WASHINGTON - By all accounts, Robert L. Hotchkiss turned around tiny Genoa Banking Co. after taking the helm as president in 1978.

Under his leadership, the suburban Toledo institution nearly quadrupled its asset size, growing to $64 million. The bank expanded into insurance and data processing, resolved lingering capital trouble, and became a training institution for new examiners.

Now, however, the Federal Reserve Board is asking an administrative law judge to permanently ban Mr. Hotchkiss from the industry, charging that he permitted the bank to lose more than $600,000 to a single customer.

Mr. Hotchkiss, who was forced to leave the bank in 1992, plans to fight the Fed during a three-day hearing, which starts today.

After the hearing, the Fed board will review the judge's decision and issue its own ruling.

That the case is headed to a hearing is quite unusual. Data in the Federal Reserve Bulletin indicate that the Fed argued no cases before administrative law judges last year, although the board of governors did act on two cases that the Comptroller of the Currency brought.

When accused by the Fed, most bankers settle, preferring to avoid publicity.

Because Mr. Hotchkiss chose to fight the Fed, his case will provide a rare public glimpse into the inner workings of the Fed's disciplinary process. It may also tell the industry just how capable the central bank is of backing up charges it brings.

Ronald Glancz, a partner at the law firm Venable, Baetjer, Howard & Civiletti who specializes in this type of case, said the Fed must go beyond merely alleging a violation.

"You are innocent until proven guilty," Mr. Glancz said. "The government has the burden of proof, and they often forget that. They have to show through witnesses and documentation that there was a violation of law."

He said bankers so rarely challenge regulators that the agencies often present weak cases at trial.

In this case, the Fed is charging that Mr. Hotchkiss engaged in "unsafe and unsound" practices during a series of transactions with local businessman Lawrence Johnson.

According to documents filed with the judge on Jan. 3, the Fed plans to show at the hearing that Mr. Hotchkiss facilitated a check-kiting scheme for Mr. Johnson by authorizing payment of $48,000 in checks drawn against uncollected funds.

Also, it said it will show that Mr. Hotchkiss broke numerous rules when he issued Mr. Johnson a $500,000, three-year standby letter of credit without obtaining the bank board's approval or recording the letter of credit on call reports.

Finally, the Fed said it will demonstrate that Mr. Hotchkiss directed Genoa to issue, without proper collateral, $1.6 million in loans for cemetery plots that Mr. Johnson controlled.

The Fed is asking the judge to determine if Mr. Hotchkiss acted with "personal dishonesty or a willful or continuing disregard for Genoa's safety and soundness."

To support its case, the Fed has informed the judge that it will call several Genoa employees as witnesses, including the official who prepared the letter of credit and a bookkeeper who monitored the alleged check- kiting scheme. Also, it will call the examiner who uncovered the activities.

Mr. Johnson did not return messages seeking comment. Law-enforcement officials have not charged Mr. Johnson with any crime. But, the Toledo Blade reported this week that the Federal Bureau of Investigation is investigating him in connection with the check kiting.

Mr. Hotchkiss denies wrongdoing. He has had 19 people subpoenaed, including former employees of both Mr. Johnson and the bank. He said he also will call several state and Fed examiners.

He said the witnesses will show that though he may have made mistakes, he did not intentionally jeopardize the bank.

Also, he said, witnesses will support his claim that he did not profit from the transactions.

"They forced me out of the bank," Mr. Hotchkiss said. "I accepted that. I never denied that I made some human errors and some bad business judgments. But I've never done anything dishonest or illegal. Every decision I made I thought was right for the bank."

Mr. Hotchkiss said his witnesses will show that a former bank employee and Mr. Johnson both misled and tricked him.

Mr. Hotchkiss said he learned that he was the victim of someone else's misdeeds in 1991, when lawyers contacted Genoa and demanded that it cover a $500,000 letter of credit used to support a cemetery that Mr. Johnson had bought.

The problem, Mr. Hotchkiss said, is that the letter should have expired more than two years earlier. But he said he learned that a former employee, who had left the bank to work for Mr. Johnson, issued a three-year letter without his knowledge.

Mr. Hotchkiss said the bank's lawyers advised the institution that it had to honor the letter, despite Mr. Hotchkiss' claim that it should have expired.

On the check-kiting issue, Mr. Hotchkiss said a bank employee approached him and asked him if the institution should honor the checks. Mr. Hotchkiss, who said he was busy dealing with the ongoing annual meeting that day, quickly called up the account on a computer.

He said he misread the screen and approved the transaction on the basis of that misreading.

"I admit it," Mr. Hotchkiss said. "I've never denied my human errors."

Finally, Mr. Hotchkiss said the cemetery-loan issue is bogus, noting that the bank has not lost any money on it.

Mr. Glancz said Mr. Hotchkiss might have some trouble arguing that others misled him.

"You can't claim you were victimized," Mr. Glancz said. "You were the one who was supposed to run the institution, so there wouldn't be any victims."

Mr. Hotchkiss said he sees an ulterior motive at work. He said Cleveland Fed officials have a vendetta against him and are trying to bankrupt him.

"I used to be a bank examiner, and I have enemies at the Cleveland Fed who were very jealous of my success," Mr. Hotchkiss said. "They just want to pay me back. That's part of the problem."

Fed spokesman Bob Moore said the central bank would not comment on the charge.

Though the Fed may still be pursuing Mr. Hotchkiss, it recently withdrew a cease-and-desist order against Genoa. The bank's new president, Timothy R. Taylor, said the bank worked hard to increase its Tier 1 capital to 8.5% and to boost its loan-to-deposit ratio from 39% to 55%.

'I'm not ready to declare that the job is done," Mr. Taylor said. "We still have some issues to deal with. But we think we can get those behind us in 1995."

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