The former chief executive of a now-defunct Michigan bank has been banned for life from the banking sector and fined $125,000 by the Federal Deposit Insurance Corp. – for the second time.
Harry C. Calcutt III allegedly negotiated and approved a series of unsafe and unsound transactions with the largest group of borrowers at Northwestern Bank in Traverse City, Michigan, where he was president and CEO from 2000 to 2013.
He then concealed the nature of the transactions from the bank’s board of directors and its regulators, according to the FDIC. His ban and penalty were signed by a judge April 16, and announced by the FDIC on Friday.
Calcutt’s original lifelong ban and civil monetary penalty were handed down by the FDIC in 2020. But these enforcements sustained court challenges that, in 2023, rose to the U.S. Supreme Court, which ruled that a federal appeals court erred by upholding an enforcement action against Calcutt after finding the FDIC had used the wrong legal standards.
The FDIC board, at the court’s direction, began its re-evaluation of the case under the correct legal parameters in 2024. Its re-evaluation yielded the same result.
Under Calcutt’s watch, one of Northwestern’s largest customers – Nielsen Entities, which had $38 million in loans with the bank, and represented roughly 47% of the bank’s tier 1 capital, according to court documents seen by Banking Dive – defaulted on all of its loans.
In the years leading up to the defaults, Calcutt instructed Nielsen representatives to book loan payments in a way that would conceal wrongdoing from the bank’s regulators. Further, he consented to a loan restructuring rife with issues, including that it violated his bank’s consumer loan policy, and then he lied to FDIC examiners about the loans in both 2010 and 2011.
Calcutt retired from Northwestern in 2013.
The following year, the bank was purchased by Midland, Michigan-based Chemical Financial Corp. for $121 million, which then entered into a merger-of-equals with Detroit-based TCF Financial Corporation in 2019 in a transaction valued at $3.6 billion. Huntington bought TCF for $6 billion in 2020.
The FDIC did not immediately respond to a request for comment.
