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November 13, 1984


The opinion of the court was delivered by: Shadur, District Judge.

                             MEMORANDUM OPINION
                                 AND ORDER

Federal Savings and Loan Insurance Corporation ("FSLIC") has filed its Petition under 12 U.S.C. § 1730(k)(2)*fn1 for enforcement of a cease and desist order (the "Order") issued August 11, 1976 against Glen Ellyn Savings and Loan Association ("Glen Ellyn"), an institution insured by FSLIC. For the reasons stated in this memorandum opinion and order, FSLIC's petition is granted.


In 1976 FSLIC charged Glen Ellyn with numerous violations of federal and state regulatory provisions applicable to Illinois-chartered, FSLIC-insured savings and loan associations. Those violations, in FSLIC's view, were "unsafe or unsound practices" warranting the entry of a cease and desist order as provided in Section 1730(e). Glen Ellyn chose not to contest FSLIC's judgment. It consented to entry of the Order, avoiding the institution of cease-and-desist proceedings under the statute.

Periodic examinations of Glen Ellyn since 1976 have revealed continuing violations of various provisions of the Order. FSLIC has not responded by seeking judicial enforcement of the Order. Instead it has engaged in frequent negotiation and discussion with Glen Ellyn to obtain correction of the violations—informal means upon which FSLIC typically relies to seek compliance with a cease-and-desist order. Only in cases where such efforts repeatedly fail does FSLIC resort to judicial enforcement proceedings.*fn2 This year the examiner's discovery of violations of ten of the Order's 26 provisions prompted FSLIC's resort to this Court for enforcement.*fn3

Glen Ellyn offered no testimony at the hearing. It introduced copies of letters submitted in response to FSLIC's examination reports. Def. Ex. 2-6. While those letters question the existence of some of the violations identified by the examiners, they acknowledge the accuracy of the examination reports as to numerous violations and indicate Glen Ellyn's intent to take appropriate corrective action.

Glen Ellyn's real defense to the Petition is a laches argument (tendered by an "Addendum to Answer and Affirmative Defenses," filed the day of this Court's hearing). It contends FSLIC had not sought enforcement of the Order in the more than eight years since it was agreed to, a period in which there have been changes in (1) the ownership of Glen Ellyn's common stock, (2) the composition of Glen Ellyn's board of directors and (3) Glen Ellyn's management. Glen Ellyn asserts those changes were predicated, at least in part, on the belief FSLIC would seek no further enforcement of the Order. Under those circumstances, Glen Ellyn says, FSLIC should be barred from enforcement by the equitable doctrine of laches.

FSLIC's Right to Enforcement

In both contractual and statutory terms, FSLIC's right to enforcement is plain. Glen Ellyn's consent to entry of the Order in 1976-and to its enforceability thereafter—was unequivocal (Pl. Ex. 1):

  Glen Ellyn stipulates and agrees that said Order shall
  be deemed to be a "cease-and-desist order which has
  become final" as defined in Section 407(q)(1)(A) of
  the Act  (12 U.S.C. § 1730(q)(1)(A)), that it
  fully complies with all requirements of law, and that
  the said Order shall become effective upon its
  issuance and be enforceable by the FSLIC under the
  provisions of Section 407(k)(2) of the Act  (
  12 U.S.C. § 1730(k)(2)).

Nor does the Order contain any expiration provision. Indeed, Section 1730(e)(2) negates any concept comparable to a "sunset law":

  A cease-and-desist order . . . shall remain effective
  and enforceable except to such extent as it is
  stayed, modified, terminated, or set aside by action
  of the Corporation or a reviewing court.

FSLIC itself has declined to take any such action. In March 1980 Glen Ellyn petitioned FSLIC to terminate the Order. In denying that petition, Board supervisory agent David J. Kalina*fn4 explained (Ans. Ex. B):

1. As a matter of policy, cease and desist orders will not be terminated until five years after issuance date.

2. The Board would usually require a record of no violations for at least two consecutive examinations immediately preceding the termination.*fn5 Neither of those conditions had been met in 1980, and the second has yet to be. Absent some specific action to terminate by FSLIC, the Order ...

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