti on
Bobtail Examination
•
REGIONAL ADMINISTRATOR
Comptroller of the Currency
Administrator of National Banks
W a s h in g to n ,
D.C. 20219
SPECIAL PROJECTS/BANK REVIEW PROGRAM
ANALYSIS SHEET
C HARTER#
R E G IO N ..
NAMF o f pa m k
STATE _
r.iT Y
HOLDING COMPANY AFFILIATION
(Show prior three and current examinations)
(Omit 000’s)
f|
2.
3.
4.
R atin g ...............................................................................• ..............• - • ------------------------Date of Examination........................................................................... • • ------------------------Examiner-in-Charge ......................................................................... • • • ------------------------Total R esources.................................................................. ................................................
5. Total D eposits............................................................... .......................................................
6. Percent of Time Deposits to Total Deposits........ ■......... ............
- _
7: Gross Capital Funds (GCF) ............................ ..............................• - • -----------------------8. Adjusted Capital Funds ( A C F )........................................................... ............................9. Deposits x G C F ........ ............................. . ............................................ ................................
10. Total Assets x G C F ................................................................................ ..............................
11. Loans x G C F .............................................. ............................• • • .......................................
12 Percent of Loans to D epo sits........................................ ...................................................
13. Substandard ......................................................................... \ ............... ............ .................
14. Doubtful ................................................................................................■• ----------------------15. Loss.................. .................................................. .................................. .. • —-------------------16. Total Classified Assets........ . ............... .......................... ...................................................
17. Percent of Classified Assets to GCF ................................................. ...............................
18. O L F M ................................................................. ............. ................. . . ...............................
19. Percent of OLEM to GCF ................................................................... ...............................
20. *S P Ratio.............. ............................................... ................................ ...............................
21. Valuation Portion (Reserve for Loan Losses)— Amount . . . . . . . . . ---------------------Percent of Total L oan s............................................................. ......................................
22. Loans not supported by current Credit Information— Amount........ .............................
Percent of Total L oan s...................................................................................................
23. Overdue Loans— A m ount..................................................................................................
Percent of Total L oan s..............................................................* • ______________
24. Non-Accrual Loans— Amount........ ................................................................................
Percent of Total L oan s..................................................................................................
25. Bond Depreciation— A m o u n t...................... ...................................................................
Percent of A C F ....... ........................................................................... ...........................
26. Percent of Direct or Indirect Investment in F/A to A C F .............. ..
|____________
27. Percent of Net Liquid Assets to Net Deposits ...................................I_____________
OVER
CC-9060-03
I
t
analysis s h e e t
28. Loans and O verdrafts. .......................
29. Direct Lease Financing .....................
30. Acceptances .........................................
31. Stand-by Letters of C r e d it.................
32. Irrevocable commitments to lend . . .
33. Advances to A ffiliates..........................
34. TOTAL (Lines 28 through 3 3 ) ...........
/
35. Line 34 x G C F ..............................
36. Large (S100M or more) Tim e CDs ..
37. Due to Banks— T i m e ..........................
38. Borrowings— Short Term ** .............
39. TOTAL (Lines 36 through 3 8 ) ..........
40. Cash and Due from Banks
(Demand and T im e ) .......................
41. Money Market Assets * * * ...................
42. Market Value Unpledged Bonds —
43. TOTAL (Lines 40 through 42) . . —
44. Net Volatile Liabilities (Line 39
minus Line 4 3 ) ................................
Percent of Total R esou rces.........
197__
197__
197__
197__
45. Operating In c o m e ................. ............
46. Operating Expense ; ..........................
47. Income before Income Taxes &
Securities G a in s /L o s s e s .............
48. Net In co m e. .........................................
49. Add Provision for Loan L o s s e s .......
50. Add Recoveries credited to
Reserves ............................ !_____
51. Less: Losses charged to Reserves
52. Adjusted Net In c o m e ............. ..........
53. Less: Dividends .................................
54. Retained P rofits................................
*
**
***
****
SP Ratio: T he adjusted sum of substandard, 5 0% of Doubtful and 50% of O LEM as a percentage of Adjusted
Capital Funds.
Borrowings— Short Term— Include all forms of money market obligations, except for mortgage debt and capital
notes and debentures.
Money Market Assets— Include Federal Funds sold and securities purchased under R esale Agreements.
Show last three full calendar years plus interim figures through the month-end prior to the examination date.