Departed MV Savings Bank chief banned from banking by FDIC

Richard Leonard (left), Martha's Vineyard Co-operative Bank president and Christopher A. Wells, Dukes County Savings Bank president, outside the Dukes County Bank in Edgartown on June 5, 2007, after announcing the merger of the two banks. — File photo by Jon Ollwerther

Updated 11 am, Tuesday, April 9

Christopher A. Wells, former Martha’s Vineyard Savings Bank president and chief executive officer, who resigned last May amid much speculation but no explanation from bank officials as to the reasons for his sudden departure, has agreed to the terms of a Federal Deposit Insurance Corporation (FDIC) order that accused him of serious violations of banking regulations and personal dishonesty. The order prohibits Mr. Wells from working in any FDIC-insured financial institution in the future, without the approval of federal regulatory agencies.

The FDIC’s formal enforcement order includes language common to such documents that alerts depositors that “…the bank has suffered or will probably suffer financial loss or other damage, [and that] the interests of the Bank’s depositors have been or could be prejudiced….”

An FDIC investigation following a routine audit of the Island’s largest bank revealed discrepancies in mortgage lending practices by Mr. Wells, according to one source familiar with the reasons behind the departure of Mr. Wells and the termination of Brad Egan, chief lending officer.

On Monday, bank officials and board leaders said they could say little about the events behind Mr. Wells’s departure or the FDIC action. Martha’s Vineyard Savings Bank CEO and president Paul Falvey cited FDIC regulations.

The FDIC action is in the form of an “order of prohibition from further participation,” dated February 28, 2013. Mr. Wells had the right to appeal the order, but waived that right and agreed to the findings and the order, FDIC spokesman Greg Hernandez told The Times in a telephone conversation Friday.

Mr. Hernandez said the FDIC supervises more than 4,400 banks and conducts routine examinations. When the FDIC identifies unsound practices, it enters into a discussion with bank officials.

“Once those items are identified, if it cannot be resolved or there is some individual that needs to be banned from banking, the FDIC will move ahead and issue a formal enforcement action, and in this case it was a prohibition order,” Mr. Hernandez said.

Unfit to serve

The order only applies to Mr. Wells and not the Martha’s Vineyard Savings Bank. It describes the violations in general, broad strokes.

Mr. Hernandez said banking privacy laws prohibit providing more detail. “Bank examinations are confidential and against the law to divulge,” he said.

The order states that the FDIC has “reason to believe” that Mr. Wells “…engaged or participated in violations of law and/or regulations, unsafe or unsound banking practices, and/or breaches of fiduciary duty as an institution-affiliated party of Martha’s Vineyard Savings Bank, Edgartown; by reason of such violations, practices and/or breaches of fiduciary duty, the Bank has suffered or will probably suffer financial loss or other damage, the interests of the Bank’s depositors have been or could be prejudiced and/or Respondent [Mr. Wells] received financial gain or other benefit; and such violations, practices and/or breaches of fiduciary duty involve personal dishonesty on the part of the respondent or demonstrate the respondent’s willful and/or continuing disregard for the safety or soundness of the Bank.”

The FDIC order further states that Mr. Wells’s conduct and actions demonstrate his “unfitness to serve as a director, officer, or person participating in the conduct of the affairs or as an institution-affiliated party of the Bank, any other insured depository institution, or any agency or organization” enumerated in FDIC regulations.

“He is pretty much done from working in banking,” Mr. Hernandez said, by way of explanation.

Bank is strong

In a telephone conversation Monday, Mr. Falvey would say little more other than that many people do not fully comprehend the restrictions FDIC regulations place on the bank trustees and bank managers. “We can’t comment on any information contained or related to examinations, operating or condition reports,” he said.

Asked by The Times how Mr. Wells was able to run afoul of FDIC regulations without it coming to light prior to the FDIC review, Mr. Falvey paused and said, “I do apologize, but I really can’t respond to that.”

Asked if the bank had suffered any financial loss as a result of Mr. Wells’s actions, Mr. Falvey picked his words carefully. “For an entity that’s about $700 million in assets under management, in 2011, loan losses were about $88,000,” he said. “Those numbers in banking terms, not to minimize it, those numbers are approaching zero.”

And that trend continued in 2012 and in the first quarter of 2013, he said.

Mr. Falvey said banks issue detailed quarterly reports that provide the public with information about a bank’s financial health. “And I am happy to say those reports for this bank continue to be exceptional. It is a very healthy and very profitable bank.”

Mr. Falvey said since his arrived in late November he has continued a process that began before he arrived, of upgrading and restructuring the bank systems, in keeping with heightened levels of regulatory scrutiny.

The bank board includes well-known and well-respected members of the Island community. Although the news of the FDIC action was a source of great consternation, board members The Times spoke to stressed that the bank is healthy.

“The bank did not suffer any losses,” Frank Fenner of Chilmark, vice chairman of the board of trustees, said. “And we are looking forward to a bright future. The bank is exceptionally strong. Paul is doing a terrific job and I think when he gets past some of these changes that have been taking place he is going to be just a terrific addition.”

Very serious

Last October at the time of Mr. Wells’s departure, bank officials hinted at problems in the loan office of a procedural nature. Philip “Jeff” Norton, an Edgartown lawyer and chairman of the bank’s board, told the Vineyard Gazette, “Through discussions with regulators we learned about credit matters where maybe the I’s were not dotted or the T’s crossed and Chris decided that the best thing for him and the bank was to resign.”

On Friday, Mr. Wells spoke to the Cape Cod Times. “I think what happened at the bank and the FDIC is a personal travesty stemming from a technicality,” he said, but declined to elaborate.

FDIC spokesman Greg Hernandez said Mr. Wells waived his right of appeal and agreed to abide by the consent order. “Even though enforcement actions are not rare, they are very serious matters and financial institutions and individuals ought to take them very seriously,” he said.

Mr. Wells did not return a message left on his cell phone.

Shared values

Mr. Wells arrived on the Vineyard in 2004, with a background in financial services and local banking on Cape Cod, to serve as president of what was then the Dukes County Savings Bank.

On June 5, 2007, citing a shared culture of personal service and community values and the evolving nature of the banking business, Martha’s Vineyard Co-operative Bank president Richard Leonard and Mr. Wells, Dukes County Savings Bank president, announced plans to merge the financial institutions.

The merger was not necessarily one of equals. The MV Co-Operative Bank was the older of the two. Founded in 1909, at the time of the merger it had assets of $160 million and employed 46 people in three Vineyard locations.

Dukes County Savings Bank, the newer of the two, was founded in 1955 and had assets exceeding $300 million, 61 employees and seven locations on the Island.

Mr. Wells became president of what became the Martha’s Vineyard Savings Bank.

On May 30, 2012, in a brief press release, bank officials announced the departure of Mr. Wells but said nothing about the circumstances surrounding his abrupt departure.

In October, the bank announced that Paul Falvey of Hingham, a banker with 25 years experience, was the new president and CEO of The Martha’s Vineyard Savings Bank.

Familiar face leaves

The bank provided no announcement last week of the retirement after 28 years of Richard Leonard, a longtime bank officer and well-known figure in the community, associated with many volunteer efforts and organizations.

In a telephone conversation Friday, Mr. Leonard said the timing was unfortunate, but his decision to retire was not directly linked to the FDIC action or Mr. Wells. “It was simply time to move on,” he said.

On Monday, Mr. Falvey said there is absolutely not any connection between Mr. Leonard’s retirement and the FDIC. “It is an unfortunate coincidence,” he said. “And it could not be more unrelated.”

Mr. Falvey said he sent an internal memo to bank employees praising Mr. Leonard’s many contributions. The bank issued no press release, he said, at Mr. Leonard’s request.

Mr. Leonard, a native of Oak Bluffs, started in banking at the age of 15 at Edgartown National. “I consider myself to have been very fortunate, and I’ve really enjoyed serving the customers in the community and working with the wonderful folks on the staff and I’m grateful to everyone I’ve had the pleasure to work cooperatively with,” he said. “I am very grateful for the wonderful opportunity I’ve had.”

He is looking forward to the future and new professional opportunities, but not right away. “Right now I’m looking forward to working in the yard, biking, golfing, and shellfishing,” he said.