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Canandaigua Bank CEO assails enforcement actions

The CEO of an upstate bank has rallied to the defense of other small banks – possibly Evans Bank and the parent of Five Star Bank – against “arbitrary” government legal action.

Frank H. Hamlin III, CEO of Canandaigua National Bank and Trust, never names Evans, Five Star, or state Attorney General Eric T. Schneiderman in his strongly worded shareholders letter.

Hamlin says his own bank’s interactions with its primary regulators “are healthy. I am, however, extremely suspicious of the arbitrary and capricious manner in which various agencies (prosecutors) are abusing the legal system in order to further their own political and economic interests.”

“In the recent past, we have witnessed two local community banks charged with violations of consumer protection regulations,” Hamlin said. “The regulations are vague in explaining what conduct is actually prohibited. The media, of course, does the people no service by merely assuming these prosecutions are based in sound legal theory and fact.”

The state Attorney General last September sued Hamburg-based Evans Bancorp in U.S. District Court, accusing the bank of “redlining,” or refusing to do business in certain neighborhoods on the East Side of Buffalo. Evans has battled back against the charges. Separately, the state Attorney General in January announced an agreement with Five Star’s parent, Warsaw-based Financial Institutions Inc., related to an investigation of what Schneiderman called “racially discriminatory mortgage lending practices” by the bank in Rochester.

Without naming the two banks, Hamlin in his letter said one of them “has chosen to merely fold while the other has chosen to fight. I can understand the decision to fold. The potential sanctions are severe on both corporate and personal fronts. One must decide whether to put the livelihood of their employees and potentially their own personal liberty on the line or merely cry ‘uncle’ and give the ‘people’ its pound of flesh and go on with life.

“Those who choose to fight are forced to depend upon a legal system that has mutated its focus from time-honored legal principle and justice to efficiency and political expediency,” he wrote. “I can assure you, there is no such thing as ‘efficient justice.’”

Nick Benson, a spokesman for Schneiderman’s office, said in a statement: “Redlining is illegal and discriminatory, and we stand firmly behind our allegations against Evans Bank.”

David Nasca, CEO of Evans Bancorp, said he had not spoken to Hamlin about his remarks and did not know what prompted it. “It’s nice to have the support from a fellow banker, but I don’t know why he did it.”

Evans and the Attorney General’s office met once with a mediator, at the court’s direction, but that session did not result in a settlement. “We don’t believe they have grounds,” he said of the lawsuit.

While Hamlin is a banker, he was previously a defense attorney for more than a decade. He represents the fifth generation of his family to lead Canandaigua National Corp., which is based in Ontario County.

Hamlin did not return messages to comment. A bank spokeswoman, Lindsay Morrow-Lilly, said Hamlin would not comment further about the letter, saying it “speaks for itself.”

Hamlin also wrote in his letter: “I ask you, the reader, to be extremely suspicious of any settlement of a government prosecution. The reason that 98 percent of prosecutions are settled instead of taken to trial is not the result of defendants saying, ‘awshucks, you caught me.’ It has to do with a fundamental and reasonable lack of faith that our legal system is working properly.”