As the Federal Deposit Insurance Corporation continues
to pursue professional liability suits against directors
and officers of failed banks, the agency’s recent regulatory
guidance addressing the removal or copying of internal
bank documents for both failed and troubled banks
has further tilted the playing field in favor of the FDIC.
By severely limiting the instances in which bank directors
and officers may remove or copy documents for
their own personal defense, the FDIC has significantly
impeded their ability to defend themselves against potential
administrative, civil, and criminal proceedings.
These disadvantages are most pronounced at troubled
community banks, where directors and officers generally
lack the background and resources to navigate FDIC investigations
Interpreted in light of both the FDIC’s recent litigation
on this issue and the historical patterns of FDIC
lawsuits, the new FDIC guidance allows the FDIC to
build a robust case without having to turn to discovery
or other traditional investigative or litigation techniques.
The FDIC’s new guidance gives the agency more documentary
information than a potential defendant, and as
a result, not only stacks the litigation deck against defendants
but also significantly impairs their ability to negotiate
fair and reasonable settlements.