United States District Court, Northern District of Illinois, E.D
November 30, 1982
FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, PETITIONER,
BASS FINANCIAL CORPORATION, RESPONDENT.
The opinion of the court was delivered by: Aspen, District Judge:
MEMORANDUM OPINION AND ORDER
Petitioner the Federal Savings and Loan Insurance
Corporation ("FSLIC") seeks an order enforcing an
investigative subpoena duces tecum against Bass Financial
Corporation ("Bass").*fn1 This Court granted FSLIC's motion
for entry of an order to show cause on October 6, 1982,
against Bass. After carefully considering Bass' response and
surreply to the order to show cause, as well as FSLIC's reply,
we grant FSLIC's petition to enforce its subpoena.
The FSLIC, a corporate agency of the United States, insures
the accounts of qualifying savings and loan associations and
examines these institutions to determine whether they are
operating in accordance with applicable laws and regulations
and in a sound manner. Unity Savings Association ("Unity"),
located in Schaumburg, Illinois, is a wholly owned subsidiary
of Bass. Unity's accounts were insured by FSLIC on February
20, 1982, when it took over Unity's assets as a receiver.*fn2
On August 17, 1982, the Federal Home Loan Bank Board, which
operates FSLIC, issued a subpoena duces tecum seeking
All of the books, papers, records, and documents
of Bass Financial Corporation including, but not
limited to, loan documents, contracts,
correspondence, leases, memoranda, notations,
cancelled checks, check registers, deposit
tickets, bank statements, general ledgers,
subsidiary ledgers, invoices and receipts, cash
receipt and disbursement journals, budgets, tax
returns, and all other business records of any
kind or nature
as part of its decision to conduct a formal examination of the
affairs of Unity pursuant to 12 U.S.C. § 1730(m)(1) and (2).
Bass, however, has failed to produce the records and documents
sought by FSLIC. Bass argues that FSLIC lacks the authority to
issue examination subpoenas to institutions that were not
insured on the date of the subpoena; Unity was insured by FSLIC
only until February 20, 1982. Bass further asserts that the
subpoena in the instant case violates the fourth amendment
because the investigative purpose behind it cannot be
ascertained and because it is overbroad.
In deciding FSLIC's authority to issue the subpoena, as well
as Bass' fourth amendment claim, we observe initially that a
court's role in proceedings to enforce administrative
subpoenas is limited "because of the important governmental
interest in the expeditious investigation of possible lawful
activity." F.T.C. v. Texaco, Inc., 180 U.S.App.D.C. 390,
555 F.2d 862, 872 (1977), cert. denied, 431 U.S. 974, 97 S.Ct.
2940, 53 L.Ed.2d 1072 (1977).
The Federal Home Loan Bank Board, which operates FSLIC, has
plenary authority to charter, regulate and supervise federal
savings and loan associations pursuant to the Home Owners'
Loan Act of 1933, 12 U.S.C. § 1461-1468. Guardian Federal
Savings & Loan Assn. v. Federal Savings & Loan Insurance Corp.,
589 F.2d 658, 661 (D.C. Cir. 1978). Congress created FSLIC
under Title IV of the National Housing Act, 12 U.S.C. § 1724-1730c.
In 1966, Congress enacted the Financial
Institutions Supervisory Act of 1966 "to strengthen the
regulatory and supervisory authority of Federal agencies over
insured banks and insured savings and loan associations,"
S.Rep. No. 1482, 89th Cong., 2d Sess. 1, reprinted in 1966,
U.S.Code Cong. & Ad. News 3532. This statute establishes a
comprehensive scheme for the regulation of insured banks and
savings and loan associations by granting FSLIC the power to
cease-and-desist orders against institutions which are
violating statutes, rules, regulations or engaging in unsound
practices, as well as the right to suspend or remove officers
or directors of such institutions. 12 U.S.C. § 1730. In
connection with its regulatory powers, section 407(m)(1) of the
Act confers authority on FSLIC to examine federally-insured
savings and loan associations and their affiliates "as shall be
necessary to disclose fully the relations between such
institutions and their affiliates and the effect of such
relations upon such institutions." 12 U.S.C. § 1730(m)(1).
Section 407(m)(2) authorizes FSLIC, in connection with such
examinations, to take testimony under oath and to issue
The legislative history of this statute reveals an intention
"to strengthen and make more immediately effective the
supervisory and regulatory authority of, among other agencies,
the Federal Home Loan Bank Board over all savings and loan
associations under its jurisdiction." Hearings Before a
Subcommittee of the Senate Committee on Banking and Currency on
S. 3158, 89th Cong., 2d Sess. 8 (1966) (Statement of Mr. Horne,
Chairman of the Federal Home Loan Bank Board). As Senator
McClellan declared, "additional powers are needed to get
effective results, when banks and financial institutions, it is
discovered they are being operated improperly." Senate
Hearings, id. at 3. Courts have broadly construed the subpoena
powers of the Act, for example, by holding that FSLIC may
subpoena books and records from borrowers of, and other persons
doing business with, insured institutions. Federal Savings &
Loan Insurance Corp. v. First National Development Corp.,
497 F. Supp. 724, 731 (S.D. Tex. 1980). Unity was an insured
institution prior to the date FSLIC was appointed as receiver
on February 20, 1982; and we therefore decline to hold that
FSLIC lacks the authority to subpoena Bass. Nothing in the
Financial Institutions Supervisory Act of 1966 supports Bass'
argument that because Unity was not insured as of the date of
the subpoena, August 17, 1982, FSLIC lacks the authority to
issue the subpoena to Unity or an affiliate of Unity. Such a
reading of the statute would undermine the intentions of its
Turning to Bass' other objections to the subpoena, we begin
by noting that courts will enforce an administrative
investigation "if the inquiry is within the authority of the
agency, the demand is not too indefinite and the information
sought is reasonably relevant." United States v. Morton Salt
Co., 338 U.S. 632, 652, 70 S.Ct. 357, 369, 94 L.Ed. 401 (1950);
E.E.O.C. v. Bay Shipbuilding Corp., 668 F.2d 304, 310 (7th Cir.
1981). More specifically, to obtain enforcement of a subpoena,
an agency must:
show that the investigation will be conducted
pursuant to a legitimate purpose, that the
inquiry may be relevant to the purpose, that the
information sought is not already within the
Commission's possession, and that the
administrative steps required by the Code have
United States v. Powell, 379 U.S. 48
, 57-58, 85 S.Ct. 248, 255,
13 L.Ed.2d 112 (1964); Marshall v. Amalgamated Insurance Agency
Services, 523 F. Supp. 231
, 233 (N.D.Ill. 1981). Subpoenas which
in the past were considered parts of "fishing expeditions" are
often permitted under contemporary standards, E.E.O.C. v.
University of New Mexico, 504 F.2d 1296
, 1303 (10th Cir. 1974).
Moreover, in considering relevancy, adequacy or excess in
breadth of a subpoena, we must keep in mind that such matters
vary depending upon the nature, purposes and scope of the
administrative inquiry. Oklahoma Press Publishing Co. v.
Walling, 327 U.S. 186
, 209, 66 S.Ct. 494, 506, 90 L.Ed. 614
(1946). The burden of showing that a subpoena is unreasonable
rests with the respondent, F.T.C. v. Rockefeller, 591 F.2d 182
190 (2d Cir. 1979). In the instant case, we do not agree that
the subpoena is overbroad or violative of the fourth amendment.
We have previously determined that since FSLIC lacks the
information sought by the subpoena and is conducting its
pursuant to a legitimate purpose, the inquiry into Bass'
relationship with Unity is within the authority of FSLIC. The
subpoena is not "too indefinite," and the information sought,
while broad, is reasonably relevant to the investigation of
Bass' relationship to Unity.
Accordingly, FSLIC's petition to enforce its subpoena duces
tecum is granted. It is so ordered.