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E. Initial Actions by Bank Regulators
1. The Cease and Desist Order
On June 16, 1986, the Federal Home Loan Bank Board (FHLBB)
issued a cease and desist order (FHLBB order) to Vernon because
of its improper lending practices. The FHLBB order required
Vernon to correct its loan approval process, to evaluate its
portfolio, and to bring its operations into compliance with
regulatory standards. The FHLBB order required Vernon to prepare
a plan detailing its projected business strategies and operations
through June 30, 1989.
2. Petitioner's Resignation From Dondi Financial
Petitioner resigned from Dondi Financial on August 15, 1986.
Petitioner wanted to sell his Dondi Financial stock for about
$1.3 million as provided by the shareholder agreement. In
December 1986, Dondi Financial offered to buy petitioner's stock
for an amount not disclosed in the record. Petitioner rejected
this offer. Petitioner and Dondi Financial could not agree on a
selling price, and petitioner did not sell the stock.
3. Vernon's Financial Troubles
In September 1986, the State of Texas appointed Earl Hall
(Hall), a State regulatory agent, to run Vernon. Hall and the
remaining directors tried to continue Vernon's operations.
On December 11, 1986, respondent issued a refund check to
Dondi Financial for $6,054,581. On January 15, 1987, Dondi
Financial endorsed the check to Vernon.
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