Jonathan Cohen Quoted in ACAMS moneylaundering.com Article on Directors and Officers Liability Insurance Issues
Joseph & Cohen, Professional Corporation, was featured in a recent ACAMS moneylaundering.com article by Kira Zalan and Colby Adams titled “With Regulators’ Talk of Individual Fines Comes Bankers’ Queries on Insurance.”
Published on June 17, 2014, the article explores why more and more bank compliance officers are exploring the scope of insurance coverage under Directors and Officers (D&O) liability insurance policies to address the rise of regulatory penalties against individual bankers.
The article notes an important and often overlooked reality that many financial institutions and their officers are unaware of the exclusions in their D&O policies, to which Jonathan Cohen, the firm’s head of litigation, was quoted:
“More often than not an officer or director will be surprised by the lack of coverage that they have.”
Joseph & Cohen’s core corporate and regulatory practice includes the representation of federally insured depository institutions and the defense of Officers and Directors of financial institutions in civil damage actions instituted by the FDIC or shareholders and administrative proceedings brought by the FDIC for civil money penalties or other sanctions. Joseph & Cohen also has extensive experience in advising institutions and their Offices and Directors in connection with insurance coverage and related litigation.
SAN FRANCISCO, CA – March 22, 2013. Joseph & Cohen, headquartered in San Francisco, rolled out a new marketing campaign today as part of its sponsorship of the Western Independent Bankers’ (WIB) Annual Conference for Bank Presidents, Senior Officers & Directors being held in Kauai, HI from March 23 – 27, 2013. Managing Partner Jonathan Joseph notes, “Joseph & Cohen is proud to be a major sponsor of WIB for the fourth consecutive year. WIB’s commitment to assist bankers and directors in navigating the complex changes in the industry mirrors our own.”
For this year’s marketing sponsorship, Joseph & Cohen, which specializes in representing independent and regional banks, chose the image below of a well-dressed attorney riding a skateboard. The concept emphasizes the firm’s ability to solve complex legal matters with skill and agility in a laid-back but professional and cutting edge manner. Joseph & Cohen believes its fresh vision provides a competitive edge in connecting with the next generation of banking leaders.
To learn more, call 415.817.9200 to speak to either of the firm’s name partners: Jonathan Joseph or Jon Cohen.
Department of Financial Institutions Attorney Ken Sayre-Peterson Joins Joseph & Cohen – Expands Firm’s Core Regulatory Practice
SAN FRANCISCO, CA – February 21, 2012. Joseph & Cohen, Professional Corporation, announced today it has expanded the depth and scope of its bank regulatory, financial services and legislative practice with the addition of Kenneth Sayre-Peterson as Of Counsel. Sayre-Peterson elected to join Joseph & Cohen following his retirement from the California Department of Financial Institutions (DFI), where he served in various legal capacities during a lengthy career, most recently having acted as the DFI’s General Counsel.
Kenneth Sayre-Peterson acted as the General Counsel for the California Department of Financial Institutions from June 2007 until his retirement in November 2011. His final position with the DFI was the culmination of 22 years of service that began in 1988. Prior to joining the legal staff of the California DFI, Mr. Sayre-Peterson practiced tax law for four years as a staff counsel with the California State Board of Equalization. Before entering state service, he spent two years in private practice, specializing in appellate work and lobbying.
“We are extremely pleased that Ken Sayre-Peterson is teaming up with Joseph & Cohen. Ken is one of the preeminent financial institutions lawyers in California. His many years of bank and credit union regulatory expertise and financial services legislative skills coupled with the firm’s well regarded financial services practice, deepens and expands Joseph & Cohen’s ability to offer complete legal solutions to banks, thrifts, money transmitters and other financial institutions,” said Jonathan D. Joseph, Joseph & Cohen’s Managing Partner.
Joseph added “Ken’s insider perspective from more than two decades with the Department of Financial Institutions allows the firm to provide an unprecedented level of legal Joseph added “Ken’s insider perspective from more than two decades with the California services to money center, regional and community banks in connection with their most complex acquisitions, transactional and regulatory imperatives while also lending unparalleled strength to our existing team that advises troubled banks and defends officers and directors of failed banks in all types of enforcement proceedings.”
Ken Sayre-Peterson stated “I’ve known Jonathan Joseph since my early days with the CA DFI. From my vantage point in the Department I’ve admired the quality, integrity and tenacity of his lawyering in matters before the DFI. Consequently, I am delighted to step back into private practice with Joseph & Cohen and believe that we will achieve significant synergies through our respective talents.”
Throughout his career at the California Department of Financial Institutions, Mr. Sayre-Peterson practiced general financial institutions law which resulted in an intimate knowledge of the banking, credit union, money transmitters, securities, and trust laws of California, as well as the pertinent and corresponding federal laws. Additionally, Mr. Sayre-Peterson was the attorney responsible for assisting the DFI’s Legislative Section. In that position, Ken spearheaded the recent revision and restatement of California’s Banking Law as newly codified in the California Financial Code, and drafted all legislation necessary to complete that four year project. While serving as the DFI’s General Counsel, Ken also played a major role in the policy making process, influencing both the direction and scope of the DFI’s examination and enforcement program.
Ken Sayre Peterson became a member of the State Bar of California in1983 after graduating from the McGeorge School of Law in Sacramento, with distinction. He earned a Bachelor of Arts degree in History from California Polytechnic State University, San Luis Obispo, in 1977.
Joseph & Cohen, Professional Corporation, is an AV® rated law firm headquartered in San Francisco, California. The firm emphasizes complex banking, corporate, regulatory, securities, employment, litigation and transactional matters for financial institutions, small businesses, investors and venture capital firms. Joseph & Cohen is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized capabilities typically found only in the largest American law firms. The Firm’s core areas include advice related to banking and financial services law; directors and executives; regulatory and legislative matters; mergers & acquisitions; securities offerings; SEC disclosure matters; employment litigation; D & O insurance coverage; money transmitters; bank operations; and regulatory agency enforcement proceedings.
By Jonathan Joseph*
The total number of bank failures since the banking crisis began in 2008 is now dangerously close to 400. To date, the FDIC has only filed 14 lawsuits against failed bank directors and officers from thirteen different failed banks. A total of 103 former bank directors and officers have been named in these suits.
Based on published statistics and our own analysis of U.S. bank failures from 2008 to September 16, 2011, we believe that approximately 80 additional suits will be brought by the FDIC, as receiver, in the next two years. While the FDIC’s investigation and claim process has moved slowly, the number of damage suits authorized and filed is quickening and, we expect, will spike in 2012.
In August 2011, 5 new suits were filed, more than double any previous month. Currently, the FDIC’s website states it has authorized suits in connection with 32 failed institutions against 294 individuals for D&O liability with damage claims of at least $7.2 billion. All but one of these suits involved banks that failed prior to July 2009. Consequently, while 14 lawsuits have been filed and the FDIC has approved claims against an additional 191 directors and officers who served 18 different failed banks, this significantly understates the number of new suits to be filed and D&O’s to be named.
The current round of bank failures began somewhat slowly in 2008. The closing of IndyMac Bank in July 2008 marked the beginning of a huge acceleration of failures with 140 failures in 2009 and 157 in 2010. The pace has slowed in 2011 with 71 failures year to date. Some of the 18 authorized FDIC lawsuits not yet filed may settle; however, the FDIC will approve additional lawsuits against bank directors and officers at an increased pace in the ensuing months because 252 or 64 percent of the current round of bank failures occurred between July 9, 2009 and December 31, 2010. The FDIC is now approaching the decision point in many of these pre-2011 failures including the retention of outside law firms to prosecute damage claims on its behalf, as receiver.
D&O liability suits are generally only pursued if the FDIC concludes they are both meritorious and cost-effective. Before seeking recoveries from individual directors and officers, the FDIC conducts an investigation into the causes of the failure. The FDIC states on its website that investigations are usually completed within 18 months from the time the institution is closed, but lawsuits typically aren’t filed for another few months to a year. Investigations can extend longer and lawsuits are sometimes filed just before the third anniversary of a bank’s failure.
Here are some illustrations: Georgia’s Silverton Bank failed on May 1, 2009 and suit was filed on August 22, 2011 (27 months). Haven Trust Bank in Georgia failed on December 12, 2008 and suit wasn’t filed until July 14, 2011 (32 months). Cooperative Bank in North Carolina was closed in June 2009 and suit was filed August 10, 2011 (26 months). On the other hand, Wheatland Bank in Illinois failed on April 23, 2010 and suit was filed on May 5, 2011 (13 months). With $11.2 billion in assets, San Francisco based United Commercial Bank was closed and most of its assets were assumed by East West Bank on November 6, 2009. Yet after almost two years, no public announcement of FDIC damage claims against any of UCB’s executive officers and directors have surfaced. United Commercial Bank was California’s largest ever commercial bank failure.
Not all bank failures result in Director and Officer (D&O) lawsuits. The FDIC brought claims against directors and officers in 24 percent of the bank failures between 1985 and 1992. Since July 2009, the FDIC was named receiver at 323 failed banks. Bank failures have been most heavily focused in Georgia (70), Florida (56), Illinois (45), California (37), Washington (17) and Minnesota (16). If one assumes the same 24 percent ratio of suits from the 1985 – 1992 era will be repeated in connection with failures since June 2009, former directors and officers of about 80 additional banks could be targets of FDIC damage suits in the next two years in addition to the 14 suits already underway. The actual number could be somewhat higher but we doubt it will be much lower.
Prior to filing a lawsuit against a director or officer of a failed bank, staff for the FDIC, in its capacity as the receiver (or outside counsel representing the FDIC as receiver), will mail a demand letter to the bank’s officers and directors asserting the FDIC’s claims for monetary damages arising out of the bank’s failure. These demand letters typically do not distinguish between the different roles that officers and directors may have played under the circumstances nor is much effort made (at this point in the process) to determine which officers and directors in a particular organization may have been negligent, grossly negligent, breached fiduciary duties or wasted assets.
In a number of recent suits, the FDIC has focused on outside directors that had more banking industry expertise than other directors (i.e., directors of Silverton Bank) who were not themselves professional bankers. Directors with lending, accounting and CPA expertise may potentially be held by FDIC to higher standards, which could make them more visible targets. Often the FDIC’s demand letter is sent to trigger a claim under the bank’s director and officer liability policy and as part of an attempt to settle with the responsible parties. If a settlement cannot be reached, however, a complaint will be filed, typically in federal court. Thus, in many of the upcoming lawsuits, the FDIC may pursue claims against individuals but will also focus on the insurance proceeds that could be available in connection with many failures especially those that occurred prior to 2011 (when regulatory exclusions were not as widespread).
It is crucial that officers and directors of a troubled or failed bank retain knowledgeable insurance coverage and bank regulatory counsel to assert rights to coverage under the bank’s liability policies and to determine whether the facts and circumstances raise unique or special legal defenses. Officers and directors of all distressed banks should attempt to retain experienced outside counsel prior to a bank’s failure as the bank’s existing counsel will usually be conflicted out upon failure. Notice of circumstances that could give rise to coverage under a policy should be filed with insurers on a timely basis (usually pre-failure) and written follow-up by coverage counsel with insurers post-failure is often be necessary. If a director or bank officer hasn’t done so prior to failure, they should always retain experienced counsel at the first hint of an investigation or demand arising out of the bank failure.
In many of cases, the FDIC’s ultimate objective will be the recovery of D&O insurance proceeds. For this reason, it is often advisable to retain a combined legal team that has the capability to address insurance issues, liability and damage claims, regulatory enforcement actions (such as banking industry bans and civil money penalties) and, in rarer cases, criminal probes and indictments.
*About the Author: For over thirty-two years, Jonathan Joseph has focused on the representation of community and regional banks and officers and directors of distressed and failed banking organizations in connection with regulatory, transactional and corporate matters. He is a member of the Financial Institutions Committee of the California State Bar and a leading banking industry lawyer in California. Mr. Joseph founded the firm of Joseph & Cohen, Professional Corporation, in 2006 and is its Chief Executive Officer. Joseph & Cohen currently represents financial institutions and officers and directors of troubled and failed banks from its office in San Francisco, CA.
For additional information, please email the author: Jon@JosephandCohen.com.
© Joseph & Cohen, Professional Corporation. 2011. All Rights Reserved.
SAN FRANCISCO, CA – March 28, 2011. Joseph & Cohen, Professional Corporation, announced today that its co-founders, Jonathan D. Joseph and Jonathan M. Cohen, joined the Ad Hoc Committee of Bank Counsel (“Amici” or “Committee”) in support of the law firm, Bryan Cave LLP (“Bryan Cave”), in a case brought against them by the FDIC (FDIC v. Bryan Cave LLP, 10-cv-03666). The FDIC sued Bryan Cave in November 2010 in the U.S. District Court in Atlanta, charging Bryan Cave with failing to hand over bank records related to the October 2010 collapse of Kansas-based Hillcrest Bank.
The Committee, comprised of some of the top banking lawyers in the country, was formed last week to file an Amicus Brief supporting Bryan Cave’s motion for a summary judgment. The controversy relates to Bryan Cave’s representation of the directors of Hillcrest Bank in the brief period before and after that Bank failed. The issue in the case is of vital importance to bank directors and executive officers as the FDIC has asserted that bank directors and officers have no right to retain bank documents after the FDIC is appointed receiver of a failed bank.
The Committee’s “friend of the court” brief points out that the FDIC’s complaint, if sustained, would be an unprecedented deprivation of long accepted rights of bank officers and directors to mount and conduct an adequate and timely defense against claims by the FDIC and others. The Committee’s Amicus Brief was filed before Judge Timothy Batten, Sr. in the Northern District of Georgia on March 24, 2011. As Amici, their court filing fulfills the classic role of amicus curiae by assisting in a case of general public interest and supplements the efforts of counsel to a party in the case.
The Committee is a group of twenty-eight experienced and recognized bank attorneys and one major national law firm all of whom are currently active in the representation of FDIC insured financial institutions, as well as their officers and directors. Members of the Committee are frequently called upon to provide advice and counsel to officers and directors regarding their rights and obligations when they are subject to or threatened with a claim by the FDIC, by shareholders or other third parties, for claims incident to a failure or risk of failure of the bank for which they serve.
Jonathan Joseph, CEO of Joseph & Cohen, stated “We joined the Amicus Committee to advocate for a fair and just resolution of the matters in dispute consistent with the statutory and constitutional rights of bank directors and officers of failed and failing banks to defend, with the aid of counsel, against suits and claims, as well as the interest of the FDIC in maintaining the confidentiality of protected records.”
The central question in the case is whether directors and officers of federally insured banks may access and obtain copies of bank documents in anticipation of the bank’s failure, so that they may later use the copies, with the assistance of counsel to explain and defend their conduct. Bryan Cave has filed a motion asking the Court to dismiss the case arguing that as a matter of law the FDIC has no valid claims.
Bryan Cave’s motion points out that no federal statute or regulation prohibits a bank director or officer from accessing bank documents to assist in explaining or defending his or her conduct. Consequently, they assert that under Kansas law, as in Delaware, New York and many other states, bank directors have a well-recognized right to review and copy corporate documents, and to share those copies with their own counsel, for the entirely legitimate purpose of explaining and defending their own conduct.
Joseph & Cohen, Professional Corporation, is an AV® rated law firm based in San Francisco, California that emphasizes the representation of community and regional banks and bank holding companies and their officers and directors. The firm also handles complex corporate, securities, regulatory, employment and merger transactions as well as commercial and executive employment litigation. Joseph & Cohen is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized capabilities typically found only in the largest American law firms.
Joseph Law Corporation Adds Litigation and Employment Law Specialties with Addition of Jonathan M. Cohen
San Francisco, CA — April 27, 2010. Joseph Law Corporation announced today that it has expanded its complex litigation and employment law expertise through the addition of Jonathan M. Cohen as Of Counsel to the firm.
“We are extremely pleased that Jonathan Cohen is teaming up with Joseph Law Corporation. With his extensive state and federal court litigation expertise as well as his experience providing pre-dispute advice in the areas of complex commercial transactions, executive compensation and employment law, we have rounded out our ability to offer complete legal solutions to public companies and private businesses,” said Jonathan Joseph, the firm’s chief executive officer.
Jonathan Cohen brings many years of trial experience to Joseph Law Corporation. He concentrates his practice on complex litigation as well as pre-dispute counseling. His practice includes executive compensation negotiations and employment law, including wrongful termination litigation, harassment, retaliation and discrimination. His trial experience includes class actions, complex commercial disputes, insurance coverage, real estate, product liability, securities, commodities and derivative litigation. He has represented clients in state and federal court in addition to domestic and international arbitrations and mediations. Prior to joining the Joseph Law Corporation, Mr. Cohen was a partner in the San Francisco office of Winston & Strawn LLP. Jon Joseph and Jonathan Cohen initially met eight years ago when they were partners in the San Francisco office of K & L Gates (previously known as Kirkpatrick & Lockhart Nicholson Graham LLP).
Joseph Law Corporation is an AV® rated firm based in California that emphasizes complex banking, corporate, regulatory, securities and transactional matters for financial institutions, entrepreneurs, businesses, investors and venture capital firms. Joseph Law is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized capabilities typically found only in the largest American law firms.
Jonathan Joseph is the firm’s Managing Partner and an AV® peer review rated attorney with over thirty-four years of experience representing banks and other depository institutions with their most complex business and legal imperatives such as mergers and acquisitions, regulatory and enforcement matters, corporate governance, board, audit and compensation matters, raising capital, investigations, strategic planning and D & O insurance coverage and indemnification. He is well known in the financial services industry for his creativity, skill and judgment and relentless determination to achieve the objectives of his clients.
Mr. Joseph also represents other financial services clients with a focus on credit unions, e-commerce, investment bankers, money transmitters, private equity firms, public companies and venture capital firms. He often acts as lead or special counsel for bankers, fund managers and other financial services clients in connection with bank acquisitions and divestitures, equity investments in early stage and mezzanine companies, cross-border transactions, public offerings, securities and disclosure issues, as well as federal and state bank regulatory and enforcement matters involving the federal banking agencies and California Department of Financial Institutions.
A core specialty involves advising directors and officers of troubled and failed banks and defending litigation and enforcement claims brought by federal banking agencies. Some of the more prominent bank failure cases in which Mr. Joseph has been involved include:
- Settling negligence and breach of fiduciary duty claims brought by the Federal Deposit Insurance Corporation against the five most senior officers of County Bank in FDIC as Receiver for County Bank vs. Hawker, et al., (E.D. CA 2012);
- Representing the outside directors of a failed state chartered bank headquartered in California;
- Defending an officer of the failed United Commercial Bank (San Francisco) in connection with a criminal investigation by the United States Department of Justice and a lifetime banking industry ban instituted by the FDIC;
- Favorably resolving a proposed civil money penalty enforcement action proposed against an executive officer by the FDIC as receiver for a failed state chartered bank;
- Favorably resolving potential civil claims prior to institution of civil damage or enforcement actions by the Officer of Thrift Supervision and its successor, the Comptroller of the Currency;
- Representing a group of outside directors of a failed state chartered bank in a mediation before a retired Judge prior to the institution of a civil damage action by the FDIC; and
- Favorably settling bankruptcy and indemnification claims in the Chapter 11 reorganization case of In re: Capital Corp of the West, (U.S Bk. Ct., E.D.CA. – Fresno Division, 2012).
Mr. Joseph is a member of the Financial Institutions Committee of the State Bar of California’s Business Law Section (2009 – present) and currently serves as its Co-Vice Chair. He is the Chairman-elect beginning in October 2013 and previously served on the Financial Institutions Committee from 1988 to 1991. He is a member of the State Bar of California, the District of Columbia Bar, State Bar of New York and the American Bar Association.
Mr. Joseph’s past law firm experience includes:
- Partner at K & L Gates LLP (previously known as Kirkpatrick & Lockhart Nicholson Graham LLP) in the Corporate and Investment Management Group in San Francisco (2003-2006).
- Partner at Pillsbury Winthrop Shaw Pittman LLP (previously known as Pillsbury Madison & Sutro LLP) in the Corporate Securities and Financial Institutions Group in San Francisco (1990-2003).
- Associate and then Partner at Rosen Wachtell & Gilbert, P.C. in Los Angeles and San Francisco (1979-1990).
Mr. Joseph earned his Juris Doctor degree from the Washington University School of Law in St. Louis, Missouri in 1979, where he interned for F. Hodge O’Neal, the George Alexander Madill Professor of Corporate Law, and was a contributing writer of the 1979 Supplement to Professor O’Neal’s seminal work: “Squeeze-Outs” of Minority Shareholders: Expulsion or Oppression of Business Associates, Chicago: Callaghan, c1975.
Mr. Joseph has been a frequent lecturer and writer on subjects relating to banking and financial institutions, money transmission, corporate law, Dodd-Frank Act, mergers and acquisitions and venture capital. His professional interests also extend into the arts, serving as an art dealer in San Francisco for five years specializing in postmodern art and photography. He was a trustee of the American Conservatory Theater Foundation (A.C.T.) for six years and also served on its executive committee.