TX bank CEO fined $25k over alleged inaction on check kiting suspicions

The chief executive officer and director of FirstCapital Bank of Texas, N.A., Midland, Texas, was assessed a $25,000 civil money penalty in April over findings he had, among other thigns, repeatedly approved NSF checks by a customer whose unpaid balances had reached millions of dollars and who was eventually discovered to be kiting checks, according to a consent order announced Thursday by the Office of the Comptroller of the Currency (OCC).

The OCC order states that Burgess “breached his fiduciary duty to the Bank, and these breaches were part of a pattern of misconduct.”

The order states that Burgess, who was also account officer at least from November 2017 to August 2018 for the largest of several entities affiliated with the bank customer (referred to collectively as “Customer A”),  communicated frequently in 2018 with the customer’s chief financial officer regarding checks written by the customer against insufficient funds (NSF). It said he “personally approved the payment of NSF checks written by Customer A, which were usually covered by deposits the same day.”

Burgess reportedly was contacted more than once by the bank’s fraud officer and its chief lending officer regarding the customer’s uncollected funds balances, with those officers initially suggesting that such balances and other account activity may indicate potential check kiting. It states that Burgess reached out directly to the customer but took no other action or directed any action by any other bank employee to determine whether there should be further investigation, “although Respondent continued to communicate to Customer A the need to inject additional working capital.” It said the check-kiting scheme was discovered that August.

OCC Enforcement Actions and Terminations