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Miami-based Hamilton Bank, under siege by banking regulators for months, is striking back with a racial profiling lawsuit against a top federal agency. In a complaint filed Wednesday in U.S. District Court in Miami, the bank says the Office of the Comptroller of the Currency acted against the bank based on the Hispanic ethnicity of its owners and employees. The move by the $1.5 billion, Miami-based bank seems to be carefully planned. The OCC’s practice of racial profiling has “been investigated for some time,” said Marty Steinberg, a lawyer with Hunton & Williams in Miami, which is representing Hamilton Bank and Hamilton Bancorp. OCC and bank officials did not return phone calls. The predominantly Hispanic-owned bank specializes in international trade involving customers and accounts from Latin America. Juan Carlos Bernace is the president of Hamilton Bank and Eduardo Masferrer is the bank’s chairman and chief executive officer. In the 41-page suit, the bank documents what it calls “improper, inconsistent, unprofessional and arbitrary and capricious conduct and actions” taken by the OCC since 1998. Hamilton officials charge that the bank’s refusal to reduce its international trade activities to a level sought by the OCC has “infuriated” regulatory representatives and resulted in the OCC’s “arbitrary behavior” toward the bank. According to Hamilton, the OCC did not apply the same standards to larger, non-Hispanic banks that operate in emerging markets. The bank alleges that its examiners scrutinized Hamilton with a presumption of wrongdoing, making “questionable” statements about the ethnic background of some bank employees. In one instance in 1998, an OCC examiner told Hamilton’s head of compliance, that she spoke English very well “for a Hispanic,” Hamilton alleges. In another case, according to Hamilton, the examiner said he moved to Broward County because he had been “kicked out” of Miami-Dade County by Hispanic immigration. “The OCC has regulated Hamilton under a presumption of guilt based on the OCC’s stereotype of Hamilton’s customers, that as Hispanics living in South Florida and South and Central America, these individuals and entities are more likely to be engaged in money laundering,” the suit states. The lawsuit against the OCC represents the latest clash in a heated conflict between federal bank regulators and Hamilton bank executives over the bank’s financial health, business plan and oversight. Bank examiners recently classified the bank as undercapitalized. Over the past few years, the OCC has investigated the bank at least twice for possible violations of U.S. anti-money laundering laws. Regulators also initiated four enforcement actions against the bank on other fronts, and this year the OCC even sought to initiate civil money penalties against Hamilton executives, according to the suit. To be sure, Hamilton is not only being challenged by U.S. regulators. Hamilton has also been sued by bank regulators in Peru over a lending transaction involving an insolvent Peruvian bank and a third party. On other fronts, at least two Latin American customers have sued the bank over account transaction disputes. What’s more, the bank, which has restated its earnings twice in the past 12 months, has become the target of suits by shareholders angered by the sharp drop in Hamilton’s stock on the Nasdaq exchange. The bank links the shareholders suits to fallout from the OCC’s aggressive regulatory actions. He had no comment on the other lawsuits Hamilton is facing. Lawyers for the bank charge that federal bank regulators are biased against the bank and the bank’s Latin American customer base. The OCC has taken “a series of actions that we believe make it impossible for the bank to service its customers,” Steinberg said. The OCC, the suit alleges, produced a “blacklist” of Hispanic customers and companies the bank should no longer deal with. One of those customers, according to the lawsuit, transferred his Hamilton accounts to Northern Trust Bank. “It appears that, because Hamilton’s directors, officers, shareholders, employees and clients are predominantly Hispanic and conduct business with predominantly Hispanic companies and countries, the OCC’s regulation and examination of Hamilton has been tainted and conducted under a presumption of guilt,” the lawsuit states. “This appears to be racial profiling at its worst.” Hamilton’s accusations of racism echo a similar lawsuit filed by Sinclair National Bank, according to the complaint. Based in Little Rock, Ark., that bank specialized in lending to minorities. Closer to home, banking regulators also engaged in “very discriminatory practices,” according to the Hamilton lawsuit. “Other Hispanic-owned and controlled national banks in South Florida and in other parts of the United States have suffered from similar discriminatory and unreasonable conduct by OCC representatives,” according to the lawsuit. Hamilton seeks court relief from a number of regulatory actions taken by the OCC. The bank also wants the court to declare that “OCC examinations since early 2000 are invalid,” according to the complaint. Hamilton’s legal team wants the court to halt various enforcement actions, including a federal move to classify the bank as undercapitalized, and to stop the “OCC from taking any further adverse administrative action against Hamilton pending full judicial review of the OCC’s action. Meanwhile, Wall Street has turned a bearish eye on Hamilton. On Dec. 3, Joe Gladue, an analyst at Chapman Co. and a longtime bull on the stock, downgraded Hamilton shares to a “sell” recommendation from a previous “hold.” Based in Baltimore, Chapman specializes in investment research on minority-owned companies. In making his bearish recommendation on Hamilton, Gladue cited the “decay” in the bank’s credit quality and its falling net interest margins. The bank’s ongoing disagreements with regulators were also noted in the analyst’s report. “Due to this bleak outlook, we are reducing our rating on Hamilton,” Gladue wrote in his Dec. 3 report. That day, Hamilton’s stock traded at $2.28 a share, compared with its 52-week high of $11.25.

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