Before 2024: fair-lending, ESOP, flood and loan-office cases

analysisOn January 21, 2016 the federal court for the Western District of Tennessee entered a consent order in United States v. Evolve Bank & Trust (No. 2:16-cv-2040), resolving the Justice Department's claims that the bank discriminated on the basis of disability and of receipt of public assistance by requiring some mortgage applicants to provide a doctor's letter showing that Social Security Disability Insurance and other disability income would continue. The bank agreed to an $86,000 fund for 50 borrowers and to new policies, training and monitoring. Evolve denied the allegations and stated that it had treated applicants fairly and without regard to factors such as disability; the order provided for dismissal with prejudice once the court's retained jurisdiction ended. ¹

analysisThe Federal Reserve referred the bank to the Justice Department on February 8, 2019 after reviewing mortgages originated in 2014 to 2016. On September 29, 2022 the department sued (No. 2:22-cv-02667), alleging that from at least 2014 through 2019 the bank charged Black, Hispanic and individual female borrowers statistically significantly higher discretionary pricing than comparable white and male borrowers. A consent order of October 17, 2022 required a $1.3 million fund for affected borrowers, a $50,000 civil penalty, revised pricing policies, a fair-lending officer and committee, training and monitoring. The bank denied liability and any wrongdoing, stating that its annual pricing tests for 2014 to 2019 showed no pattern of statistically significant disparities. A fintech industry newsletter reported that the St. Louis Reserve Bank had referred Evolve to the Justice Department three times in ten years over mortgage discrimination, and that the Labor Department's ESOP case below arose from a trust-business deal handled by Kenneth Lenoir; the retained consent orders document two Justice Department cases. ^{2 3 4}

analysisIn August 2019 the Labor Department announced that the federal court for the Western District of Virginia had ordered Adam Vinoskey, former chief executive of Sentry Equipment Erectors, and Evolve Bank & Trust, the transactional fiduciary of Sentry's employee stock ownership plan, to restore $6,502,500 to the plan. The court found that in December 2010 they approved the plan's purchase of Vinoskey's 51,000 shares at $406 each although the stock had been appraised at $285 in 2009, and that Evolve failed to investigate red flags in the appraisal, breaching its duties of loyalty and prudence. a fintech industry newsletter later reported that the amount was lowered to about $1.9 million on appeal; the appellate decision is not in the retained record. ^{1 2}

analysisEffective June 15, 2022 the Federal Reserve Board assessed a $13,950 civil money penalty on the bank for a pattern or practice of violations of its flood-insurance rules (Docket No. 22-016-CMP-SM), payable to the National Flood Insurance Program; the bank consented without admitting or denying the allegations, and Stafford signed as chief executive. Effective May 26, 2020 the Board issued consent orders of prohibition against Aaron K. Hill and Jessica A. Hill, former employees who ran a mortgage loan production office in Louisville, Kentucky, first for Evolve and then for First Savings Bank. The order states that Aaron Hill concealed the couple's ownership of a lead-management vendor that overcharged both banks and that Jessica Hill was paid by both without reporting to work. The Hills consented without admitting or denying the allegations and before any adjudication; they may not take part in the affairs of an insured institution without approval and must cooperate with the Board's investigations of the banks. ^{1 2 3 4}