Lincoln S&L; Seized by U.S. Regulators; Officials Ousted : Bank Board Claims Irvine-Based Thrift Was Being Run in an Unsafe Manner; Finds Assets ‘Substantially Dissipated’

Federal regulators seized ailing Lincoln Savings & Loan Assn. early Friday and ousted its top management, one day after its parent company, American Continental Corp. of Phoenix, filed for bankruptcy.

In taking control of Lincoln and its 29 branches throughout Southern California, the Federal Home Loan Bank Board declared that the savings and loan was being operated in an unsafe manner and that its assets had been “substantially dissipated.”

Regulators said all of the S&L;’s branches will continue operating and that Friday’s takeover will not affect depositors or most of the S&L;’s 800 employees. The federal government will continue to insure deposits of up to $100,000.

The bank board said the S&L;’s management “appeared to operate Lincoln mainly for the benefit of American Continental Corp. at the expense of the institution (and) has repeatedly violated regulations relating to transactions with affiliates, used poor underwriting and has refused to follow supervisory directives.”

Regulatory officials refused to go beyond that statement, but privately said they believe that American Continental had been draining Lincoln’s assets.

Irvine-based Lincoln, the 42nd-largest S&L; in the country, is the latest major California S&L; and the 16th in the state to be seized by regulators this year. Gibraltar Savings in Beverly Hills was taken over just two weeks ago. It is the 216th to be placed in the S&L; rescue plan announced in February by President Bush.

A spokesman for American Continental called the government’s action “unfortunate and regrettable” and suggested that it stemmed from a government vendetta against American Continental Chairman and major shareholder Charles H. Keating Jr. rather than from real problems at Lincoln.

May Be Difficult

Several regulators said they suspect that American Continental filed for Chapter 11 bankruptcy protection from creditors on Thursday to keep the bank board and its deposit insurance agency, the Federal Savings and Loan Insurance Corp., from seizing American Continental assets they may claim belong to the S&L.;

Marc Winthrop, an Irvine bankruptcy attorney, suggested that it may now be difficult for regulators to go after American Continental assets because they will have to argue for them in bankruptcy court, where the government has no priority claim over other creditors.

Lincoln, with deposits of $4.4 billion in 176,323 accounts, had assets of $5.4 billion but only $20 million in required capital on hand when it was seized, regulators said. It should have had almost $325 million in capital to meet the requirements set by the bank board, they said.

The American Continental spokesman said officials at American Continental and Lincoln have had a “long-running feud” with regulators over how Lincoln’s capital is being counted and claimed that the S&L; actually has at least $200 million more than regulators are crediting it with.

Keating, a politically connected developer who bought Lincoln in 1984 and rapidly quintupled its size, has been involved in a number of feuds with S&L; regulators over the years.

The battles generally have centered on his insistance in involving the S&L; in highly speculative commercial real estate investment and development rather than sticking with relatively safe but lower-profit single family home loans.

Gonzalez Blames Wall

Friday’s action by the bank board, acting in concert with the Federal Deposit Insurance Corp., drew immediate response in Congress, where Keating has had strong supporters as well as detractors.

Rep. Henry B. Gonzalez (D-Tex.), House Banking Committee chairman, blamed bank board Chairman M. Danny Wall for “gross mishandling” of the Lincoln case and called for Wall’s removal.

Wall complained Friday that Gonzalez is trying to blame him for the entire S&L; crisis when it is Congress that should shoulder the blame.

John H. Rousselot, the former Republican congressman from Arcadia who was named Lincoln’s chairman and chief executive on Tuesday, resigned those posts Friday. Rousselot led a group of investors negotiating to buy Lincoln. His appointment had been made in hopes of speeding approval of the sale, which regulators turned down on Thursday.