Enforcement actions

Federal Reserve Bulletin, Winter, 2004

The Federal Reserve Board, on November 21, 2003, announced the issuance of a final decision and order of prohibition against Garfield C. Brown, Jr., a former employee of Mellon Bank, N.A., Pittsburgh, Pennsylvania. The order, the result of an action brought by the Office of the Comptroller of the Currency, prohibits Mr. Brown from participating in the conduct of the affairs of any financial institution or holding company.

The Federal Reserve Board, on November 26, 2003, announced the issuance of a consent order of assessment of a civil money penalty against The Bank of Currituck, Moyock, North Carolina, a state member bank. The Bank of Currituck, without admitting to any allegations, consented to the issuance of the order in connection with its alleged violations of the Board's Regulations implementing the National Flood Insurance Act.

The order requires The Bank of Currituck to pay a civil money penalty of $16,000, which will be remitted to the Federal Emergency Management Agency for deposit into the National Flood Mitigation Fund.

The Federal Reserve Board, on November 26, 2003, announced the issuance of a consent order of assessment of a civil money penalty against the Provident Bank, Cincinnati, Ohio, a state member bank. Provident Bank, without admitting to any allegations, consented to the issuance of the order in connection with its alleged violations of the Board's Regulations implementing the National Flood Insurance Act.

The order requires Provident Bank to pay a civil money penalty of $34,100, which will be remitted to the Federal Emergency Management Agency for deposit into the National Flood Mitigation Fund.

The Federal Reserve Board, on December 1, 2003, announced the execution of a written agreement by and among the Putnam County Bank, Hurricane, West Virginia; the West Virginia Division of Banking, Charlestown, West Virginia; and the Federal Reserve Bank of Richmond.

The Federal Reserve Board, on December 18, 2003, announced the issuance of several enforcement actions involving Credit Lyonnais, S.A., a large French bank with several U.S. offices. The actions relate primarily to Credit Lyonnais's participation in the rehabilitation of the Executive Life Insurance Company of California, which was declared insolvent in 1991. The Federal Reserve's actions included the following:

* A civil money penalty of $100 million against Credit Lyonnais issued

by consent.

* A consent cease and desist order against Credit Lyonnais designed to prevent future violations of the Bank Holding Company Act.

* Initiation of a formal enforcement action against Jean Peyrelevade, the former chairman and chief executive officer of Credit Lyonnais, seeking to prohibit him from the U.S. banking industry, and assessing a $500,000 civil money penalty against him. Peyrelevade will have an opportunity to answer the charges and request a hearing before an administrative law judge.

* A written agreement between Credit Agricole, the parent of Credit Lyonnais, and the Federal Reserve Bank of New York in which Credit Agricole agrees to comply with the restrictions in the Credit Lyonnais cease and desist order. Credit Agricole, which acquired Credit Lyonnais in June 2003, had no part in the conduct that led to these enforcement actions.

In addition to the Federal Reserve's actions, the U.S. attorney in Los Angeles is announcing that Credit Lyonnais and several other entities and individuals have agreed to plead guilty to specific crimes related to their roles in the Executive Life matter, as well as announcing an indictment against several other individuals involved in the matter, including Peyrelevade. The Federal Reserve Board and the Federal Reserve Bank of New York investigated the matter jointly with the U.S. Attorney's Office. The consent enforcement actions being announced by the Federal Reserve are part of a global accord designed to address both the regulatory and criminal aspects of the Executive Life matter.

The Federal Reserve is also working with the French banking supervisor to take joint action to require Credit Lyonnais and its parent to enhance their overall compliance programs. Completion of the documentation for this action is expected shortly.

The Federal Reserve's consent action against Credit Lyonnais resolves allegations that, beginning in the early 1990s, Credit Lyonnais violated the Bank Holding Company Act by acquiring the company that assumed Executive Life's insurance underwriting business through secret agreements that were concealed from the Federal Reserve. The action also resolves allegations that Credit Lyonnais intentionally misrepresented to the Federal Reserve the extent of its ownership interests in a portfolio of junk bonds that had been acquired from Executive Life, as well as its substantial equity investment and other relationships with Artemis, S.A., a French company that subsequently acquired the successor insurance company and junk bond portfolio. In the Board's order, Credit Lyonnais neither admits nor denies these allegations.