Last updated: February 20. 2013 4:20AM - 927 Views

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DUNMORE – A federal appellate court has overturned a ruling by banking regulators that banned Louis DeNaples from serving on the board of First National Community Bank, but stopped short of ordering the agencies to allow DeNaples to regain his seat on the board.

The ruling by the Court of Appeals for the District of Columbia returns the case to the Office of the Comptroller of the Currency and the Board of Federal Reserve, directing the agencies to reconsider their interpretation of an agreement DeNaples reached with Dauphin County prosecutors that led to perjury charges being withdrawn against him.

DeNaples, of Dunmore, was charged in 2008 with perjury for allegedly lying to gaming regulators investigating his suitability to hold a license for the Mount Airy Casino.

In 2009, he reached an agreement with prosecutors that he would give up control of the casino. In exchange, the charges would be dropped.

That ended the criminal case, but caused problems for him with banking regulators.

The Federal Reserve and OCC each deemed that agreement to be similar to a pre-trial diversion program, which they said triggered a law that prevents any person convicted of a crime of dishonesty from serving on a bank's board.

DeNaples argued the agreement was not equivalent to a pre-trial diversion program. An administrative law judge who heard the case last year disagreed and upheld cease-and-desist orders issued by regulators. DeNaples appealed to the Circuit Court.

In a 22-page opinion, a three-judge panel of the court faulted the Federal Reserve and OCC's for its scattergun interpretation of the 2009 Dauphin County agreement, finding the two agencies had employed contradictory reasoning in reaching their conclusions.

The court vacated both orders, but the decision does not guarantee DeNaples' return to the board. The court's ruling returns the matter to the agencies, directing them to adequately justify their reasoning behind their positions.

While distinctions between convictions and pretrial diversions may be justifiable, the agencies must acknowledge these differences explicitly and consistently and explain why they make sense, the court said.

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