By Matthew R. Lee, Exclusive
SOUTH BRONX, SDNY, Sept 4 – Amid escalating attacks on the U.S. Community Reinvestment Act, Inner City Press / Fair Finance Watch back in August filed comments under the CRA opposing Banco Bradesco's application to acquire BAC Florida, see below.
Amid the Coronavirus pandemic, it has continued to appear that the Federal Reserve is churning forward to try to rubber stamp a bank merger. On April 7 the Fed asked Banco Bradesco's New York law firm to supplement the record with how it is dealing with current economic situation. On April 24 the bank's law firm Shearman & Sterling sent an answer to the Fed - with the entire Covid section, as sent as required to Fair Finance Watch and Inner City Press, entirely redacted. Inner City Press FOIA-ed that, then was asked to narrow the request.
So S&S submitted another filing, with even the name of the exhibits redacted. As of June 7, the Fed has simply extended its time to reply.
Next the Fed telephoned Bradesco to ask about the impact of the US travel ban on Brazil on the proposed transaction and integration. The question was not conveyed to Inner City Press until Bradesco's entirely redacted answer. This is Orwellian. Inner City Press has written to the Fed: "This is a FOIA request for the all withheld portions of the additional information submitted by Banco Bradesco on or about May 29, 2020 as part of its challenged but still being processed amid the COVID-19 pandemic to aquire BAC including but not limited to the redaction of the entire answer to the Fed's telephonic question (not otherwise provided to ICP) about the effect of the travel ban on Brazil on the proposed transaction. This follows up on our previous and still outstanding FOIA request which we voluntarily narrowed on April 30 in response to the inquiry by Katrina Allen-Austin of the Legal Division dated the same date and the FOIA after that. Note: processing of this application should be suspended until COVID-19 restrictions, which continue in New York after June 8, are lifted."
Now on September 4, the Fed has asked this: "We refer to the application filed on behalf of Banco Bradesco, S.A., Lecce Holdings S.A., Fundação Bradesco, BBD Participações S.A., Nova Cidade de Deus Participações S.A., and Cidade de Deus Cia. Commercial de Participações, (“Bradesco”) all of Osasco, São Paulo, Brazil, to become bank holding companies by acquiring substantially all of the shares of BAC Florida Bank, Coral Gables, Florida, pursuant to Section 3 of the Bank Holding Company Act, as amended (“BHC Act”). Based on our review of the current record, we request the following additional information. Please also respond to the questions in the Confidential Annex. Supporting documentation should be provided, as appropriate. 1. Describe any situations in which the Central Bank of Brazil (“BCB”) has imposed fines higher than the contribution payment made by Bradesco under the Termo De Compromisso (“Termo”) with the BCB on May 29, 2020. 2. Please confirm whether any of the transactions or activity addressed in the Termo relate to USD transactions transmitted through financial institutions in the United States. Please provide your response addressed to the undersigned within 8 business days of the date of this letter. Any information for which confidential treatment is desired should be so labeled and separately bound in accordance with Section 261.15 of the Board's Rules Regarding Availability of Information. In addition, in accordance with the Federal Reserve's ex parte procedures, provide a copy of the public portion of your response (together with any attachments) directly to the commenter." Watch this site.
Fair Finance Watch is proposing a CRA requirement on all Payroll Protection Program lenders - all of them - and raised this to Congressional leadership. #TreasureCRA. Watch this site.
On December 12 on a two and a half week delay the Federal Reserve sent Inner City Press a terse summary of an ex parte meeting it held with Bradesco. The delay was not explained; if the past is any guide, this may just be the Fed ticking the boxes in order to rubber stamp Bradesco's application despite its record.
Now the Fed has entirely ignored evidence that Banco Bradesco and its outside law firm gamed the system and violated the Fed's own Rules Against Ex Parte Communications by withholding for a month from Inner City Press a letter they emailed to Fed - and snail mailed a month late to Inner City Press.
And the Fed's delay spawned even more outrageous behavior by Bradesco and its outside law firm Shearman and Sterling. Inner City Press / Fair Finance Watch on January 11 complainted to the Federal Reserve Board: "Re: Outraged Supplemental Comment on Application by Banco Bradesco to acquire BAC Florida in Extraordinary Circumstances: redacted CRA answer of Dec 11 sent to us Jan 9
Dear Chair Powell, Secretary Misback and others in the FRS:
This is a supplemental comment opposing and requesting redacted information late sent -- cynically mailed a month late - and in this connection an extension of the FRB's public comment period on the Application by Banco Bradesco to acquire BAC Florida. As we stated in August, this is a proposal by a bank in Brazil where authorities are reviewing the bank for corruption, to buy a US bank with a disparate lending record in order to use it to serve disproportionately the affluent. There is no public benefit; the application should be denied. Troublingly, today I received in regular mail an envelope mailed on January 9 by Bradesco's outside law firm. Inside the envelope was a submission including about CRA, redacted - and the letter to the Fed was dated December 11, four weeks prior.
So Bradesco is trying to redacted CRA information - and cynically snail mailed its submission to Inner City Press four weeks after they submitted it to the Fed.
We have today submitted a FOIA request for all of the redacted information - in fact, it should be provided forthwith under the Ex Parte Rules. But the Fed must act on this, the four week delay. The comment period must be reopened and this application should - must - be denied. Otherwise banks will game the system and the Fed simply accept it. This letter should be responded to forthwith."
But here on January 15 is the Federal Reserve Bank's non-responsive response: "Dear Mr. Lee: January 15, 2020 We acknowledge receipt on January 13, 2020 of your e-mail dated January 11, 2020 ("Comment Letter"), commenting on the application submitted by Banco Bradesco, S.A., Lecce Holdings S.A., Fundacao Bradesco, BBD Partipacoes S.A., Nova Cidade de Deus Participacoes S.A., and Cidade de Deus Cia. Comercial de Participcoes ( collectively, the "Applicants"), all of Osasco, Sao Paulo, Brazil for prior approval of the Board of Governors of the Federal Reserve System (the "Board") pursuant to Section 3(a)( I) of the Bank Holding Company Act of 1956, as amended, and Section 225.15 of Regulation Y, to become bank holdings companies by acquiring substantially all of the shares of SAC Florida Bank, Coral Gables, Florida. The Board generally provides a period of at least 30 days for interested members of the public to comment on applications submitted under the BHC Act. See 12 C.F.R. §§ 225.16 and 262.3(e). Comments received after the end of the public comment period generally will not be made pa1i of the record considered by the Board, though the Board may, in its sole discretion and without notifying the paiiies, take into consideration the substance of late comments. See 12 C.F.R. § 262.3( e ). The public comment period for this application ended on August 12, 2019. Since your Comment Letter was received after the end of the public comment period, it will not be made a part of the record of this application unless the Board in its sole discretion determines to consider your late comments. By email dated August 10, 2019, however, you previously submitted timely comments that have been made a part of the application record that the Board will consider. Sincerely, cc: Board of Governors Reena Sahni, Esq.- Shearman & Sterling LLP ~ Brian S. Steffey Assistant Vice President Bank Applications Function." Really? Watch this site.
Here's Fed's earlier the memo: Hello Mr. Lee, I’m writing regarding the section 3 application by Banco Bradesco S.A. (“Bradesco”) and certain affiliates to acquire BAC Florida Bank pursuant to section 3 of the Bank Holding Company Act. Attached, please find a summary of a meeting that took place between representatives of Bradesco and Federal Reserve staff. This document has been included as part of the application’s public record. Regards, Evans Muzere Legal Division Board of Governors of the Federal Reserve System: TO: File FROM: Staff SUBJECT: Meeting with representatives of Banco Bradesco S.A. DATE: December 12, 2019 Meeting attendees • Board of Governors of the Federal Reserve System: Evans Muzere and Jon Stoloff (Legal Division); Betsy Howes-Bean and Pat Soriano (Division of Supervision and Regulation); and Peggy Naulty (Division of Consumer and Community Affairs). • Federal Reserve Bank of New York: Lisa Kraidin (Legal).1 • Shearman & Sterling LLP: Mr. Timothy Byrne, Esq. and Ms. Reena Sahni, Esq. • Banco Bradesco S.A.: Mr. Henrique Leme Pinto Lima, Officer; Ms. Yara Piauilino, M&A Superintendent Executive. Summary: On Monday, November 25, 2019, staff of the Board of Governors of the Federal Reserve System (“Board”) held a meeting with outside counsel and employees of Banco Bradesco S.A. (“Bradesco”), Osasco, São Paulo, Brazil. The meeting occurred at the request of Bradesco and took place at the Board’s main office building in Washington, D.C. The meeting focused on the structure and home country supervision of Bradesco’s four parent companies: (1) Fundação Bradesco, (2) BBD Participações S.A., (3) Nova Cidade de Deus Participações S.A., and (4) Cidade de Deus Cia. Comercial de Participações, all of Osasco, São Paulo, Brazil. Meeting attendees discussed the management structure and activities of Bradesco’s parent companies. Bradesco’s representatives described the rationale for the group structure and answered questions regarding the ownership chain and activities of the parent companies. Attendees also discussed the home country supervision of Bradesco’s parent companies by Brazilian authorities, including the Brazilian Central Bank. This discussion focused on the methods by which the Brazilian Central Bank and other Brazilian authorities exercise oversight over Bradesco’s parent companies." And what was said? And what about this? We'll have more on this.
Here's some of the protest: "This is a timely first comment opposing and requesting documents about and an extension of the FRB's public comment period on the Application by Banco Bradesco to acquire BAC Florida. This is a proposal by a bank in Brazil where authorities are reviewing the bank for corruption, to buy a US bank with a disparate lending record in order to use it to serve disproportionately the affluent. There is no public benefit; the application should be denied. Fair Finance Watch has been reviewing the Home Mortgage Disclosure Act (HMDA) data for 2017 for BAC Florida and finds, troublingly, that for home purchase loans in the New York City MSA it made 13 such loans to Asians, and none to African Americans or Latinos. For Latinos it hada 100% denial rate. In the Miama MSA in 2017, BAC Florida made 68 home puchase loans to whites and none to African Americans. Now see, for the record, "Brazil's Bradesco to buy Florida bank to focus on wealthy individuals" - "Banco Bradesco SA has embarked on its first-ever international acquisition by paying approximately $500 million to buy BAC Florida Bank, which focuses on high-net-worth individuals in a move intended to close the gap with Brazilian rivals. Based in Coral Gables, BAC Florida is controlled by Grupo Pellas, which was founded in 1877 in Nicaragua. After the deal closes, Bradesco said its main goal is to provide a wide range of financial services in the United States to Bradesco clients and lure new customers to BAC Florida. Bradesco Chief Executive Officer Octavio de Lazari said on a call with journalists that the Brazilian bank’s private banking clients have increasingly demanded diversification and greater access to global products. “This move underscores our expansion not only in the U.S., but also in Latin America as a whole, as BAC has clients all over the region,” he said. Around 20 percent of BAC Florida’s clients are Brazilian and 9 percent are American. Still, Lazari said Bradesco is not seeking to build a retail base outside Brazil, but wants to boost its private banking business." Where is the CRA?
Now see this, on managerial resources, also for the record and the request for an evidentiary hearing: "Brazilian anti-graft prosecutors mull lawsuit against Bradesco" - " Brazilian prosecutors are considering a civil lawsuit against Banco Bradesco SA , as they believe the country’s second-largest private-sector bank may have failed to prevent corruption schemes, Valor Econômico reported on Thursday. Earlier this week, prosecutors asked a court to issue an arrest warrant for two Bradesco bank managers, saying they had been part of a complex scheme involving shell companies, fraudulent checks and bank slips that helped launder nearly 1 billion reais ($252 million). Eduardo El Hage, the prosecutor heading the Rio de Janeiro part of the massive “Car Wash” corruption investigation, told the Brazilian newspaper he believes Bradesco should have caught on to those financial transactions. Bradesco declined to comment on the matter." On the current record, Banco Bradesco's applications should be denied."
On September 6, the Federal Reserve asked Bradesco questions including "Based on our review of the current record, the following additional information is requested. Please provide responses to all of the following items, including those in the Confidential Annex. Supporting documentation should be provided, as appropriate. Proposal 1. The filing states that Lecce will be a Brazilian holding company over BAC. Discuss the role and purpose of Lecce and how it will be integrated into the governance, operating, and reporting structure of Bradesco. 2. Provide a summary of the findings of the due diligence review by Shearman & Sterling LLP, KPMG, and CRMa, LLC., and discuss whether any findings had a bearing on Bradesco's strategy for BAC or would result in changes to BAC's risk management framework and internal controls. 3. Discuss whether the U.S. securities broker-dealers of BAC and Bradesco will maintain separate operations and customer bases, or whether their operations and customers are expected to be integrated. 4. Provide an updated list of the proposed directors and senior executive officers of BAC indicating which of the current BAC directors and senior executive officers are expected to remain with BAC. For any of the proposed directors and senior executive officers who currently have positions with Bradesco, provide their roles in the chart.
5. Page 23 of Bradesco's Reference Form (2019) in Public Exhibit 2 states that as of December 31, 2018, Fundacao directly and indirectly held 59.1 percent of Bradesco's common shares. As a result, Fundacao "has the power, among other things, to prevent a change in control of our company, even if a transaction of that nature would be beneficial to our other shareholders, as well as to approve related party transactions or corporate reorganizations." In view of the direct and indirect control of more than 50 percent of Bradesco's outstanding voting shares explain how Fundacao's financial statements in Financial Exhibits 6 and 7, which do not consolidate Bradesco, are consistent both with IFRS and Brazilian accounting standards. Organizational Structure 6. Page 1 of the filing notes that each of Bradesco' s Parent Companies ( as defined in the filing) has previously elected to be treated as a financial holding company ("FHC"). Confirm that BBD is the successor company for Elo Participacoes S.A., Vihich was listed on the January 30, 2004 FHC approval letter. 7. Pages 9-12 of the filing provide a description of the Parent Companies and various limitations on their activities. Provide a more specific explanation of the legal limitations of the activities of each Parent Company, including: a. with respect to Fundac;:ao, describe the legal limits on the scope of its investments and activities; b. with respect to BBD, discuss the requirements for amending its bylaws; c. with respect to Nova Cidade, discuss the requirements for changing its governing documents; and, d. with respect to Cidade, discuss the requirements for changing its governing documents. 8. The filing states that apart from its publicly traded shares, Bradesco is owned by Fundacao, an educational foundation, the senior managers of Bradesco, and family members of the founder. In that respect, discuss the business rationale for the three nonoperating parent companies, BBD, Nova Cidade, and Cidade, focusing in particular on their various interrelated and complex cross-holdings, and the additional NCF Participacoes, S.A. ("NCF") intermediate holding company. With respect to the crossholdings, it is noted that Fundac;:ao has direct ownership in Nova Cidade ( 46.3 percent), Cidade (35.4 percent), (25.1 percent), and Bradesco (17.1 percent); Cidade has direct ownership in Bradesco (45.6 percent) and NCF (74.7 percent); and NCF has direct ownership in Bradesco (8.43 percent)." We'll have more on this.
On October 1 Inner City Press / Fair Finance Watch submitted the documents obtained under FOIA into the record before the OCC, stating that "These documents, which must be considered as part of this ANPR and any subsequent formal rulemaking, show that fraudulent comments supporting Otting's OneWest were submitted to the OCC - presumptively attributable to Otting.
The documents show that the OCC sought an explanation from Otting's / OneWest's outside counsel - and the OCC's and Justice Department's response to date reflect that no such explanation was ever provided. The OCC nevertheless approved the merger and even gave weight to the fraudulent comments. On this record we again insist that Otting be recused from this ANPR and any related rulemaking or proceedings. We have other substantive concerns about this ANPR but view the question of Mr Otting's recusal (and of with whom he has met, on which Inner City Press has another long-pending FOIA request) as threshold matter than must be addressed as quickly as possible."
The FOIA document as provided by the OCC and US Department of Justice reflect that the OCC never followed up on its lone (and wan) question to Otting's counsel as Sullivan & Cromwell to explain the fraudulent comments. Nor did this counsel respond to questions from The Intercept's David Dayen, who reports: "AFTER A YEARLONG effort to obtain the information, which included ongoing litigation, the OCC made available 15 pages. They contain emails to and from David Finnegan, an OCC senior licensing analyst who was a point of contact for public comment on the merger.
Four individuals contended in emails to Finnegan that they never sent the comment letters supporting the merger. “This is to bring to your attention that I received an email from the office of OCC regarding a subject I am completely unaware of,” wrote one individual (the OCC redacted the emailers’ identifying information). “I DID NOT send the email below that you responded to. This is a fraudulent use of my email account.” The other three sent similar complaints.
The letter of support attributed to these individuals was identical to the letter posted at the OneWest Bank website.
Matthew Lee of Inner City Press expressed outrage at the fake comments. “There’s nothing more offensive of speech rights than artificially presenting someone as saying something you don’t believe,” Lee said. “You have the right to be silent. It’s so beyond the pale.”
FOIA Finds: OneWest CIT Ban... by on Scribd
Finnegan responded to these emailers, thanking them for letting him know. He also sent two emails to Stephen Salley, an attorney with Sullivan & Cromwell, who was representing OneWest in the merger. “FYI and review. We would appreciate any information you can provide regarding this submission,” Finnegan wrote to Salley on both occasions.
Presumably, Finnegan reached out to OneWest’s lawyer about the fake comments because they featured the same form letter that OneWest had written to encourage public support. But the two emails are the only record that OCC did any investigation of the fake comments. There is no reply from Salley or Sullivan & Cromwell to the OCC, at least not in written form. ... In his public comment for Inner City Press, Lee asked for Otting to recuse himself from the new rule-making, highlighting the fake comment controversy. “Public participation is key to CRA, on performance evaluations and crucially on bank merger and expansion applications,” Lee wrote. He added that it’s unclear whether the OCC has improved its processes to prevent fake comments from being submitted again in the CRA rule-making. We'll have more on this.
