Last month, the Federal Reserve Board (FRB) announced a $9,524,000 fine to be imposed on EagleBank, of Bethesda, Maryland for violations of Regulation O. The bank improperly extended credit to entities owned or controlled by its then-CEO and Chairman, Ronald D. Paul.
The FRB:
- Found that EagleBank had deficient internal controls over insider lending practices between 2015 and 2018:
- Which allowed the bank to extend credit totaling $99 million to entities that Paul owned or controlled, including certain family trusts, without making appropriate disclosures to, or obtaining required approvals from, a majority of the bank’s board of directors.
- Which also extended to the bank’s supervision of lending staff, who permitted Paul to participate in matters in which he had a conflict of interest including on behalf of his 2 family trusts and wholly-owned real estate development company and for his own personal gain, and resulted in the Bank’s extension of credit, in at least one instance, without adequate director approval under applicable Bank lending policies.
- Cited EagleBank for third-party risk management deficiencies over the same period that resulted in inadequate oversight of contracts between the bank and an entity owned and operated by a D.C. Council member, who received a retainer fee from the Bank but performed no measurable services.
- Has permanently barred Paul from employment in the banking industry and assessed a $90,000 fine against him for his central role in the bank’s violations of law and unsafe and unsound practices.
- With the exception of one loan, which is currently performing, the extensions of credit that violated Regulation O have been repaid in full, Paul’s conduct posed risks to the Bank
- Paul is retired and not presently involved in the banking industry
In conjunction with these actions by the Board, the U.S. Securities and Exchange Commission (SEC) today announced its own settlement of actions against Paul and EagleBank’s holding company, Eagle Bancorp, Inc. In total, the bank and holding company will pay approximately $13.4 million and Paul will pay approximately $431,000 to settle the SEC actions.
The Board previously barred EagleBank’s former General Counsel Laurence E. Bensignor from banking for his role in EagleBank’s unsafe and unsound lending practices.