The Federal Reserve Board issued a $9.5 million fine against Maryland-based EagleBank for violations of the board’s insider lending regulation. The Fed found that the bank improperly extended credit to entities owned or controlled by its then-CEO and Chairman Ronald Paul.
The Fed found that EagleBank had deficient internal controls over insider lending practices between 2015 and 2018, which allowed the bank to extend credit totaling almost $100 million to entities that Paul owned or controlled, including certain family trusts, without making appropriate disclosures to, or obtaining required approvals from, a majority of the bank's board of directors. These internal control deficiencies also extended to the bank's supervision of lending staff, who permitted Paul to participate in matters in which he had a conflict of interest.
The Fed also cited EagleBank for third-party risk management deficiencies over the same period that resulted in inadequate oversight of contracts between the bank and a local government official.
The Fed also permanently barred Paul from employment in the banking industry and assessed a $90,000 fine against him for his role in the bank’s violation of law and unsafe-and-unsound practices
In conjunction with these actions by the Fed, the U.S. Securities and Exchange Commission announced its own settlement of actions against Paul and EagleBank's holding company, Eagle Bancorp, Inc. In total, the bank and holding company will pay approximately $22.9 million and Paul will pay approximately $521,000 to settle the agency actions.