Two Wyoming bank employees who were ordered by a court in April to pay that bank a collective $2.2 million in damages — related to, among other things, their misappropriation of confidential and proprietary information — are named in a “notice of intent” to prohibit announced Thursday by the Federal Reserve Board.
The notice says that the two individuals, Frank Smith and Mark Kiolbasa, most recently with Farmers State Bank of Pine Bluffs, Wyo., conspired while they were working for Central Bank & Trust of Lander, Wyo., to misappropriate Central’s proprietary business information in a plan to acquire an ownership interest in Farmers’ holding company, Commercial Bancorp (also in Pine Bluffs), and to take management positions at Farmers.
The notice says the two engaged in unsafe or unsound banking practices by, among other things, conspiring to acquire and misappropriating confidential and proprietary information of Central, including trade secrets; secretly performing services for and acting on behalf of Farmers, and seeking to misappropriate a business opportunity of Central. Aiding and abetting each others’ actions were included in the list of activities charged.
Central on Sept. 29, 2016, filed suit against Farmers, Smith, Kiolbasa, and the other members of Farmers’ board of directors, alleging, among other things, that Smith and Kiolbasa misappropriated trade secrets, breached their fiduciary duties, and converted property of Central. During the litigation, Smith testified falsely that he sent certain confidential Central documents to Kiolbasa – including Central’s Liquidity, Public Funds and GAP Reports and Central’s ALCO Model Look Back and Asset-Liability Management/Interest Rate Sensitivity analysis by Central Trust Company – at the request of a Reserve Bank senior examiner.
The judgment against Smith and Kiolbasa and in Central’s favor cites misappropriation of trade secrets, breaches of fiduciary duties and tortious interference with a contract or prospective economic advantage, according to the Fed notice. As part of the judgment, the court awarded Central $1.18 million in total damages against Smith, which included $50,000 in punitive damages; and $1.04 million in total damages against Kiolbasa, which included $25,000 in punitive damages.
According to the notice, these two individuals had been working on their plan, which included the transfer of some customers’ accounts from Central to Farmers, since at least 2013. It says that since May 27, 2015, Smith has been employed as president and chief executive officer of Farmers at its location in Pine Bluffs. Kiolbasa, since about May 27, 2015, has been employed as an executive vice president of Farmers at its location in Pine Bluffs. Both are Farmers State Bank board members and shareholders of Commercial Bancorp, it says.
The Fed notice seeks a hearing in the United States District Court of Wyoming. If the order is implemented, Smith and Kiolbasa would be barred from participating in the future, and “in any manner,” in the affairs of a federally insured financial institution.