Summary: The Federal Deposit Insurance Corporation's (FDIC) procedures and actions in notifying the proper authorities of alleged violations of criminal law at a bank were evaluated. The FDIC had formal, required procedures for reporting suspected criminal violations, and optional followup and other legal or administrative procedures reinforced the required procedures. The bank's first FDIC examination showed that the bank was in good financial condition. The next examination, 7 months later, showed that the bank was near insolvency because it had granted several bad loans and that criminal law had probably been violated. The FDIC took required and administrative actions by preparing internal memoranda and by conducting a meeting on the bank's insurability. Two months after the second examination, the regional examiner sent a memorandum to headquarters stating: (1) because the FBI had been notified and was investigating the case, a report to the U.S. Attorney was not prepared; and (2) the bank's bonding company had been notified of possible criminal actions. Technically, the FDIC did not follow its reporting procedures because it did not send a letter to the U.S. Attorney stating that criminal laws might have been violated. However, while not completely in accordance with established procedures, the FDIC actions were effective because the proper authorities were notified.
