Code of Ethics

This appears to be the code of ethics referenced in the DEF 14A · For 5/10/11 filing

SEC Info – Princeton National Bancorp Inc – 10-K – For 12/31/03 – EX-14.

21 comments on “Code of Ethics

  1. Dear Directors and Executives (former and present): What is your protection in case the FDIC sues you sometime after the bank is shut down, as they did for Broadway Bank in Chicago? The bank’s directors and officers insurance? You might want to check that out.

    Typical casualty insurance, such as auto insurance, is written on an “occurance” basis. But D&O insurance is written on a “claims-made” basis. So, if the FDIC were to sue you some time after the bank’s demise, there likely may be no D&O coverage in place for you. And, your personal liability insurance won’t kick in either.

    I’m not an attorney, which is why my fees are so low.

  2. As I have posited in past postings, FDIC will investigate the circumstances surrounding the bank failure and depending on internal findings, will make a formal claims against the bank’s insurance carrier under the D & O and/or E & O policy. Depending on coverage amounts, and findings they may go after the Executive and Directors individually. Too premature to speculate at this point, but I would not want to be them at this point.

      • Here is an excerpt from the failed Broadway Bank story, in which the FDIC is suing the directors personally:

        “According to the FDIC, the entire bank board was ‘grossly inattentive to the affairs of the bank — deferring excessively to the whims of the Giannoulias family. As a consequence, reports were not closely read, little or no due diligence into the bank’s condition was done, regulatory criticisms were discounted….’ ”

        I don’t read “intent” being part of that claim, but I haven’t seen the whole document.

        The Broadway Bank suit by the FDIC isn’t a criminal case, such as for embezzlement, where intent maybe has to be proved. The FDIC is saying that the directors dropped the ball and, as a result, the FDIC had to shell out money to depositors. And now the FDIC wants its money back from the directors, personally. Makes sense to me.

  3. Directors and executives, former or present, may be well advised to get lawyered up, personally. And maybe start thinking about copping a plea – if you don’t, maybe somebody else will do it first? Maybe the person you least expect?

  4. Intent doesn’t really play a big part unless there is outright fraud. In the case of PNBC, the angle may well focus on recklessness and acting in a prudent manner. It will all go to their pattern of behavior. Think of it like those class action lawsuits that are filed by law firms when a stock drops precipitously in value. FDIC will probably reach a settlement with the insurance company and the executives and directors (if it comes to that). Again, it all hinges on their investigation and whether they feel they have a case because remeber the deposit insurance fund (DIF) of the FDIC takes a hit when they close a bank, so the more they can recover from loan workout and other activities such as claims against the insurance, the less the losses will be to taxpayers.

  5. Almost all attorney’s professional liability insurance is now written on a “claims made” basis.When you retire, it behooves you to buy “tail” insurance to cover future claims that might arise. Premiums are based on company’s assessment of your risk based on past history of claims, statute of limitations etc.

    • Steve, this is what I’m wondering: In the event of a bank’s failure, it is essentially out of business, kaput, right? With a national bank, the feds withdraw the bank’s charter. Technically, it is still owned by the shareholders, but with no revenue and probably a host of claims against the bank, it seems unlikely to me that a failed bank would be in position to continue its directors & officers insurance in force even if any insurance company were willing to sell them such insurance. Likewise, a failed bank’s purchasing tails coverage for the benefit of its directors seems unlikely to me. That could leave the directors exposed.

      I heard that Citizens’ annual D&O coverage premiums have increased greatly of late, maybe several hundred thousand dollars. I would have to put it in the “rumor” category – although many rumors seem to have eventually been confirmed.

      If a failed bank is taken over by another, as the FDIC sometimes arranges, my understanding is the the successor bank merely acquires the assets and some of the liabilites, such as deposits. The successor bank does not actually acquire the failed bank’s stock, and presumably would not be in position to provide D&O coverage to the failed bank’s directors?

      Since you are an esteemed attorney, Steve, your input would be much appreciated.

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