Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

In the Matter of: Bank United F.S.B. (10061) Coral Gables


April 11, 2012


The opinion of the court was delivered by: Howard R. Lloyd United States Magistrate Judge



Michael Orlando moves to quash a subpoena issued by the Federal Deposit Insurance Corporation ("FDIC") in the matter of Bank United F.S.B. (10061) Coral Gables, Florida, pursuant 17 to the Federal Deposit Insurance Act, 12 U.S.C. § 1818(n) and 12 U.S.C. 1821(d)(2)(I). The FDIC 18 initiated an investigation into Bank United F.S.B. ("Bank United") after it failed in mid-2009. In 19

November 2009, the FDIC issued an Order of Investigation to investigate, in part, any third parties 20 who provided residential home loan mortgage application and closing services to Bank United, and 21 to determine (1) "whether claims exist against any person as a result of any actions or failures to act 22 with respect to Bank United," and (2) whether the FDIC should seek to avoid any transfers made by 23 these persons and/or attach the assets of these persons." Dkt. No. 7 p. 3 ("Opp'n"); Goosenberg 24 Decl. Exh. A ("Order of Investigation"). 25

Pursuant to the Order of Investigation, the FDIC issued a subpoena duces tecum*fn1 on Union Bank, for the purpose of investigating "several arguably fraudulent mortgage finance transactions in 27

Case5:11-mc-80223-EJD Document15 Filed04/11/12 Page2 of 8

which purported borrowers were extended credit based on assets in checking and/or savings 2 accounts verified by Crocker Financial." Opp'n, p. 1. The FDIC identified at least two cases in 3 which Bank United extended loans to borrowers whose accounts were verified by an entity called 4

Bank United to purchase real property (the "Graves loan"). The second involved an individual 6 known as "C.P.," who obtained a loan to refinance real property (the "C.P. loan"). Both transactions 7 occurred in mid-2007. Crocker Financial deposited the required escrow funds in both cases, and in 8 the Graves loan, listed itself as remitter, leading the FDIC to suspect that the borrowers were merely 9 strawmen who provided neither accurate account information nor the funds required to consummate 10 the transactions. Orlando admits that Crocker Financial is a fictitious business name and that the

Crocker Financial Bank United account (account number 1470027874) "was opened as his own account," and which he used to "conduct[] a variety of financial transactions." Dkt. No. 1, p. 3 13 Crocker Financial. The first involved an individual named Jeff Graves, who obtained a loan from 5 ("Motion"). It is not clear where Orlando/Crocker Financial's "clients" kept their checking and/or 14 savings account funds, if not in the Crocker Financial account(s) at Union Bank. Orlando argues that 15 the FDIC's only "legitimate" investigation concerns the Graves loan. Id. 16 1470027874; (2) "any and all Crocker Financial Accounts;" and (3) any other accounts owned by 18

Quash, Exh. A, p. 7 ("Subpoena"). For each of these three categories, the subpoena seeks copies of 20 all signature cards, and evidence of all of the following from the period from May 1, 2006 through 21 June 1, 2008: all bank statements, all deposits of $7,500 or more, and all withdrawals of $7,500 or 22 more. Id. 23 grounds that the subpoena is overbroad and seeks the production of privileged and confidential 25 information that goes beyond the scope of the FDIC's investigation. FDIC has opposed the motion. 26

Orlando has replied, and the presiding Judge Davila gave the FDIC permission to file a sur-reply. 27 28

subpoena were two cashier's checks used in the Graves transaction. Once the FDIC realized its mistake re: the account number, it issued the instant subpoena.

The subpoena duces tecum seeks documents and records for (1) Union Bank account number "any and all persons whose name appears on a signature card for" account 1470027874. Motion to 19 Union Bank sent Orlando notice of the subpoena, and Orlando has moved to quash on the Dkt. Nos. 9, 13. Orlando has responded to the sur-reply. Dkt. No. 14. Based on the moving papers 2 and applicable authority, the court rules as follows. 3

U.S.C. § 1821(d)(2) permits the FDIC to issue subpoenas when acting "as conservator, 5 receiver, or exclusive manager and for purposes of carrying out any power, authority, or duty with 6 respect to an insured depository institution (including determining any claim against the institution 7 and determining and realizing upon any asset of any person in the course of collecting money due 8 the institution)." 12 U.S.C. § 1818(n) delineates the subpoena power: the agency conducting the 9 proceeding, examination, or investigation or considering the claim for insured deposits . . . shall 10 have the power to . . . issue, revoke, quash, or modify subpenas and subpenas duces tecum.

Federal courts shall "accord[] substantial deference" to agency-issued subpoenas, and should uphold such a subpoena "so long as it is for a proper purpose, the information sought is relevant to 13 that purpose, and the statutory procedures are observed." Federal Election Com. v. La Rouche 14 58 (1964)). The court's role in a subpoena enforcement proceeding is "strictly limited to inquiring 16 whether the above requirements have been met. . . . 'As long as the investigation is within the 17 agency's authority, the subpoena is not too indefinite, and the information sought is reasonably 18 relevant, the district court must enforce an administrative subpoena.'" United States v. Comley, 890 19 Cir. 1987)). 21

22 unless the party being investigated proves the inquiry is unreasonable because it is overbroad or 23 unduly burdensome.'" FDIC v. Garner, 126 F.3d 1138, 1145 (9th Cir. 1997) (quoting NLRB v. 24 North Bay Plumbing, Inc., 102 F.3d 1005, 1007 (9th Cir. 1996)). 25 A. Whether the FDIC Has Made A Prima Facie Showing for Upholding the Subpoena 27 articulated a proper purpose for issuing the subpoena. Congress vested the FDIC with the authority LEGAL STANDARD Campaign, 817 F.2d 233, 234 (2d Cir. N.Y. 1987) (citing United States v. Powell, 379 U.S. 48, 57-15 F.2d 539, 541 (1st Cir. Mass. 1989) (quoting EEOC v. Tempel Steel Co., 814 F.2d 482, 485 (7th 20

"[O]nce an agency establishes that it has properly issued a subpoena, it 'should be enforced


The FDIC has made a satisfactory showing for upholding the subpoena at issue. First, it has to issue subpoenas in connection with investigations into bank failures. See, e.g., 12 U.S.C. § 2 1818(n) (governing the use of subpoenas in investigations into "termination of insured depository 3 institutions"). Here, the FDIC issued an Order of Investigation to investigate, in part, any third 4 parties who provided residential home loan mortgage application and closing services to Bank 5

United, and to determine (1) "whether claims exist against any person as a result of any actions or 6 failures to act with respect to Bank United," and (2) whether the FDIC should seek to avoid any 7 transfers made by these persons and/or attach the assets of these persons." Opp'n p. 3; Goosenberg 8

Investigation's goal, to determine whether a third party is liable for acts or omissions in connection 10 with Bank United's financial activities, is expressly permitted pursuant to the FDIC's authority to oversee insured banks and investigate their failure when needed. See 12 U.S.C. § 1820(c); 12 U.S.C. § 1818(n); 12 U.S.C. § 1821(d)(2)(1). Thus, the FDIC has established a proper purpose. 13 information sought by the subpoena is reasonably relevant to the purpose of the investigation, and 15 that the subpoena itself is not too indefinite. The declaration of FDIC's counsel Jennifer Goosenberg 16 states that the FDIC suspects that Crocker Financial fraudulently deposited escrow funds in at least 17 two loan transactions-the Graves loan and the C.P. loan. Goosenberg Decl. ¶¶ 3-5. The subpoena 18 duces tecum specifically seeks information about (1) who controls the Crocker Financial account(s), 19 and (2) whether the funds for the loans at issue came from the named borrowers or some other 20 individual(s). Because Crocker Financial is merely a fictitious business name, not a depository 21 institution, its account records are the only means the FDIC can use to trace the source of funds used 22 in the Graves and C.P. loans. In addition, the FDIC attests that the time period is reasonable because 23 it will allow the FDIC to learn where the funds originated, when they appeared in the Crocker 24

Financial account, and what occurred after they were deposited into escrow. There is little doubt that 25 the subpoena is therefore reasonably relevant to the FDIC's ongoing investigation into what role 26 these loans played in Bank United's failure. 27 28 clearly-all signature cards for Union Bank account number 1470027874, copies of all bank Decl. Exh. A ("Order of Investigation"). Use of a subpoena duces tecum to achieve the Order of 9 Having made a prima facie showing of proper purpose, the FDIC must next show that the Moreover, the subpoena defines each term used and lists each type of document requested statements for that account from May 1, 2006 through June 1, 2008, and copies of all deposits and 2 withdrawals of $7,500 or more to that account from May 1, 2006 through June 1, 2008. In addition, 3 it requests bank statements and deposits and withdrawals of $7,500 or greater for the same time 4 period from any other "Crocker Financial Accounts" and any other account owned by any person 5 whose name appears on a signature card for account number 1470027874. In short, the FDIC names 6 one account number and two other categories of account, and requests specific documents from a 7 specified time period for each account or type of account. There is nothing indefinite about such a 8 request. 9 enforcement of the subpoena duces tecum.

B. Orlando's Challenges to Enforcement of the Subpoena

Accordingly, the court concludes that the FDIC has made a prima facie showing to support is overbroad and unduly burdensome. Second, he argues that it seeks privileged information not 14 relevant to the FDIC's investigation in violation of the Right to Financial Privacy Act. 15

Orlando argues that the subpoena request is overly broad and unduly burdensome. Dkt. No. 1, p. 4. In essence, his argument is that the subpoena is a fishing expedition because it requests 18 documents covering a two-year period and seeks information not limited to the Graves loan. 19

The party being investigated bears the burden of proving that the subpoena is overbroad or 21 unduly burdensome. United States v. Stuart, 489 U.S. 353, 360 (U.S. 1989). Here, Orlando contends 22 that the subpoena, which requests bank statements and deposit and withdrawals of $7,500 or more 23 from at least one Crocker Financial bank account over a two-year period, is overbroad because it 24 seeks information not relevant to the investigation of the Graves loan. Dkt. No. 1, p. 4. He 25 summarily argues that the subpoena "is by its very terms in the nature of a fishing expedition." Id. 26

However, the FDIC repeatedly states that its investigation covers multiple loans made to borrowers 27 whose accounts were verified by Crocker Financial. See, e.g., Dkt. No. 8, p. 4. It has identified at 28 least one other such transaction, the C.P. loan. It argues that the two-year time period is reasonable Orlando challenges the enforcement of the subpoena on two grounds. First, he argues that it

1. Whether the Subpoena Is Overly Broad or Unduly Burdensome Motion, p. 4. 20 because it spans approximately one year before and after the Graves and C.P. loans occurred, and 2 would allow the FDIC to trace the funds used as down payments in those loans, as well as any 3 significant subsequent activity. It also argues that because Crocker Financial is not a depository 4 institution, subpoenaing its bank records (and those for other bank accounts held at Union Bank by 5 holders of signature cards for the Crocker Financial account) is the only way for the FDIC to track 6 deposits and withdrawals made by the alleged borrowers in the Graves and C.P. loans. 7

Orlando bears the burden of establishing that the subpoena is overbroad and unduly 8 burdensome. His conclusory argument that the subpoena is overbroad because it seeks documents 9 not directly related to the Graves loan does not satisfy the burden. Accordingly, the court cannot 10 conclude that the subpoena is overly broad or unduly burdensome.

2. Whether the Subpoena Improperly Seeks Privileged Information

Orlando also argues that the subpoena runs afoul of the Right to Financial Privacy Act

("RFPA"), 12 U.S.C. § 3401 et seq. because (1) the FDIC failed to provide notice of the subpoena 14 directly to Orlando, and (2) the records are not relevant to a "legitimate law enforcement inquiry." 15

The RFPA provides specific procedures by which federal agencies may obtain access to 17 bank records, and requires agencies to provide notice to consumers when their records will be 18 produced. But, as the FDIC has correctly noted in its sur-reply, the RFPA exempts the FDIC from 19 its consumer notice requirement. See Dkt. No. 13, p. 2 (citing 12 U.S.C. § 3413(b)). Orlando 20 acknowledges this fact in his response to the sur-reply. Dkt. No. 14. 21 22 relevant to the Graves loan, it is not relevant to a legitimate law enforcement inquiry. Dkt. No. 1, pp. 23 5-6. The FDIC established in its opposition brief that, in fact, its investigation concerns at least two 24 suspect loans extended to customers of Crocker Financial. In addition, the Order of Investigation is 25 broadly worded, directing the FDIC to investigate "whether any claims exist" due to illegal acts or 26 omissions to act with respect to Bank United. Therefore, the court cannot conclude that the 27 subpoena is not relevant to a legitimate law enforcement inquiry. Because the court has determined 28 Dkt. No. 1, p. 5. This argument also fails. 16

Finally, Orlando argues that, to the extent the FDIC seeks information beyond that directly that the subpoena is a valid agency subpoena in light of applicable law and the FDIC's stated 2 purpose in issuing it, it is relevant to a legitimate law enforcement purpose. 3


Based on all of the foregoing, the court concludes that the subpoena is valid and enforceable as written, and the motion to quash is DENIED. 6


Dated: April 11, 2012 8

C11-80223 EJD Notice will be electronically mailed to: Frank Ubhaus Maurice Wainer 3 Counsel are responsible for distributing copies of this document to co-counsel who have not registered for e-filing under the court's CM/ECF program.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.