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CAA: Airport News, "O'Hare International Airport: Currency Business Lands Chicago Bank in Trouble"
Friday, February 4, 2000
Currency Business Lands Chicago Bank in Trouble
The American Banker
The Chicago bank that provides currency exchange services throughout O'Hare
International Airport kept such sloppy records that examiners could not tell
whether it was solvent, the Federal Deposit Insurance Corp. says.
Highland Community Bank engaged in practices that were "likely to cause
insolvency or significant dissipation" of its assets and earnings, the FDIC
said in a cease-and-desist order. It instructed the Highland Community Co.
subsidiary to straighten out its books.
In addition, an unusually specific provision told the $282 million-asset
bank not to get into the business of providing depository services for
O'Hare's parking facilities or vendors at the airport without specific FDIC
approval.
The order was issued Dec. 13 but released to the public Tuesday.
George Barr, who took over as president and chief executive officer on
Tuesday -- and declined to say when his predecessor, George R. Brokemond,
had left -- minimized the problem Thursday.
Mr. Barr said that the foreign-currency problems have been solved, and that
the state-chartered bank has addressed the other regulatory matters. In
particular, he said an FDIC requirement that gave the bank until Monday of
this week to adjust its general ledger and debug software it uses for its
foreign- currency exchange business had been met.
"This is a temporary cease-and-desist, and my expectation is that it will be
lifted soon," Mr. Barr said. "I don't expect to see a permanent C and D
ordered. We've brought ourselves into line with their order."
Mr. Barr said the airport foreign exchange services, which the bank has been
providing for a year and a half, are only a small part of its business. He
declined to say what businesses the bank was pursuing or plans to pursue.
"Strategic planning is certainly one of the areas I'll focus on," he said,
"but not on my third day."
The cease-and-desist order said Highland's records were "so incomplete or
inaccurate" that the FDIC was unable to determine its financial condition.
It cited discrepancies, many of them related to the foreign-currency
exchange business, in Highland's books and records. It told the bank that it
must straighten out its books by reconciling all out-of-balance accounts or
charging off any account differences that originated before Oct. 5, 1999.
The regulator also ordered Highland to hire qualified management, add staff
and oversight at its data-processing center, and form a four-member
compliance committee of outside directors to make sure the orders are
implemented.
An FDIC spokesman declined to discuss the case. But an Illinois regulator
said the FDIC was concerned that Highland might take on more business than
it could handle.
"The bank was experiencing existing problems, and they didn't want them to
assume more additional duties until they were able to get their existing
difficulties straightened out," said Scott Clarke, assistant commissioner of
the Illinois Office of Banks and Real Estate.
Monique Bond, a spokeswoman with the Chicago Aviation Department, said
Highland is operating foreign-currency stations at the airport under a
contract that runs through Dec. 31, 2002. However, the bank must get an
extension of the contract every year to continue doing business at the
city-owned airport. Its existing extension runs through Dec. 31 of this
year.
"This hasn't been a problem from our perspective," Ms. Bond said. "The
airport and customers have not been affected. These are internal problems
they're facing that need to be rectified. We're looking forward to their
being rectified."
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