 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued January 10, 2014               Decided March 7, 2014

                        No. 12-1416

                     LAWRENCE DODGE,
                        PETITIONER

                              v.

             COMPTROLLER OF THE CURRENCY,
                     RESPONDENT


          On Petition for Review of an Order of the
          Office of the Comptroller of the Currency


     Erik M. Andersen argued the cause for petitioner. On the
briefs was Thomas L. Vincent.

     Gabriel A. Hindin, Attorney, Office of the Comptroller of
the Currency, argued the cause for respondent. With him on the
brief were Horace G. Sneed and Douglas B. Jordan, Attorneys.

   Before: ROGERS, Circuit Judge, and WILLIAMS and
SENTELLE, Senior Circuit Judges.

    Opinion for the court by Circuit Judge ROGERS.

     ROGERS, Circuit Judge: Prior to 2006, the American
Sterling Bank, a federally insured savings bank, had received
high composite ratings by the Office of Thrift Supervision
                                 2

(“OTS”). By April 2007, however, the OTS had become
concerned about the Bank’s declining capital reserves. Several
transactions reported as capital in the Bank’s quarterly financial
reports to the OTS over six consecutive reporting periods
through June 2008 led to enforcement proceedings. On
September 17, 2012, the Comptroller of the Currency found that
Lawrence Dodge, as the Chief Executive Officer and a director
of the Bank, had engaged in a pattern of willfully
misrepresenting the Bank’s capital reserves to the OTS and the
Bank’s board of directors, and he issued orders prohibiting
Dodge from participating in the affairs of any federally insured
financial institution and assessing a civil penalty of one million
dollars. Dodge petitions for review, contending principally that
he could not have knowingly violated accounting standards
because they were evolving at the time and his later infusions of
cash into the Bank render the prohibition and penalty
unjustified. For the following reasons, we deny the petition for
review.

                                I.

     The Federal Deposit Insurance Act (“FDI Act”) authorizes
the entry of a prohibition order barring future “participation . . .
in the conduct of the affairs of any insured depository institution”
when the appropriate federal banking agency finds that a party
affiliated with an insured institution (1) violated “any law or
regulation,” “engaged or participated in any unsafe or unsound
practice,” or breached a fiduciary duty; (2) that either causes the
bank to “suffer[] or . . . probably suffer financial loss or other
damage,” prejudices or could prejudice depositors’ interests, or
gives the party “financial gain or other benefit;” and (3) that
“involves personal dishonesty . . . or . . . demonstrates willful or
continuing disregard . . . for the safety or soundness of [the
bank].” 12 U.S.C. § 1818(e)(1). These three prongs of the
prohibition action are known respectively as “misconduct,”
                                   3

“effects,” and “culpability.” See Proffitt v. FDIC, 200 F.3d 855,
862 (D.C. Cir. 2000). For each prong, any one of multiple
alternative grounds can support an adverse finding. An order of
prohibition is supportable upon proof of each prong so long as
the misconduct creates a “reasonably foreseeable” risk to the
financial institution. Kaplan v. OTS, 104 F.3d 417, 421 (D.C.
Cir. 1997); see Kim v. OTS, 40 F.3d 1050, 1054 (9th Cir. 1994).
Additionally, a civil monetary penalty (of not more than $25,000
for each day the violation continues) may be entered for violating
laws, regulations, or other requirements, “recklessly engag[ing]
in an unsafe or unsound practice,” or breaching a fiduciary duty,
when that action is “part of a pattern of misconduct,” or “causes
or is likely to cause more than a minimal loss to [the bank],” or
“results in pecuniary gain or other benefit to such party.” 12
U.S.C. § 1818(i)(2)(B).

     The FDI Act authorizes federal officials to take “prompt
corrective action” in order “to resolve the problems of insured
depository institutions at the least possible long-term loss to the
Deposit Insurance Fund.” 12 U.S.C. §1831o(a)(1). It defines
five capital categories for insured banks ranging from “well
capitalized” to “critically undercapitalized.” Id. § 1831o(b). The
OTS regulations, in turn, require “[e]ach savings association and
its affiliates [to] maintain accurate and complete records of all
business transactions.” 12 C.F.R. § 562.1(b)(1) (recodified as
§ 162.1(b)(1)).1 “Such records shall support and be readily


        1
            Under Title III of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376
(2010), functions of the OTS related to federal savings associations
were transferred to the Comptroller of the Currency, effective July
21, 2011. See 12 U.S.C. §§ 5412(b)(2)(B), 5414(a)(2)(B). Upon
transfer, the OTS regulations were recodifed. In this opinion we
cite the regulations as they were codified during the events at issue,
noting the recodified number within parentheses.
                                 4

reconcilable to any regulatory reports submitted to the OTS and
financial reports prepared in accordance with [Generally
Accepted Accounting Principles (GAAP)].” Id.; see also id.
§ 563.180(a) (recodified as § 163.180(a)). The financial reports
must conform to “the GAAP that best reflects the underlying
economic substance of the transaction at issue” as well as “safe
and sound practices contained in OTS regulations, bulletins,
examination handbooks and instructions to regulatory reports.”
Id. § 562.2(b) (recodified as § 162.2(b)). Of relevance here,
§ 562.2(b) incorporates the guidance for contributing capital
contained in Section 110.16 of the OTS Examination Handbook,
which provides that savings associations may accept without
limit capital contributions in the form of “Cash[,] Cash
Equivalents[,] Other high quality, marketable assets provided
they are otherwise permissible for the savings association . . .
[or] other forms of contributed capital if the association receives
prior OTS Regional Director approval.” The regulations warn
that “[n]o savings association or [affiliated person] shall
knowingly . . . [m]ake any written or oral statement to the [OTS]
or to an agent . . . of the [OTS] that is false or misleading with
respect to any material fact or omits to state a material fact
concerning any matter within the jurisdiction of the [OTS].” 12
C.F.R. § 563.180(b)(1) (recodified at § 163.180(b)(1)); see also
18 U.S.C. § 1005.

       The enforcement proceeding against Dodge involved four
transactions reported as contributions to Bank capital that the
OTS alleged failed to comply with GAAP or regulatory
requirements. By December 2006, the Bank’s capital reserves
had declined to “adequately capitalized.” In response to the
OTS’s request, the Bank’s holding company, American Sterling
Corporation, of which Dodge was CEO and an 85% shareholder,
adopted a resolution on April 25, 2007, stating that it would
“take appropriate steps to assure [the Bank] meets or exceeds the
. . . required capital ratios in order to remain well capitalized at
                              5

the end of each regulatory financial reporting period.” The ALJ
found that between April 2007 and May 2008, the holding
company and the Bank made four contributions that the Bank
reported as capital:

        • California Republican Party (“CRP”) Loan
        Participation. In 2006, the holding company made an
        unsecured $3 million loan to the CRP using $3 million
        supplied by Dodge personally. When the CRP failed to
        repay the loan at maturity on February 9, 2007, the due
        date was extended to June 30, 2007. Meanwhile, in
        April, 2007, the holding company contributed a $2
        million participation in the CRP loan to the Bank’s
        capital account for the purpose of increasing the Bank’s
        capital levels. When the CRP again failed to pay on
        June 30, Dodge extended the maturity date several
        times, to March 17, 2008, at which point the holding
        company conveyed the note back to Dodge, who paid
        nothing in exchange and forgave the loan on June 6,
        2008. The Bank informed the OTS that it had received
        a loan participation due in June 2007, but never
        disclosed the loan’s prior or subsequent extensions or
        its forgiveness. Dodge admitted he caused the Bank’s
        financial reports to the OTS for March 31, 2007, and all
        subsequent reports through the second quarter of 2008
        to reflect the $2 million as capital.

        • Millennium Gate Foundation (“MGF”) Loan
        Purchase. In 2001, Dodge proposed and the Bank’s
        board approved a $400,000 loan to MGF, and Dodge
        personally guaranteed repayment. When the loan was
        not repaid, the Bank charged it off in 2004 and Dodge
        failed to perform on his guarantee. In April 2007, the
        Bank transferred the charged-off promissory note to its
        holding company and reported an inter-company
                      6

receivable from the holding company for $400,000 in
the Bank’s capital account, effective March 31, 2007.
The Bank recorded $265,000 as added capital from the
loan purchase. The MGF loan file contained no
documentation supporting a receivable or the holding
company’s obligation to pay the Bank. A Bank officer
informed the OTS that the holding company had
purchased a $400,000 charged-off loan from the Bank,
resulting in $265,000 being added to capital. The Bank
directors understood the Bank would receive the
$400,000 in cash, but that did not happen prior to June
30, 2008. Nonetheless, Dodge caused the $265,000 to
be included as capital in the Bank’s reports to the OTS
over the six reporting periods at issue.

• 9800 Muirlands/Inter-Company Receivables. On
January 16 and February 12, 2008, a Bank officer, at
Dodge’s direction, reported $470,000 and $280,000 on
the Bank’s books as capital contributions from the
holding company and corresponding inter-company
receivables from the holding company.              Both
contributions were backdated to December 31, 2007,
for the purpose of making the Bank appear “well
capitalized,” and were reported to the OTS in the
Bank’s financial reports for the fourth quarter of 2007
and the first quarter of 2008. Dodge told the OTS and
senior Bank managers that the total $750,000 was
attributed to the holding company’s expected sale of a
commercial property known as 9800 Muirlands. As of
December 31, 2007, there was no executed agreement
or note between the holding company and the Bank
regarding an obligation to pay the Bank $750,000 upon
the sale of 9800 Muirlands. Nor had a contract for the
property sale been executed by January 16 or February
12, 2008, when the receivables were reported as capital,
                                7

         and no sale had occurred by June 2008.

         • Mountain View Pipeline Income. In 2008, the Bank’s
         executive management team, including Dodge,
         considered a proposal to service mortgage loans owned
         by Mountain View Capital. A member of the
         management team estimated the potential fee income at
         $706,949. The management team instructed a Bank
         employee to report the potential income stream as
         income on the Bank’s books even though the Bank had
         no written agreement with Mountain View to service
         the loans. The “income” was effective May 5, 2008,
         and backdated to April 30, 2008. In December 2008,
         upon learning from Dodge that there was “confusion”
         whether an agreement with Mountain View existed, and
         because the income had been reported for the second
         and third quarters of 2008, the Bank’s board of
         directors decided to hire an outside auditor to determine
         the proper treatment under GAAP; the auditor
         concluded the revenue should not have been reported in
         the Bank’s financial reports to the OTS as income.

      During the OTS examination beginning June 30, 2008, the
OTS ordered the Bank to reverse the first three contributions,
totaling $3,015,000. As a result, and with the addition of other
write-downs largely associated with the Bank’s heavy portfolio
of mortgages, the Bank became “critically undercapitalized” in
the summer of 2008. On August 11 and 13, 2008, Dodge caused
approximately $12 million in capital to be infused in the Bank
through loans obtained by a holding company subsidiary. On
August 20, 2008, the OTS issued a cease and desist order
requiring the Bank to meet increased capital levels by September
12. Although Dodge obtained an additional $7.5 million from
the holding company, the Bank failed to meet the capitalization
requirements of the cease and desist order. On April 17, 2009,
                                8

the OTS placed the Bank in receivership.

     On June 25, 2010, the OTS issued a Notice of Intention to
Prohibit and Notice of Assessment of a Civil Money Penalty
(“OTS Notice”) against Dodge. Following an evidentiary
hearing, an Administrative Law Judge (“ALJ”) issued a
recommended decision on November 1, 2011. Although
concluding that Dodge’s actions were not the actual cause of the
failure of the Bank, the ALJ found that for approximately
fourteen months, or six OTS reporting periods, Dodge committed
“serious” violations of regulatory reporting requirements,
prohibitions on false banking statements, and the requirement
that only “well-capitalized” institutions accept “brokered”
deposits, and that as the Bank’s CEO and a board member acted
knowingly and recklessly in disregarding risks to the Bank. The
ALJ recommended that the Comptroller, see supra note 1, enter
an order of prohibition against Dodge and an order assessing a
civil monetary penalty of $1 million, rather than the $2.5 million
proposed in the OTS Notice. Dodge filed exceptions. On
September 17, 2012, the Comptroller adopted the ALJ’s
Recommended Decision as “well reasoned and supported by a
preponderance of the evidence,” Decision at 10 (citing
Steadman v. SEC, 450 U.S. 91, 104 (1981) (citing the
Administrative Procedure Act, 5 U.S.C. § 556(d))), denied
Dodge’s exceptions, and entered the recommended orders.
Dodge petitions for review.

                               II.

     Dodge seeks dismissal of the Comptroller’s decision and
orders on the grounds of legal error in relying on later-developed
standards in the OTS New Directions Bulletin of 2009 when
there were no clear standards at the relevant times, and in
applying a “should have known” scienter standard in findings
that required a more demanding level of scienter. He also seeks
                                9

dismissal because of the “lack of substantial evidence to support
any finding of likely harm, or culpable scienter, or personal
gain.” Pet’rs Br. at 31. In his view, the analytical errors
stemmed from the Comptroller’s failure to acknowledge the
commitment of the holding company to back the Bank, the
comparatively small risk to the Bank and its depositors caused by
any accounting mistakes, and his initiation of discussions with an
OTS examiner and infusion of more than $17 million into the
Bank       all of which, he maintains, makes clear his good
intentions and his lack of culpability.

     The enforcement proceeding reveals the parties’ divergent
views about relevant events. Dodge sees himself as a victim of
overzealous enforcement efforts during a time of changing
standards on what qualified as a capital contribution when no
financial harm to the Bank in fact occurred and he acted to shore
up the Bank’s capital reserves, ultimately infusing, he asserts,
more money in the Bank from the holding company than was
legally required. See id. at 30 32. In the absence of explicit
objection by the OTS to the three non-cash contributions, he
views his intentions as honorable and lawful, but for the delay in
replacing the receivables with cash. The Comptroller, on the
other hand, views Dodge’s manipulation of the Bank’s capital
accounts to be plainly contrary to established requirements in a
way that could have caused financial harm or other damage to
the Bank and did compromise the OTS’s ability to take prompt
corrective action. To the extent Dodge now urges the court to
reweigh the evidence, the court’s role in reviewing his challenges
to the Comptroller’s decision and orders is more limited.

     The court must affirm the Comptroller’s decision unless it
is “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” Proffitt, 200 F.3d at 860 (quoting 5
U.S.C. § 706(2)(A)). Although the court owes no deference to
the Comptroller’s interpretation of 12 U.S.C. § 1818 under
                               10

Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984), because several agencies administer the
provision, see Proffitt, 200 F.3d at 863 n.7; Wachtel v. OTS, 982
F.2d 581, 585 (D.C. Cir. 1993), and the court therefore “must
decide for [itself] the best reading,” Miller v. Clinton, 687 F.3d
1332, 1342 (D.C. Cir. 2012) (citation omitted), the court will
accord the Comptroller’s views the weight due from their “power
to persuade,” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
Cf. MBIA Ins. Corp. v. FDIC, 708 F.3d 234, 240 (D.C. Cir.
2013) (citation omitted); Miller, 687 F.3d at 1342 n.11 (citation
omitted). The Comptroller’s findings of fact are final if
supported by substantial evidence in the record as a whole. See
Proffitt, 200 F.3d at 860; see also Universal Camera Corp. v.
NLRB, 340 U.S. 474, 477 (1951).

     We conclude Dodge has failed to show that the stringent
statutory requirements for an order of prohibition were not met.

                                A.
     The “misconduct” prong of § 1818(e)(1)(A) may be satisfied
by a finding of violation of law or regulation, unsafe or unsound
practices, or breach of fiduciary duty. Although the Comptroller
found that Dodge committed misconduct on all three grounds, it
suffices that the court upholds the misconduct finding on the
basis that Dodge engaged in unsafe or unsound practices, id.
§ 1818(e)(1)(A)(ii). See, e.g., Landry v. FDIC, 204 F.3d 1125,
1138 (D.C. Cir. 2000). An unsafe or unsound practice is “one
that posed a ‘reasonably foreseeable’ ‘undue risk to the
institution.’” Id. (quoting Kaplan, 104 F.3d at 421). There was
substantial evidence that Dodge’s repeated reporting of certain
contributions as qualifying capital “threaten[ed] the financial
integrity of the [Bank],” Johnson v. OTS, 81 F.3d 195, 204 (D.C.
Cir. 1996) (citation and internal quotation mark omitted), by
making it appear better capitalized than it was and therefore
delaying OTS intervention. See ALJ Recommended Decision
                               11

(Nov. 1, 2011) (“ALJ Rec. Dec.”) at 32 33.

      Adequate capital provides a “cushion” against potential
bank losses. Nw. Nat’l Bank, Fayetteville, Ark. v. OCC, 917 F.2d
1111, 1115 (8th Cir. 1990). As this court recounted in Transohio
Savings Bank v. OTS, 967 F.2d 598, 603 04 (D.C. Cir. 1992), in
the wake of the savings and loan crisis, Congress enacted the
Financial Institutions Reform, Recovery, and Enforcement Act
(“FIRREA”), Pub. L. No. 101-73, 103 Stat. 183 (1989), which
required “all savings associations” to meet or exceed uniformly
applicable minimum capital levels to be established by the OTS.
See 12 U.S.C. §§ 1464(s)-(t)(1)(A). According to the
Conference Report, these new capital requirements would
“provide the self-restraint necessary to limit risk-taking by
Federally insured savings associations” and “protec[t] the deposit
insurance fund by providing a cushion against losses if the
institution’s condition deteriorates.” H.R. CONF. REP. NO.
101-222, at 404 (1989).

     Experts within and independent of the OTS testified that
Dodge’s accounting practices did not conform to GAAP. The
OTS offered the testimony of a Bank officer and CPA as an
expert in GAAP and regulatory accounting; he testified that the
contributions were inconsistent with accounting principles
because they were not “cash, cash equivalents, or other high
quality, marketable assets” as required under OTS Examination
Handbook § 110.16, and he agreed that GAAP prohibited
reporting as capital “a receivable evidenced by an unsecured note
from a third party.” Hearing Tr. at 573 (Mar. 9, 2011). Similarly
qualified experts, an OTS senior policy accountant and the
Bank’s outside auditor hired by the Bank’s board of directors,
offered opinions to the same effect. See id. at 635 36, 658 60
(Patricia Hildebrand); 685 89 (Anthony Coble); see also ALJ
Rec. Dec. at 23 24. Dodge’s own expert witness agreed that the
recording of the CRP loan did not comport with regulatory
                                12

requirements and “was potentially” a violation of GAAP.
Hearing Tr. at 956, 965 (Leonard Lyons). And he agreed that the
Bank’s failure to settle the 9800 Muirlands receivables before
filing its quarterly financial report with the OTS violated GAAP,
as did the reporting of unrealized Mountain View income. See
id. at 963, 965.

     Dodge was well aware of the OTS concerns about
maintaining adequate Bank capital levels, as the holding
company’s April 2007 resolution illustrates. Moreover, Dodge
conceded before the ALJ that two of the four challenged
contributions       the receivables from the 9800 Muirlands
property sale that never occurred and the Mountain View fee
income as the result of an agreement that was never reached
violated “in various technical ways” either GAAP or regulatory
accounting principles at the time they were reported on the
Bank’s books as capital. See Dodge Brief in Support of
Proposed Findings of Fact and Conclusions of Law at 6 & n.4
(June 2, 2011). With regard to the CRP loan participation and
the MGF receivable, Dodge acknowledged that the contributions
eventually fell out of compliance with GAAP and regulatory
accounting principles when they were not repaid or received
within a reasonable time. See id.; see also Petr’s Br. at 50; Reply
Br. at 17. By recording receivables for funds that the holding
company had no documented obligation to provide and
prematurely recording income from a potential Mountain View
agreement, Dodge disregarded the Bank’s need to have adequate
available capital.2


        2
           Even were the court to consider documents of which
Dodge requests the court take judicial notice, the relevant
documents do not call into question the conclusion that Dodge’s
practices were unsafe or unsound. The Treasury Department’s
Inspector General audit report, which addressed the backdating of
capital contributions at other banks, indicates that the OTS
                                   13

     Furthermore, substantial evidence showed that Dodge’s
conduct in reporting the challenged contributions as capital was
intended to and had the effect of misleading regulators about the
Bank’s capital condition. The Bank’s chief financial officer and
senior vice president testified that Dodge caused the Bank to
record the 9800 Muirlands receivables as capital when he knew
that they did not reflect actual capital in the Bank’s possession
and was warned that the recording of income from anticipated
Mountain View fees was “very aggressive” and might be
challenged under GAAP. See Hearing Tr. at 512 (Group CFO
Ron Dearden) (Mar. 9, 2011). Three contributions were
backdated to the end of financial reporting periods in order to
make the Bank appear well-capitalized. Dodge acknowledged
that the $400,000 MGF receivable did not reflect the transfer of
cash from the holding company to the Bank until after the OTS
ordered the holding company to replace the receivables with cash


disregarded standards in the period leading up to the 2007–08
financial crisis, but it does not suggest that requirements before the
crisis allowed the Bank’s challenged accounting practices; rather
the audit report states that backdating capital contributions “is not in
accordance with [GAAP] and allows for misleading financial
reporting.” OFFICE OF INSPECTOR GENERAL, DEP’T OF TREASURY,
OIG-09-037, SAFETY AND SOUNDNESS: OTS INVOLVEMENT WITH
BACKDATED CAPITAL CONTRIBUTIONS BY THRIFTS, at 2 (2009).
The Financial Accounting Standards Board Emerging Issues Task
Force Abstract 85-1, issued in 1985, states that “reporting [a] note
as an asset is generally not appropriate, except in very limited
circumstances when there is substantial evidence of ability and
intent to pay within a reasonably short period of time.” Dodge
maintains that he believed the challenged contributions at least
initially satisfied that standard, and that the New Directions Bulletin
imposed a more demanding standard, but neither the MGF nor the
9800 Muirlands receivables were backed by a note or other
evidence of the Bank’s legal entitlement to the funds reported as
Bank capital.
                                14

in June 2008. He also acknowledged during the OTS
enforcement investigations that the 9800 Muirlands receivables
were reported as capital because the Bank needed $750,000 to
meet the statutory and regulatory capital requirements. And he
withheld material information from the Bank’s board and the
OTS that hindered their ability to address risks to the Bank’s
stability. See Section II.C, infra.

     Dodge’s conduct thus undermined the Bank’s safety and
soundness. The misleading quarterly reports over six reporting
periods delayed “prompt corrective action” by regulatory
officials pursuant to 12 U.S.C. § 1831o. Because Dodge caused
the Bank to report the challenged contributions as capital, the
Bank was able to appear well-capitalized and accept brokered
deposits when it otherwise could not have done so, see 12 U.S.C.
§ 1831f(a); the OTS concluded those deposits contributed to the
Bank’s potential liquidity crisis in August 2008. OTS Regional
Director Gary Scott testified that the Bank’s practices
jeopardized the Bank’s safety and soundness, further supporting
the Comptroller’s conclusion that Dodge’s reporting of non-
qualifying contributions as capital exposed the Bank to a
reasonably foreseeable undue risk of loss and constituted an
unsafe or unsound practice.

                                 B.
     The “effects” prong may be satisfied by a finding that “by
reason of” the misconduct, the bank “has suffered or will
probably suffer financial loss or other damage; the interests of
the insured depository institution’s depositors have been or could
be prejudiced; or such party has received financial gain or other
benefit.” 12 U.S.C. § 1818(e)(1)(B). It is satisfied by evidence
of either potential or actual loss to the financial institution, and
the exact amount of harm need not be proven. See Pharaon v.
Bd. of Governors of the Fed. Reserve Sys., 135 F.3d 148, 157
(D.C. Cir. 1998); Proffitt, 200 F.3d at 863. Substantial evidence
                               15

supports the Comptroller’s findings that depositors could be
prejudiced and that Dodge derived a financial benefit. 12 U.S.C.
§ 1818(e)(1)(B)(ii), (iii). We do not rely on the Comptroller’s
puzzling conclusion that Dodge met § 1818(e)(1)(B)(i) because
he “could have caused the [B]ank” financial harm. Decision at
8.

     Contrary to Dodge’s view, regulators’ heightened concern
for the Bank and its low capital levels show that the risk of a
liquidity crisis in August 2008 could have prejudiced depositors
and was not merely hypothetical. The OTS deemed the risk of
a liquidity crisis sufficiently serious to have FDIC officials
standing by during early August to take the Bank into
receivership if the need arose. The Bank’s core capital ratio was
1.6% and its risk-based capital level was 3.1%, levels low
enough to make it “critically undercapitalized” under OTS
regulations. See 12 C.F.R. §§ 565.4(b), 565.2. The Bank’s
outstanding brokered deposits increased its capital obligations,
contributing to the risk of a liquidity crisis. Absent the
challenged capital contributions the Bank would not have
appeared well-capitalized in the months before August 2008,
when regulators could have required corrective action. See 12
U.S.C. § 1831o(a)(2). The potential liquidity crisis could have
prejudiced depositors by compromising the Bank’s ability to
meet its obligations to them.

     Dodge fails to show the Comptroller unreasonably rejected
his argument that the risk of prejudice was slight because the
holding company always had cash on hand to back up the Bank’s
capital account. The Comptroller noted, contrary to Dodge’s
assertion, that the ALJ had not ignored his argument, but rather
had concluded the holding company funds were not actually
available to the Bank. Dodge testified        in response to the
question why, if the holding company had so much cash, it was
not transferred to the Bank’s capital account when the OTS
                                16

informed the Bank it needed more capital          that the cash was
being used for other business purposes and “[w]e felt we needed
to keep other credit that we had at the moment.” ALJ Rec. Dec.
at 40 (quoting Hearing Tr. at 451). The Comptroller reasonably
pointed out a “clear inconsistency” in Dodge’s position that the
holding company’s deposits were Bank capital: “If [Dodge] truly
regarded the deposits to be capital, he did not need to make the
three Non-Cash Capital Contributions.” Decision at 11. In the
Comptroller’s view, “it should be obvious even to someone
without much banking experience that deposits in the name of
others, a bank liability, cannot be considered cash or a cash
equivalent qualifying as bank capital, as asset,” id., and no
witness testified otherwise. Furthermore, Dodge’s infusions of
cash into the Bank in August and September 2008 could only
mitigate after the fact the risk of a liquidity crisis and prejudice
to depositors. To the extent Dodge suggests that at the time the
challenged contributions were recorded as capital, rather than in
hindsight, harm to the Bank or its depositors was not reasonably
foreseeable, the record evidence supports a contrary conclusion.
By reporting the challenged contributions as capital, Dodge
avoided alerting the OTS examiners that the Bank lacked
sufficient capital to survive a potential liquidity crisis, thus
delaying any OTS-ordered corrective actions, and (even if it was
not his intent) enabled the Bank to accept brokered deposits.

     Dodge also maintains that he did not financially benefit from
his actions in reporting the challenged contributions as Bank
capital because the mere availability of capital to use for other
purposes is not a benefit and ultimately he suffered substantial
financial loss when he caused the holding company to infuse
millions into the bank. But the Comptroller could reasonably
conclude that the availability of the cash deposits for use in other
business opportunities was a benefit to Dodge: “In effect . . . by
contributing ineligible assets to the Bank’s capital accounts, [he]
absolved himself from the obligation to inject actual capital into
                               17

the Bank.” Decision at 15. Dodge’s gain or benefit is analogous
to that upheld in De la Fuente II v. FDIC, 332 F.3d 1208,
1223 25 (9th Cir. 2003), where a financial benefit was found to
have accrued when De la Fuente substituted inferior collateral
for superior collateral on loans and was thereby relieved of
having to infuse capital into the bank, allowing him to use funds
for his own benefit. The financial losses Dodge cites occurred
only after the OTS ordered the Bank to reverse three non-cash
contributions and to increase its capital reserves and the Bank
was put in receivership; his infusions of cash in August and
September 2008 do not eliminate the benefit he received earlier,
during the six financial reporting periods. The cases on which
Dodge relies are unhelpful to him. In Wachtel, 982 F.2d at 583,
586, and Rapaport v. OTS, 59 F.3d 212, 216 17 (D.C. Cir.
1995), the issue was proof of “unjust enrichment,” a precondition
to requiring restitution under 12 U.S.C. § 1818(b) and a more
demanding standard than “financial gain or other benefit” under
§ 1818(e).

                                C.
     The “culpability” prong may be satisfied by a finding of
personal dishonesty or “willful or continuing disregard . . . for
the safety or soundness of” the bank. 12 U.S.C. § 1818(e)(1)(C).
The Comptroller found that Dodge’s conduct demonstrated
dishonesty as well as willful or continuing disregard, and both
findings are supported by substantial evidence.

     The personal dishonesty element of § 1818(e) is satisfied
when a person disguises wrongdoing from the institution’s board
and regulators, see Landry, 204 F.3d at 1139 40, or fails to
disclose material information, see Greenberg v. Bd. of Governors
of the Fed. Reserve Sys., 968 F.2d 164, 171 (2d. Cir. 1992); see
also Van Dyke v. Bd. of Governors of the Fed. Reserve Sys., 876
F.2d 1377, 1379 (8th Cir. 1989). Both the personal dishonesty
and willful or continuous disregard elements “require some
                                18

showing of scienter.” Landry, 204 F.3d at 1139 (citing Kim, 40
F.3d at 1054 55). “[W]illful disregard” is shown by “deliberate
conduct which exposed the bank to abnormal risk of loss or harm
contrary to prudent banking practices,” Grubb v. FDIC, 34 F.3d
956, 961 62 (10th Cir. 1994), and “continuing disregard”
requires conduct “over a period of time with heedless
indifference to the prospective consequences,” id. at 962
(citations and internal quotation marks omitted).

     Dodge challenges the culpability finding for lack of
substantial evidence on the grounds that the capital accounting
standards were unclear and he reasonably believed the
challenged contributions were proper, in part because the OTS
did not object. Substantial evidence supports the finding that
Dodge demonstrated personal dishonesty by withholding
material information from the Bank’s board of directors and the
OTS regarding whether and when the reported capital would
result in cash available to the Bank. Dodge informed the board
and the OTS that the CRP loan participation was due in June
2007, but he did not inform either that he had personally
extended and ultimately forgiven the loan, rendering it valueless
to the Bank. In early 2008, during his negotiations for the sale
of the 9800 Muirlands property, Dodge directed that anticipated
proceeds from the sale be reported as capital when he knew there
was no contract of sale. Similarly, Dodge knew no agreement
had been reached with Mountain View Capital when the fee
income was reported as Bank capital in May 2008, but he kept
the Bank’s board in the dark about whether an agreement had
ever existed for the Bank to refinance those mortgages,
responding at the December 2008 board meeting that there was
“confusion” over whether there was an agreement and he thought
treatment of the Mountain View portfolio was consistent with
other “lead” lists. Dodge also did not update the OTS when the
reported contributions failed to produce qualifying capital for the
Bank. Dodge does not dispute that the challenged contributions
remained in quarterly financial reports for multiple reporting
                                19

periods, even after the CRP loan was extended multiple times or
the two anticipated agreements failed to materialize. His failure
to disclose material information misled the Bank’s board and the
OTS and suffices to show personal dishonesty.

     The lack of clarity in accounting standards that Dodge
claimed existed in 2007 and 2008 has no bearing on his
culpability for the failure to make these disclosures to the Bank
board or the OTS. Similarly, the OTS’s lack of objection to
Dodge’s reporting of the CRP loan participation or the MGF
receivable as capital does not undermine the substantial evidence
supporting the finding of personal dishonesty. There is no
evidence that the OTS expressly approved of the challenged
contributions, and because Dodge kept the OTS in the dark about
the CRP loan’s extension and ultimate forgiveness, even
assuming tacit approval by the OTS would suffice, it would not
have been fully informed.

     Given the record evidence that Dodge directed the Bank to
report contributions as capital that were unlikely to produce cash
for the Bank, knowing that the OTS would have no reason to
doubt that the Bank was well-capitalized and take corrective
action, the Comptroller properly found that Dodge knowingly
exposed the Bank and its depositors to substantial risk,
demonstrating “willful” disregard for the Bank’s safety and
soundness. See De La Fuente II, 332 F.3d at 1223 24. That he
did so on multiple occasions over six reporting periods, at times
in the face of disagreement by other board members,
demonstrates “continuing disregard” as well. The Comptroller
recognized that Dodge’s manipulation of the capital account
“knowingly disregard[ed] the risk that the amount of legitimate
or qualifying capital might be insufficient to meet the
considerable losses the Bank was experiencing.” Decision at 16.
Dodge’s argument that “he stood behind his commitment to [the
Bank] not just for the $3.1 million in challenged transactions, but
for millions more[,] misses the point . . . [that he] failed to
                                20

reverse the non-qualifying contributions to capital until ordered
to do so by the OTS on July 24, 2008.” Id. (citation and internal
quotation marks omitted). His prior inaction amounted to a
willful or continuing disregard for the capital reserves required
to ensure the Bank’s financial soundness. See id.

     Dodge’s objection that the Comptroller and the ALJ erred as
a matter of law in applying a “should have known” or negligence
standard in making culpability and certain misconduct findings
fares no better. The ALJ based the finding of personal
dishonesty on Dodge’s withholding of material information from
the Bank board and the OTS. He also found that Dodge had
knowingly ignored risks over multiple reporting periods,
“demonstrat[ing] a continuing and willful disregard for the safety
and soundness of [the Bank].” ALJ Rec. Dec. at 42 43. To the
extent the ALJ and Comptroller stated that Dodge “should have
known” of risks or accounting standards, they were analyzing
elements that do not require heightened scienter, such as the
conceded violation of regulatory reporting standards, the breach
of fiduciary duty, or the probability of loss to the bank or
depositors. See id. at 30, 34; Decision at 11. When finding that
Dodge demonstrated personal dishonesty or acted with willful or
continuing disregard for risks, both found the required scienter.
See Decision at 16; ALJ Rec. Dec. at 41 43.

                                III.

     The requirements to impose a second-tier civil monetary
penalty are similar to the criteria for an order of prohibition. The
only new misconduct element under 12 U.S.C. § 1818(i)(2)(B)
requires evidence of “reckless” engagement in unsafe or unsound
practices. The Comptroller may satisfy the effects prong on any
of the following grounds: that the misconduct was “part of a
pattern of misconduct,” that it “causes or is likely to cause more
than a minimal loss” to the Bank, or that it “results in pecuniary
gain or other benefit.” 12 U.S.C. § 1818(i)(2)(B)(ii). The court
                                21

will not overturn a civil monetary penalty unless it is either
“unwarranted in law or . . . without justification in fact.”
Pharaon, 135 F.3d at 155 (citation omitted) (ellipsis in original).
Dodge’s challenges to the civil monetary penalty largely repeat
his objections to the order of prohibition and fail to show
grounds for reversal of the penalty.

     The Comptroller noted that all three elements of the
misconduct prong of § 1818(i)(2)(B) had been established, even
though it was only necessary to establish one, and that the effects
prong was also established, including a pattern of misconduct
sufficient to warrant the second tier penalty. See Decision at 17.
Nonetheless, the Comptroller concluded, given the mitigating
factors found by the ALJ (Dodge’s “lack of previous violations,
his prompt replacement of the disputed contributions in the
capital account with cash, his infusion of new capital, his
cooperation with OTS’s efforts to sell the Bank”), that the
recommended $1 million penalty, rather than the $2.5 million
requested by the OTS, was supported by the record. Id. at 18.

     There was substantial evidence supporting the findings that
Dodge acted recklessly, for the same reasons his conduct
demonstrated willful or continuing disregard under the
culpability prong of § 1818(e); that his pecuniary gain was
shown by the opportunity to use money unencumbered by the
Bank; and that Dodge’s repeated reporting, over multiple OTS
reporting periods, of receivables to which the Bank had no legal
entitlement or which were otherwise inadequate as Bank capital
shows a pattern of misconduct. In view of the court’s deferential
review of sanctions imposed by an implementing agency for
statutory or regulatory violations, see Pharaon, 135 F.3d at 155,
we are unpersuaded, for the reasons addressed in Part II, by
Dodge’s contentions that the Comptroller’s civil penalty was
“unwarranted in law or . . . without justification in fact,” id.

    Accordingly, we deny the petition for review.
