Agency Investigation. The Federal Home Loan Bank Board (FHLBB) operated the Federal Savings and Loan Insurance Corporation (FSLIC). The FHLBB's duties included examining all FSLIC-insured institutions to determine whether they were being operated

Question

properly under applicable laws and regulations. As part of an investigation of Texas-based Vision Banc Savings and Loan, the FHLBB became suspicious of a large loan made to Sandsend Financial Consultants, Ltd. Hoping to trace the proceeds of the loan, the FHLBB subpoenaed Sandsend's financial records from a second bank, West Belt. Sandsend requested a federal district court to void the subpoena. Should the court grant this request? Explain fully.

Answer 1

Agency investigation
The federal district court voided the subpoena, and the FHLBB appealed. The U.S. Court of Appeals for the Fifth Circuit reversed the district court's decision and directed the court to enforce the subpoena. "The FHLBB's subpoena power extends to Sandsend's financial records; it is not limited to parties directly associated with the target of an investigation. * * * [W]e note two important principles that inform our inquiry: First, an administrative agency's power to issue subpoenas is a broad-ranging one which courts are reluctant to trammel [restrict]. * * * Second, when reviewing an administrative subpoena, the court plays a ‘strictly limited' role. The court's inquiry is limited to two questions: (1) whether the investigation is for a proper statutory purpose and (2) whether the documents the agency seeks are relevant to the investigation." The court found "no basis in the record for quashing [voiding] the subpoena. First, it is undisputed that the FHLBB's examination of Vision Banc is a legitimate law enforcement inquiry. Second, Sandsend's records are relevant to the FHLBB's inquiry. * * * So long as the material requested "‘touches a matter under investigation,'" an administrative subpoena will survive a challenge that the material is not relevant. Certainly, Sandsend has only a tangential relationship to Vision Banc, the target of the investigation. But the FHLBB suspects that Sandsend is part of a scheme to defraud Vision Banc or to misuse Vision Banc's funds. * * * Sandsend may have only a loose connection with Vision Banc. Its financial records, however, touch on a matter under investigation and, thus, are relevant to the FHLBB's examination."