Service is hereby made of Enforcement Review Committee Resolution No. ERC-89-149, dated December 8, 1989, the accompanying Notice of Charges and Hearing, and the accompanying Temporary Order to Cease and Desist, approved and issued by such resolution. The Temporary Order to Cease and Desist is, by its terms, effective immediately. You have twenty (20) days in which to file an Answer to the Notice of Charges, pursuant to 12 C.F. R. § 509.14, republished at 54 Fed. Reg. 49411, 49450 (November 30, 1989). In accordance with 12 C.F.R. SS 509.9 to 509.11, republished at 54 Fed. Reg. 49411, 49449 (November 30, 1989), you must file an original and one copy of the Answer with: Secretary Office of Thrift Supervision U. S. Department of the Treasury 1700 G Street, N.W. Washington, DC 20552 In addition, you must serve one copy of the Answer upon: Director of Enforcement · Office of Thrift Supervision -U. S. Department of the Treasury Washington, DC 20552 Yours sincerely, Rosemary Stewent Rosemary Stewart Director of Enforcement and WHEREAS, CenTrust OFFICE OF THRIFT SUPERVISION No. ERC-89-149 Dated: December 8, 1989 Bank, a State Savings Bank, Miami, Florida ("CenTrust"), is a state savings association within the meaning of Section 3 of the Federal Deposit Insurance Act as amended by Section 301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 101 Stat. 183, 277 ("FIRREA"), to be codified at 12 U.S.c. S 1464; and WHEREAS, the Office of Thrift Supervision, a bureau within the United States Department of the Treasury, is the appropriate Federal banking agency with jurisdiction over state savings associations, as provided in Section 3(q) of the Federal Deposit Insurance Act as amended by Section 204(f)(4) of FIRREA, to be codified at 12 U.S.c. § 1813(q); and WHEREAS, the Director of the Office of Thrift Supervision has delegated to the Enforcement Review Committee ("ERC") the authority to issue Notices and Temporary Orders pursuant to Section 8 the Federal Deposit Insurance Act as amended by FIRREA, to be codified at 12 U.S.c. § 1818; and of WHEREAS, the ERC has reviewed a proposed Notice of Charges and Hearing to be issued against CenTrust, and a recommendation from the Enforcement staff of the Office of Thrift Supervision, and supporting documentation; WHEREFORE the ERC finds reasonable cause to believe that CenTrust or its directors, officers, employees, or agents have engaged, are engaging, or are about to engage in unsafe or unsound practices, or violations of applicable law, rule, or regulation; and or WHEREFORE the ERC finds that. CenTrust's unsafe or unsound practices, violations of applicable law, rule, or regulation, or the continuation thereof, alleged in the proposed Notice of Charges and Hearing, are likely to cause significant dissipation of the assets or earnings of CenTrust, are likely to weaken the condition of CenTrust or otherwise prejudice the interests of its depositors prior to the completion of proceedings conducted pursuant to Section 8(b)(1) of the Federal Deposit Insurance Act as amended by FIRREA, to be codified at 12 U.S.C. § 1818(e)(1), or that the books and records of CenTrust are so incomplete with respect to certain expenses and certain transactions specified in the Notice of Charges that OTS is unable, through the normal supervisory process, to determine the financial condition of CenTrust or the details or purposes of certain transactions that may have a 2 material effect on the financial condition of CenTrust; NOW, THEREFORE, IT IS RESOLVED that the said Notice of Charges and Hearing is approved and issued. The Secretary of the ERC is directed to execute said Notice and to serve or designate some suitable person to serve a copy of it, with this resolution, upon CenTrust in the manner provided by the Regulations of the office of Thrift Supervision. Following the issuance and service of said Notice, the Enforcement staff is authorized to negotiate with CenTrust for the purpose of obtaining its consent to the issuance of a final Order to Cease and Desist. AND IT IS FURTHER RESOLVED that the said Temporary Order to Cease and Desist is approved and issued. The Secretary of the ERC is directed to execute said order and to serve a copy of it upon CenTrust in the manner provided by the Regulations of the Office of Thrift Supervision. Enforcement Review Committee Rosmary Stewent Rosemary Stewart Director of Enforcement and FEDERAL HOME LOAN BANK BOARD CRIMINAL REFERRAL FORM SECTION A TO BE COMPLETED FOR ALL CRIMINAL REFERRALS 0000056 1. Name, Location and Docket Number of Financial Institution If activity occurred at branch office(s), identify: 3. 4. $8.9 billion Approximate date and dollar amount (prior to any allowances for restitution or recovery) of suspected violation Date: October 25/26, 1989 (Month) (Day) (Year) Amount: $101,250 Summary characterization of the suspected violation. Mark appropriate box(es) with an X. [ ] Defalcation/Embezzlement [ ] Bribery/Gratuity [ ] Bank Secrecy Act/ 5. Has there been any admission or a confession? 6. [ ] Yes [x] No If so, by whom? Explanation/Description of Suspected Violation (Give a brief summary of the suspected violation, explaining what is unusual or irregular about the transaction.) Senior officers of CenTrust, primarily Chairman Paul, represented on several occasions to examiners that the bank could not conduct transactions involving Integrated Resources subordinated debt because the bank had become a member of the Creditors' Steering Committee in August 1989 and that such transactions would be illegal insider trading. (CenTrust Bank had purchased $39 million of Integrated debt in April 1986, which had since declined in value to about $1-2 REV: June 1988 Page No. 1 FEDERAL HOME LOAN BANK BOARD CRIMINAL REFERRAL FORM (FHLBB 366) FHLBB DOCKET NUMBER OF THE million.) However, in late 1989 CenTrust's Supplemental Executive Retirement Plan (SERP), which benefits only selected senior executives including Mr. Paul. purchased $3,000,000 face value of Integrated bonds at approximately $.03 on the $1.00, total purchase price of $101,250. Mr. Paul is one of the three trustees of the SERP. It is apparent that either 1) Chairman Paul and other senior management members misrepresented certain facts to the examiners about Cenfrust not being allowed to trade Integrated securities or 2) insider trading was in fact conducted by the SERP based on inside information intending to benefit certain senior executives at the expense of the institution and, ultimately, the taxpayers. Further, management would not provide documents pertaining to the SERP which disclosed the Integrated purchases until ordered to do so in a Temporary Cease and Desist Order. Therefore, statutes violated fall into one of two groups, depending on the true facts, as follows: 1. Insider Trading Title 15 U.S.C. sec. 78££ : Criminal violations of securities laws. Title 18 U.S.C. sec. 371 - Conspiracy of two or more persons to either comit federal offense or to defraud the United States (or any agency of the U.S.). Title 18 U.S.C. sec. 1001 - General false statements statute knowingly and villfully falsifying or concealing a material fact or making a false statement or making or using false writing knowing it to be false. Title 18 U.S.C. sec. 1006 - False entries and reports or statements, including material omissions, made with the intent to injure or defraud an insured institution or deceive a Federal Home Loan Bank examiner; receipt of any benefits by an officer, agent or employee of the institution from a transaction of the institution with intent to defraud by the individual. 2. If not Insider Trading, as represented by_management; Title 18 U.S.C. sections 1001 and 1006 False statements to examiners representing that such transactions would be insider trading. |