Regulators performed a limited on-site “visitation” (limited-scope examination) at the bank during
September 2000, after the acquisition of MTB Bank. During an examination in March 2001, FDIC
and State of Connecticut examiners became suspicious of an unusually high volume of loan activity
that had occurred at the bank in March 2000. After they began investigating the matter, they
discovered that over $20 million of loans funded in the latter part of March 2000 were ultimately
channeled to the bank’s Chairman and used to fund the acquisition of MTB Bank. The irregularities
surrounding these loans coupled with other asset quality problems led to the bank’s closure on June
26, 2002, less than 27 months after it acquired MTB Bank.
On November 22, 2002, the FDIC issued a Notice of Charges seeking to impose civil money
penalties (CMPs) totaling $5.25 million against a group of former officers and directors of CBC.
The Notice of Charges, among other things, alleges that the Chairman of the Board and the bank
president orchestrated certain nominee6 loan schemes, the proceeds of which were used to make
the capital injection through the purchase of common and preferred stock into CBC that
ultimately paid for the acquisition of MTB Bank; refinance nonperforming loans in a nominee
borrower's name; keep nominee loans current or pay them off; and improperly provide funds to
the Chairman and related entities. According to the Notice of Charges, the bank’s directors
approved most of the nominee loans and failed to fulfill their fiduciary responsibilities to CBC.
The FDIC viewed the nominee loan scheme as having had the effect of misleading bank
regulators and CBC depositors as to the true financial condition of CBC, ultimately leading to
CBC's closure.