Buyers Say Lincoln S&L; Bid Is Still on Table; U.S. Tells of Fraud Probe
The head of a Los Angeles investor group said Wednesday that its agreement to acquire Lincoln Savings & Loan of Irvine has expired, but the group is still negotiating with Lincoln’s parent company and hopes to keep the deal alive.
Meanwhile, Asst. U.S. Atty. Terree Bowers in Los Angeles confirmed that Lincoln is involved in a criminal fraud investigation being conducted by his office. But Bowers would not say if the S&L; was involved as a suspect or a victim, and he declined further comment.
Spencer Scott, head of the investor group that agreed in December to acquire Lincoln, said his group’s acquisition proposal is still on the table, although subject to some renegotiation.
American Continental of Phoenix, Lincoln’s parent company, was to receive $288.75 million of newly issued Lincoln preferred stock under the terms of the acquisition agreement. Scott’s group also agreed to pump $50 million in cash into the S&L;’s capital base.
Mel McDonald, a Phoenix attorney who represents both American Continental and Lincoln, said the agreement to sell Lincoln to the group expired Tuesday and that American intends to look closely at other sale options while continuing to negotiate with Scott. He said American is conducting “ongoing discussions” with other suitors.
McDonald, a former U.S. attorney for Arizona, would not say what sort of criminal investigation Lincoln is involved in. He said Bowers’ statement “served no purpose except to paint us with an ugly brush. It was unfair.”
Scott, a longtime S&L; executive who headed Fidelity Federal S&L; in Glendale until 1985, said his group is in the process of revising some terms of its offer. He said he has scheduled a negotiating session next week with American Continental.
Scott said he was “amazed” at Bowers’ statement.
In researching Lincoln’s financial and legal records, attorneys for Scott’s group “have been all over that S&L;, and there is absolutely nothing that alludes to any fraudulent activities,” Scott said.
Ernest Leff, a Los Angeles financial institutions attorney and a principal in the acquisition group, which also includes Scott, Beverly Hills real estate investor Herman Rappaport and a fourth unidentified individual, said he was not aware of a fraud investigation.
“But if I were to speculate, I’d suggest it might be part of the SEC investigation into American’s press release that approval of our deal was imminent,” Leff said.
The Securities and Exchange Commission is trying to determine whether American was improperly hyping its stock last month when, in a bid to dispel rumors that the deal with the Scott group had fallen though, it announced that the acquisition was proceeding smoothly and was about to be completed.
The California Department of Savings and Loan, which must approve the sale of Lincoln, responded that the deal could not be completed quickly because Scott’s group, in its application for ownership, had not filed all of the information required by the state.
William Davis, California’s chief deputy S&L; commissioner, said Wednesday that the Scott group has until March 9 to complete the application. He said he spoke with Scott on Wednesday morning and was assured that the investors do not intend to pull out.
Leff said American Continental’s decision not to extend the deadline for the preliminary purchase agreement “removes our exclusivity, but doesn’t mean much because we are months ahead of anyone else who comes along.”
Leff said the investor group will have sufficient financing to fund the acquisition. He declined to identify the financial backers except to say they include “an East Coast bank, a California insurance company, two real estate developers and an investment banker.”
