The Office of Thrift Supervision has lost its battle to ban a former California thrift executive.
The Ninth U.S. Circuit Court of Appeals denied without comment an OTS request that the court rehear its arguments to uphold an industry ban against Young Il Kim, former president of Delta Savings Bank.
"We are disappointed that the full court did not see fit to consider the matter in a rehearing," said Office of Thrift Supervision spokesman Bill Fullwider.
The decision closes the case because OTS officials do not plan to ask the U.S. Supreme Court to hear the case, Mr. Fullwider said. It also means Mr. Kim can return to banking.
The court had overturned the agency's ban in late November after determining that the OTS had failed to prove that Mr. Kim disregarded Delta's financial safety.
The ruling was the second time in OTS history that an industry ban was overturned by the courts. The agency has never taken an appeal to the Supreme Court.
"The courts are beginning to say that, just because someone makes a mistake, the OTS is not necessarily permitted to throw the book at them without a quantification of the damage done or of the future harm that might be caused," said Kip A. Weissman, a banking regulatory attorney at Silver, Freedman & Taff in Washington, D.C. "Just because someone's driving five miles over the speed limit doesn't mean they get the electric chair."
The agency had requested either a rehearing before the three-judge panel that overturned the ban or before all nine circuit judges.
"The three-judge panel, which was unanimous before, decided they didn't need to rehear it, and no other judge of the Ninth Circuit was interested enough to petition," said Mr. Kim's attorney, Robert P. Beckham of Horgan, Rosen, Beckham, & Coren. "The government didn't get much help at all."
Delta was a minority-owned California thrift that was seized in November 1991 after the OTS charged Mr. Kim and other officials with violating banking rules. The ban was imposed in April 1993 despite a recommendation against such a strong sanction by the OTS' administrative law judge.