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Bank Named Mega Cites 2004 NYBD Letter As Preventing Showing Documents to SDNY Judge

By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - The Source

SDNY COURTHOUSE, May 22 – Mega International Commercial Bank passed information about its P&G Auditors to Navigant, and an allegedly absolute privilege for bank regulatory documents is being cited and now "documented," if only with a partially redacted 2004 interpretative letter of the then-NYSBD. Inner City Press is on the case, which still has the potential to simply disappear into settlement world.

   U.S. District Court for the Southern District of New York Judge J. Paul Oetken asked to see the documents at issue.

 But Mega Bank's lawyer from Gottesman, Wolge, Secunda said that would not be possible, without angering the NYS Department of Financial Services.

  Judge Oetken said, one week to convince me otherwise with case law, or turn over the documents in three weeks. Or settle. A number was floated by the parties but Inner City Press due to recent unclarity is still not publishing it.

 But now this: late on May 22 Mega's lawyer filed a 2004 letter: "2004 NY Bank. LEXIS 14 State of New York Banking Department August 31, 2004 Reporter 2004 NY Bank. LEXIS 14 * Subject: Re: Outsourcing of Bank Human Resources and Payroll Functions Core Terms outsource, service provider, payroll, administrative duty, national bank, general supervision, bank's board, third party, confidential, supervisory, underwrite, interview, lease, opine Request By: [*1] [REDACTED BY THE AGENCY] Reply Staff Letters and Memoranda Supervisory Procedure G 101 Dear Mr. []: Your letter of November 21, 2003 to Superintendent of Banks Taylor has been referred to me for reply. Let me begin by apologizing for the delay in responding to your letter. In part, this delay resulted from our need to review this matter with several of our supervisory divisions in the Department. As we understand it, [] is a company that leases employees to companies for the purposes of performing administrative duties in their Human Resources and Payroll Departments. You have inquired as to whether the Banking Law would prohibit a State-chartered bank from outsourcing the administrative duties of its Human Resources and Payroll departments to[]. To date, the Banking Department has not opined as to whether a State-chartered bank may outsource the administrative duties of its Human Resources and Payroll departments. The Department has permitted banking organizations to enter into contracts with third parties to provide certain services that the bank previously performed itself. For example, under Supervisory Policy G 101 banks are permitted to outsource automated data processing [*2] services, subject to the Superintendent's right to examine all records and material, use the equipment and interview employees of the independent service provider.

The Department has also permitted banks to outsource loan underwriting, subject to the requirement that bank officers take final responsibility for approving the underwriting decisions. Some guidance is provided in this area by referring to those activities deemed permissible for national banks. The OCC has opined, with respect to outsourcing the administrative functions of a bank's Human Resources and Payroll departments, that national banks may lease the services of its employees from a third party as long as the bank's board of directors continues to retain and exercise general supervision over the officers of the bank. Interpretive Letter No. 431, reprinted in [1988-1989 Transfer Binder] Fed. Banking L. Rep. (CCH) 85,655 (November 5, 1987); 12 CFR § 7.2010. See, also the "2003 Activities Permissible for a National Bank", published by the Office of the Comptroller of the Currency in March 2004. Accordingly, we conclude that it is permissible under the Banking Law for a State-chartered bank [*3] to enter into an agreement whereby the bank would outsource the administrative duties of its Human Resources and Payroll departments to an independent service provider. The bank and the independent service provider entering into such an outsourcing agreement will be subject to certain conditions. First, the bank must provide the Banking Department with prior written notice of its intention to enter such an outsourcing agreement. Second, the bank's board of directors must continue to retain and exercise general supervision over the affairs of the bank. Third, the independent service provider must agree that the Superintendent has the right to examine all of its records and material, use the equipment and interview its employees. And fourth, the independent service provider must agree that it is bound by the limitations of Banking Law Section 36(10), with respect to confidential supervisory and examination material, and provide the Department with a description of how it will ensure the confidentiality of such material. I trust the foregoing is responsive to your inquiry. Should you have any further questions please feel free to contact me at (212) 709-1649. Sincerely yours, Written By: Jay [*4] Kane Assistant Counsel."

  Will this work?

The case is P&G Auditors and Consultants, LLC v. Mega International Commercial Bank Co., Ltd, 18-cv-9232 (Oetken).


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