Several top executives at MNC Financial Inc. have had their year-end bonuses rescinded in recent days after the banking company discovered it had not followed strict regulatory procedures.
MNC, parent of Maryland National Bank and American Security Bank in Washington, has been operating under unusually tight reporting guidelines imposed last year by a number of federal regulatory agencies.
Faced with mounting losses and rapidly deteriorating loans, MNC was ordered, among other things, to receive prior approval from federal regulators before paying dividends or entering into "any new personal service contracts with executives of MNC or its subsidiary banks," according to an Oct. 25 statement. Regulators also ordered the banking company to provide continuing reports on a series of management and financial matters.
It was that strict oversight by federal regulators that led to MNC's decision in the past few days to rescind temporarily the bonus checks that had been distributed to a number of top bank officials, according to the company. It said it will seek regulatory approval for the bonuses.
"There have been several senior executives' incentive compensation packages that have within the last two weeks been rescinded as a result of a realization on the part of the company that certain procedures concerning the procurement of regulatory approval weren't properly followed," Daniel G. Finney, an MNC spokesman, confirmed yesterday.
"Anticipating that the regulators would point out to us that procedures hadn't been correctly followed and move to have us follow them, the company without direct intervention or direct request by the regulators took some proactive steps and made the decision to rescind some payments that were made to less than 10 individuals."
In another example of the power the regulators have over the operations of the banking company, MNC was asked by regulators in the past two weeks to seek repayment from Alan P. Hoblitzell Jr., former MNC chairman and chief executive, of about $1.2 million he received as part of a severance package at the time of his early retirement at the end of September. Mr. Hoblitzell has complied with that request, Mr. Finney confirmed.
"The rescission and repayment that has taken place is the result of some procedural difficulties and administrative oversights associated with regulatory approvals," Mr. Finney said. "The correct procedures are now currently being pursued to accomplish the transaction."
Mr. Hoblitzell got the lump payment, equal to two years of his base salary, in addition to about $395,000 in deferred compensation and about $465,000 a year in pension payments. The regulators' action did not affect his deferred compensation or pension, Mr. Finney said.
The original severance payment to Mr. Hoblitzell apparently riled some observers. Part of a bill empowering regulators, in some cases, to prohibit or limit "golden parachutes" to savings and loan and bank executives was called "the Hoblitzell Amendment" by some congressmen, the Washington Post said.
The regulatory decision regarding Mr. Hoblitzell and the rescinding of the executive bonuses were not connected, Mr. Finney said.
Mr. Hoblitzell could not be reached for comment last night.