OCC Will Hold Hearing on Charges against Patrick Adams; Agency Seeks Personal Cease & Desist Order and $100,000 Civil Money Penalty
The Office of the Comptroller of the Currency (OCC) today announced a public hearing before an Administrative Law Judge beginning Monday, January 23, 2012, concerning an enforcement proceeding against Patrick Adams, former President and Chief Executive Officer of T Bank, N.A., Dallas, Texas.
The OCC is seeking an order that would require Mr. Adams to refrain from involving himself with any relationship with a payment processor during any future employment at an institution insured by the Federal Deposit Insurance Corporation and to safeguard non-public supervisory information, confidential customer information, and confidential documents of the institution. In addition, the OCC seeks the assessment of a Civil Money Penalty in the amount of $100,000.
The OCC has charged Mr. Adams with engaging in unsafe or unsound practices, regulatory violations, and breaches of fiduciary duty in connection with his role as President and Chief Executive Officer at the bank. Specifically, between 2005 and 2007, the OCC charges that Mr. Adams allowed the bank to engage in a relationship with a payment processor and merchants of the payment processor and that he allowed the bank to reap substantial income from the payment processor and its merchants while ignoring potential risks of harm to consumers and without ensuring that appropriate controls were in place to protect the bank against risk of loss. In addition, the OCC alleges that when Mr. Adams resigned from the bank in July 2010, he removed documents from the bank that contained confidential customer information, non-public OCC supervisory information that belonged to the OCC, and confidential bank information.
According to the OCC charges Adams allowed Giact Systems to open and maintain bank accounts and for about 66 other business for who Giact processed payments for. Some of those businesses were for credit repair services and prepaid debit cards.
Most of the payments that Giact processed for the Giact Merchant-Clients were in the form of Remotely Created Checks (“RCCs”) that Giact created, using consumer bank account information supplied by the Merchant-Client, and then deposited electronically into the appropriate Merchant-Client’s accounts at the Bank.
An RCC, often also referred to as a “demand draft,” is a payment instrument that looks like a check but does not bear the signature of the consumer from whose account the funds are being withdrawn. Because RCCs are not signed by the consumer, they present a higher than normal risk of fraud and financial harm to consumers.
Indications that consumer harm may be occurring in connection with payment processor relationships utilizing RCCs include: high rates of return of the RCCs being deposited, consumer complaints that the withdrawals from their accounts were not authorized, inquiries from law enforcement and other government agencies, and lawsuits against the payment processor or the merchants. – Source
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