Stock Manipulation Probed in Lincoln S&L; Sale

A Cincinnati brokerage has been subpoenaed by federal investigators looking into possible stock manipulation involving American Continental of Phoenix and its efforts to sell Lincoln Savings & Loan of Irvine.

But the head of Queen City Securities said the firm was not itself a target of a Securities and Exchange Commission investigation into questionable trading of American Continental stock.

“We haven’t done anything wrong. We are cooperating with the SEC in any way we can,” said H. Garrett Frey, Queen City’s chairman.

Although SEC representative Mary McCue would not confirm or deny that a probe is under way, the National Assn. of Securities Dealers has confirmed that both it and the SEC are investigating, according to the Cincinnati Enquirer.

“We are reviewing trading in the stock,” said Enno Hobbing, an association vice president. His agency oversees the national over-the-counter securities market on which American Continental is traded.

American Continental’s common stock, which sold for more than $7 a share just 2 weeks ago, has plummeted to nearly $3. The firm’s preferred stock also has declined in price, selling at around $6.50 share in recent trading after holding steady just weeks ago at more than $10.

That drop has been blamed on persistent rumors that plans by the Arizona firm to sell Lincoln had run aground.

Earlier this week, American Continental said that its agreement to sell the thrift to a Los Angeles investor group headed by veteran thrift executive Spencer Scott had expired. The firm said it would continue to negotiate with the Scott group while entertaining bids from other suitors.

“We are certainly willing to work with Scott, but we will be looking very closely at other sale options as well,” American Continental Chairman Charles H. Keating Jr. said in a statement.

In a separate development, the U.S. Attorney’s office in Los Angeles confirmed this week that Lincoln is involved in a criminal fraud investigation. A spokesman for the office declined to discuss the matter, however. It was not clear if that investigation was related to the SEC inquiry.