29. Commitments and Contingencies

Total rent expense for the years ended December 31, 2013, 2012 and 2011 was approximately $12.3 million, $11.8 million and $8.4 million, respectively.

The Company and its subsidiaries are defendants in various lawsuits or arbitration proceedings arising in the ordinary course of business, including employment related matters. Management believes, based on the opinion of legal counsel, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition or results of operations of the Company.

Since 2005, the Company became a party to various legal proceedings, including regulatory and judicial investigations and civil litigation, arising as a result of the Company's restatement.

Legal Matters

On August 24, 2005, the U.S. Attorney's Office for the Southern District of New York served Doral Financial with a grand jury subpoena seeking the production of certain documents relating to issues arising from the restatement, including financial statements and corporate, auditing and accounting records prepared during the period from January 1, 2000 to the date of the subpoena. On February 18, 2010, a superseding criminal indictment was filed in the U.S. District Court for the Southern District of New York charging Mario S. Levis, the former Treasurer of Doral, with various counts of securities and wire fraud. Doral Financial was not charged in the indictment. Mr. Levis was subsequently convicted and sentenced for one count of securities fraud and two counts of wire fraud. Mr. Levis' conviction as to one count of wire fraud was later vacated by the U.S. Court of Appeals for the Second Circuit and remanded for further proceedings. On April 29, 2013, the United States Supreme Court denied Mr. Levis' petition for a writ of certiorari. The vacated wire fraud count was dismissed by the government on remand. Mr. Levis was resentenced on October 2, 2013 by the U.S. District Court for the Southern District of New York. The court imposed a concurrent sentence of four years imprisonment for each of the remaining two counts. Doral understands that no further appeals are available to Mr. Levis. Doral Financial cooperated with the U.S. Attorney's Office since the outset of this matter.

During the criminal prosecution, Mr. Levis sued the Company for alleged breach of its obligation to advance expenses, including attorneys' fees corresponding to his representation and defense of investigations conducted by federal agencies commencing in 2005. Due to the large amounts of money being disbursed for his defense and in order to determine whether such advances were reasonable, Doral requested Mr. Levis to provide more detail concerning the services that were being rendered by his attorneys. Controversy arose concerning the Company's request mainly as the result of Mr. Levis' refusal to provide more detail. As a result of Mr. Levis refusal, Doral stopped advancing payments for his defense. Mr. Levis then filed a civil action before the Supreme Court of New York on August 13, 2009 seeking to obtain a mandatory injunction to force the Company into continuing to advance the costs of his representation, including the appeal of his conviction to the U.S. Court of Appeals for the Second Circuit, plus the costs and fees of the civil action. Subsequently, and after substantial litigation before the Supreme Court of New York, on April 12, 2012, Mr. Levis voluntarily dismissed his civil action without prejudice, opting instead to immediately thereafter file a new civil action before the Superior Court of Puerto Rico Civil seeking relief identical to that sought before the New York state court, i.e., a mandatory injunction against the Company to force it to advance expenses including attorney's fees, without having to establish the reasonableness of the invoices. On April 19, 2013, the Superior Court of Puerto Rico entered judgment dismissing Mr. Levis' complaint against the Company. Mr. Levis appealed the dismissal of his civil action to the Puerto Rico Court of Appeals. On September 30, 2013, the Puerto Rico Court of Appeals issued a Judgment denying Mr. Levis' appeal, confirming the judgment entered by the Superior Court of Puerto Rico. Mr. Levis filed for reconsideration. On October 23, 2013, the Puerto Rico Court of Appeals issued a resolution denying Mr. Levis' motion for reconsideration. On November 25, 2013, Mr. Levis filed a petition before the Puerto Rico Supreme Court for a writ of certiorari. Mr. Levis' petition for writ of certiorari before the Puerto Rico Supreme Court is pending resolution.       

In addition, on April 3, 2013, while the aforesaid civil action filed in Puerto Rico was pending before the Superior Court of Puerto Rico, Mr. Levis filed a second complaint against the Company before the Superior Court of Puerto Rico. In this second complaint, which allegations essentially mirror those of the first, Mr. Levis included Mr. Glen R. Wakeman, President and CEO, and his wife, and Mr. Enrique R. Ubarri, Executive Vice President-General Counsel, and his wife, as additional defendants claiming that they had conspired to breach the Company's obligation to advance the costs of his legal representation. In the second complaint Mr. Levis claims the defendants, including the Company owe Mr. Levis almost $3,000,000 in economic damages (plus interest), over $2,400,000 in legal fees and expenses, and an additional amount in damages presumably on account of mental anguish. Shortly after filing this second complaint and within the time period that defendants are allowed to respond to claims pursuant to the Puerto Rico Rules of Civil Procedure, Mr. Levis filed a motion voluntarily dismissing without prejudice his complaint against Mr. and Mrs. Wakeman and Mr. and Mrs. Ubarri. The Company moved to dismiss this second complaint on grounds of res judicata and unduly splitting of claims.  Mr. Levis thereafter moved to voluntary dismiss the action against the Company which the Court granted without prejudice.

Doral has manifested its intention to pursue reimbursement from Mr. Levis of all monies advanced for his defense once the judgment dismissing his complaint becomes final.

Banking Regulatory Matters

The Company entered into a written agreement (the “Written Agreement”) dated September 11, 2012 with its primary supervisor, the FRBNY, which replaced and superseded the Cease and Desist Order entered into by the Company with the Board of Governors of the Federal Reserve System on March 16, 2006. The Written Agreement, among other things, requires the Company to (a) take appropriate steps to fully utilize its financial and managerial resources to serve as a source of strength to Doral Bank, including steps to ensure that Doral Bank complies with any supervisory action taken by Doral Bank's federal and state regulators; (b) undertake a management and staffing review to aid in the development of a suitable management structure that is adequately staffed by qualified and trained personnel; (c) establish programs, policies and procedures acceptable to the FRBNY relating to credit risk management practices, credit administration, loan grading, asset improvement, OREO, the ALLL, accounting and internal controls, and internal audit; (d) not declare any dividends without the prior written approval of the FRBNY and the Director of Banking Supervision and Regulation of the Board of Governors; (e) not directly or indirectly take any dividends or any other form of payment representing a reduction of capital from Doral Bank without the prior approval of the FRBNY; (f) not, directly or indirectly, incur, increase or guarantee any debt without the prior written approval of the FRBNY; (g) submit to the FRBNY an acceptable written plan to maintain sufficient capital at the Company on a consolidated basis; and (h) seek regulatory approval prior to the appointment of a new director or senior executive officer, any change in a senior executive officer's responsibilities, or making certain severance or indemnification payments to directors, executive officers or other affiliated persons.

On August 8, 2012, the Bank Board entered into a consent order (the “Consent Order”) with the FDIC and the Commissioner of Financial Institutions of Puerto Rico (the “Commissioner”). The FDIC has also notified Doral Bank that it deems Doral Bank to be in troubled condition. The Consent Order requires Doral Bank to have and retain qualified management acceptable to the FDIC and the Commissioner. The Consent Order also required Doral Bank to undertake through a third party consultant, an assessment of its board and management needs, as well as a review of the qualifications of the current directors and senior executive officers.

The Consent Order requires Doral Bank to eliminate from its books, by charge-off or collection, all assets or portions of assets classified “Loss” by the FDIC and the Commissioner. Doral Bank also is required to establish and provide to the FDIC and the Commissioner for review a Delinquent and Classified Asset Plan to reduce Doral Bank's risk position in each loan in excess of $1.0 million which is more than 90 days delinquent, criticized, or classified.

The Consent Order also requires Doral Bank to establish plans, policies or procedures acceptable to the FDIC and the Commissioner relating to its capital, profit and budget plan, ALLL, loan policy, loan review program, loan modification program, appraisal compliance program and its strategic plan that comply with the requirements set forth in the Consent Order.

Doral Bank is required to obtain a waiver from the FDIC before it may accept brokered deposits or extends credit to certain delinquent borrowers. As of December 31, 2013, Doral Bank is in compliance with the prohibition set forth in the Consent Order on accepting, renewing, or rolling over any brokered deposits without a waiver from the FDIC. Since issuance of the Consent Order, Doral Bank has received requested waivers to accept, renew or rollover brokered deposits. Doral Bank's current waiver is valid until March 31, 2014. In addition, Doral Bank has established and implemented protocols to maintain compliance with limitations of the amount of interest that Doral Bank may pay on deposits.

Doral Bank cannot pay a dividend without the approval of the Regional Director of the FDIC and the Commissioner. The Board of Doral Bank is required to establish a compliance committee to oversee Doral Bank's compliance with the Consent Order, and Doral Bank is required to provide quarterly updates to the Regional Director of the FDIC and the Commissioner of its compliance with the Consent Order. As of December 31, 2013, Doral Bank remains in compliance with the prohibition on the declaration and payment of any dividends without FDIC and Commissioner approval. The Bank Board established a compliance committee composed of three independent directors, which meets monthly to review actions taken or to be taken by Doral Bank to achieve or otherwise maintain compliance with the Consent Order, and to prepare a report to the Bank Board. The Bank has and will continue to timely submit required quarterly progress reports to the FDIC and the Commissioner. Since the signing of the Consent Order, Doral Bank has complied with severance or indemnification payment limitations to directors, executive officers or other affiliated persons.