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'Gross Negligence' is test for FDIC civil recoveries

By Ted Carter

At a recent press conference, Federal Deposit Insurance Corporation Chairman Sheila Bair drew a distinction between investigations of bank executives and directors her office is doing and the criminal probes launched by the FDIC’s inspector general.
She said her agency has approved about 200 civil actions against bank officers and directors aimed at recovering about $2 billion. “Obviously — we probably won’t get all of that,” she said, according to official transcripts, but added she expects the FDIC will file “many more” additional recovery actions.
She said the general criteria for setting liability on external directors is “gross negligence.”
The test, she said, is whether the FDIC finds “a clear violation of obligations by the management and directors.”
Bair did not address the inspector general’s investigation of possible criminal wrongdoing by bankers and directors other than to say the FBI is working with the IG. She referred reporters to a Wall Street Journal report that said the IG is conducting 50 criminal investigations of former executives, directors and employees at U.S. banks that have failed since the start of the financial crisis.

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