
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 12USC2277a-10b]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 23--FARM CREDIT SYSTEM
 
          SUBCHAPTER V--FARM CREDIT ADMINISTRATION ORGANIZATION
 
            Part E--Farm Credit System Insurance Corporation
 
Sec. 2277a-10b. Authority to regulate golden parachute and 
        indemnification payments
        

(a) Definitions

    In this section:

                    (1) Golden parachute payment

        The term ``golden parachute payment''--
            (A) means a payment (or any agreement to make a payment) in 
        the nature of compensation for the benefit of any institution-
        related party under an obligation of any Farm Credit System 
        institution that--
                (i) is contingent on the termination of the party's 
            relationship with the institution; and
                (ii) is received on or after the date on which--
                    (I) the institution is insolvent;
                    (II) a conservator or receiver is appointed for the 
                institution;
                    (III) the institution has been assigned by the Farm 
                Credit Administration a composite CAMEL rating of 4 or 5 
                under the Farm Credit Administration Rating System, or 
                an equivalent rating; or
                    (IV) the Corporation otherwise determines that the 
                institution is in a troubled condition (as defined in 
                regulations issued by the Corporation); and

            (B) includes a payment that would be a golden parachute 
        payment but for the fact that the payment was made before the 
        date referred to in subparagraph (A)(ii) if the payment was made 
        in contemplation of the occurrence of an event described in any 
        subclause of subparagraph (A); but
            (C) does not include--
                (i) a payment made under a retirement plan that is 
            qualified (or is intended to be qualified) under section 401 
            of title 26 or other nondiscriminatory benefit plan;
                (ii) a payment made under a bona fide supplemental 
            executive retirement plan, deferred compensation plan, or 
            other arrangement that the Corporation determines, by 
            regulation or order, to be permissible; or
                (iii) a payment made by reason of the death or 
            disability of an institution-related party.

                     (2) Indemnification payment

        The term ``indemnification payment'' means a payment (or any 
    agreement to make a payment) by any Farm Credit System institution 
    for the benefit of any person who is or was an institution-related 
    party, to pay or reimburse the person for any liability or legal 
    expense with regard to any administrative proceeding or civil action 
    instituted by the Farm Credit Administration that results in a final 
    order under which the person--
            (A) is assessed a civil money penalty; or
            (B) is removed or prohibited from participating in the 
        conduct of the affairs of the institution.

                    (3) Institution-related party

        The term ``institution-related party'' means--
            (A) a director, officer, employee, or agent for a Farm 
        Credit System institution or any conservator or receiver of such 
        an institution;
            (B) a stockholder (other than another Farm Credit System 
        institution), consultant, joint venture partner, or any other 
        person determined by the Farm Credit Administration to be a 
        participant in the conduct of the affairs of a Farm Credit 
        System institution; and
            (C) an independent contractor (including any attorney, 
        appraiser, or accountant) that knowingly or recklessly 
        participates in any violation of any law or regulation, any 
        breach of fiduciary duty, or any unsafe or unsound practice that 
        caused or is likely to cause more than a minimal financial loss 
        to, or a significant adverse effect on, the Farm Credit System 
        institution.

                   (4) Liability or legal expense

        The term ``liability or legal expense'' means--
            (A) a legal or other professional expense incurred in 
        connection with any claim, proceeding, or action;
            (B) the amount of, and any cost incurred in connection with, 
        any settlement of any claim, proceeding, or action; and
            (C) the amount of, and any cost incurred in connection with, 
        any judgment or penalty imposed with respect to any claim, 
        proceeding, or action.

                             (5) Payment

        The term ``payment'' means--
            (A) a direct or indirect transfer of any funds or any asset; 
        and
            (B) any segregation of any funds or assets for the purpose 
        of making, or under an agreement to make, any payment after the 
        date on which the funds or assets are segregated, without regard 
        to whether the obligation to make the payment is contingent on--
                (i) the determination, after that date, of the liability 
            for the payment of the amount; or
                (ii) the liquidation, after that date, of the amount of 
            the payment.

(b) Prohibition

    The Corporation may prohibit or limit, by regulation or order, any 
golden parachute payment or indemnification payment by a Farm Credit 
System institution (including any conservator or receiver of the Federal 
Agricultural Mortgage Corporation) in troubled condition (as defined in 
regulations issued by the Corporation).

(c) Factors to be taken into account

    The Corporation shall prescribe, by regulation, the factors to be 
considered by the Corporation in taking any action under subsection (b) 
of this section. The factors may include--
        (1) whether there is a reasonable basis to believe that an 
    institution-related party has committed any fraudulent act or 
    omission, breach of trust or fiduciary duty, or insider abuse with 
    regard to the Farm Credit System institution involved that has had a 
    material effect on the financial condition of the institution;
        (2) whether there is a reasonable basis to believe that the 
    institution-related party is substantially responsible for the 
    insolvency of the Farm Credit System institution, the appointment of 
    a conservator or receiver for the institution, or the institution's 
    troubled condition (as defined in regulations prescribed by the 
    Corporation);
        (3) whether there is a reasonable basis to believe that the 
    institution-related party has materially violated any applicable law 
    or regulation that has had a material effect on the financial 
    condition of the institution;
        (4) whether there is a reasonable basis to believe that the 
    institution-related party has violated or conspired to violate--
            (A) section 215, 657, 1006, 1014, or 1344 of title 18; or
            (B) section 1341 or 1343 of title 18, affecting a Farm 
        Credit System institution;

        (5) whether the institution-related party was in a position of 
    managerial or fiduciary responsibility; and
        (6) the length of time that the party was related to the Farm 
    Credit System institution and the degree to which--
            (A) the payment reasonably reflects compensation earned over 
        the period of employment; and
            (B) the compensation represents a reasonable payment for 
        services rendered.

(d) Certain payments prohibited

    No Farm Credit System institution may prepay the salary or any 
liability or legal expense of any institution-related party if the 
payment is made--
        (1) in contemplation of the insolvency of the institution or 
    after the commission of an act of insolvency; and
        (2) with a view to, or with the result of--
            (A) preventing the proper application of the assets of the 
        institution to creditors; or
            (B) preferring 1 creditor over another creditor.

(e) Rule of construction

    Nothing in this section--
        (1) prohibits any Farm Credit System institution from purchasing 
    any commercial insurance policy or fidelity bond, so long as the 
    insurance policy or bond does not cover any legal or liability 
    expense of an institution described in subsection (a)(2) of this 
    section; or
        (2) limits the powers, functions, or responsibilities of the 
    Farm Credit Administration.

(Pub. L. 92-181, title V, Sec. 5.61B, as added Pub. L. 104-105, title 
II, Sec. 218, Feb. 10, 1996, 110 Stat. 181.)
