Enforcement Actions and Professional Liability Claims Against Institution-Affiliated Parties and Individuals Associated with Failed Institutions

Evaluation Objectives and Approach

The objectives of our joint evaluation were to:

1. Describe the Regulators' processes for investigating and pursuing EAs against IAPs associated with failed institutions;
2. Describe the FDIC's process for investigating and pursuing PLCs against individuals and entities associated with failed institutions and its coordination with the FRB and OCC;
3. Determine the results of the Regulators' efforts in investigating and pursuing EAs against IAPs and the FDIC's efforts in pursuing PLCs; and
4. Assess key factors that may impact the pursuit of EAs and PLCs.

To address our objectives, we reviewed pertinent laws, regulations, policies, and procedures; researched EA and PLC activity pertaining to failed institutions; interviewed Regulator officials; and assessed coordination efforts within and among the Regulators. Our evaluation focused on the 465 institution failures that occurred during the 5-year period from 2008-2012. These institutions were regulated by the FDIC, FRB, OCC, and OTS. Portions of our testing focused on a judgmental sample of 63 of the 465 failed institutions that included the highest loss rates as a percentage of total assets, and on which we performed material loss reviews (MLR).²

The EAs and PLCs discussed in this report covered the time period from January 1, 2008 through September 30, 2013. The data in this report is current as of September 30, 2013, unless otherwise noted.

The Regulators have also imposed formal and informal EAs and other sanctions against financial institutions, and provided information or referred criminal matters to the Department of Justice (DOJ), which pursues criminal remedies. However, these activities were not included in the scope of our review, which focused on EAs against IAPs.

Appendix 1 includes additional detail on our objectives, scope, and methodology, including our sample selections. Appendix 2 contains flowcharts depicting the Regulators' EA and PLC processes. Appendix 3 contains a glossary of terms used in this report. Those terms, where first used, are underlined. Additional appendices include the Regulators' comments on this report, contributors to this report, and a report distribution list.

We performed this evaluation from April 2013 through January 2014 in accordance with the Council of the Inspectors General on Integrity and Efficiency's Quality Standards for Inspection and Evaluation.

• 2. The 63 institutions consisted of 20 whose primary federal regulator (PFR) was the FDIC, 23 whose PFR was the FRB, and 20 whose PFR was the OCC. Specific details on how this sample was selected are provided in Appendix 1: Objectives, Scope, and Methodology. Return to text