## Facts

- Lawrence Dodge was the chief executive officer (CEO) of American Sterling Bank, a federally insured savings bank.
- In 2007, Dodge caused the bank to make unusual loans connected to political organizations, nonprofits, and projects he favored and in which he had personal involvement.
- Dodge did not fully disclose his personal involvement in these loan relationships to the bank’s regulators.
- Dodge repeatedly reported the loans as performing assets and treated them as qualifying capital in regulatory reporting.
- The reporting practices misled federal supervisors about the bank’s capitalization and masked the bank’s true financial condition.
- The Office of Thrift Supervision examined the bank, and enforcement authority later transferred to the Office of the Comptroller of the Currency (OCC) as successor.
- The regulators issued an enforcement order that removed Dodge from his position, permanently barred him from participating in the affairs of any federally insured depository institution, and assessed a $1 million civil money penalty.
- Dodge filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit challenging the OCC’s final order.

## Issues

1. Whether substantial evidence supported the OCC’s determination that Dodge’s conduct satisfied the statutory requirements for a removal and prohibition order under 12 U.S.C. § 1818(e)(1), including misconduct, harmful effect (or likely harm), and the required level of culpability.
2. Whether the OCC lawfully imposed a $1 million civil money penalty under 12 U.S.C. § 1818(i), and whether the penalty decision was arbitrary or capricious.

## Decision

- The court denied Dodge’s petition for review.
- The court upheld the OCC’s removal and prohibition order under 12 U.S.C. § 1818(e)(1).
- The court concluded that substantial evidence supported the OCC’s findings that Dodge engaged in unsafe or unsound practices and/or breaches of duty by steering and maintaining loans tied to his personal interests while withholding key information and misreporting the loans’ status and capital treatment.
- The court upheld the OCC’s determination that Dodge’s conduct was likely to cause more than minimal loss to the bank or prejudice to depositors, and that it involved the culpability required by § 1818(e)(1) (personal dishonesty or willful/continuing disregard for safety and soundness).
- The court sustained the $1 million civil money penalty as authorized by statute and supported by the administrative record.

## Legal Principles

- Under 12 U.S.C. § 1818(e)(1), a federal banking agency may remove and prohibit an institution-affiliated party from the banking industry if the agency proves: (1) specified misconduct (a legal or regulatory violation, unsafe or unsound practice, or breach of fiduciary duty), (2) an actual or likely harmful effect (including more than minimal loss to the institution or prejudice to depositors), and (3) the required culpability (personal dishonesty or willful/continuing disregard for the institution’s safety or soundness).
- A pattern of directing bank activity to benefit favored entities while withholding material information from regulators, combined with inaccurate regulatory reporting that inflates apparent capital or masks asset problems, can qualify as unsafe or unsound practices and can support a prohibition order.
- On judicial review of a final enforcement order under 12 U.S.C. § 1818(h), an agency’s factual findings are sustained if supported by substantial evidence in the record as a whole; courts do not reweigh competing evidence.
- The choice and severity of sanctions (including an industry bar and civil money penalties under 12 U.S.C. § 1818(i)) receive substantial judicial deference and will be set aside only if unwarranted in law or lacking record support, or if the agency acted arbitrarily or capriciously.

## Conclusion

The D.C. Circuit upheld the OCC’s final enforcement order against Lawrence Dodge, holding that substantial evidence supported the agency’s findings that he used the bank to make self-connected loans, withheld material information about his involvement, and repeatedly misreported loan performance and regulatory capital, thereby justifying his removal, permanent prohibition from federally insured banking, and a $1 million civil money penalty under 12 U.S.C. § 1818.


Dodge v. Comptroller of the Currency, 744 F.3d 148 (2014)