Chairman of Ailing Lincoln S&L; Parent Faces Subpoena
The House Banking Committee, scheduled to begin hearings next week on the massive failure of Irvine-based Lincoln Savings & Loan, voted Thursday to subpoena Charles H. Keating Jr., chairman of Lincoln’s parent company.
The committee also agreed to issue subpoenas for 25 other witnesses, including L. William Seidman, chairman of the Federal Deposit Insurance Corp., M. Danny Wall, director of the new federal Office of Thrift Supervision, and William Crawford, California savings and loan commissioner.
“It is a case history that cries out for answers,” said committee Chairman Henry B. Gonzalez (D-Tex.). “We already know that in Lincoln, we have on our hands a case that will cost the savings and loan insurance fund at least $2 billion.
“On top of that,” Gonzalez said, “thousands of individual citizens who bought securities issued by American Continental Corp., the parent of Lincoln, stand to lose hundreds of millions of dollars.”
Regulators seized Lincoln on April 14, a day after Phoenix-based American Continental filed for protection under Chapter 11 of the federal bankruptcy laws. Regulators declared the S&L; insolvent Aug. 2 after disclosing a second-quarter loss of $788 million and placed the thrift in receivership.
After its 1984 acquisition by American Continental, Lincoln invested heavily in real estate, especially property to be held for development and sale, in an attempt to increase profits and diversify its holdings. Many of those investments failed.
In a lawsuit filed last month in federal court in Phoenix, federal regulators accused Keating and other former Lincoln and American Continental officials of devising a scheme to siphon off for their own use $1.1 billion of the thrift’s insured deposits.
Keating and his associates have accused federal regulators of trying to shut down Lincoln to punish Keating for his outspoken criticism of federal oversight of the thrift industry. Among other things, Keating has accused regulators of leaking to the press potentially damaging financial information that hastened Lincoln’s financial collapse.
The committee hearings are scheduled to begin Tuesday on Capitol Hill with Seidman the first witness. Gonzalez said Seidman asked for a subpoena “so that the agency’s (FDIC’s) testimony may be complete and the necessary documents provided without incurring additional legal risks.”
California regulators made a similar request, he said.
Wall, former chairman of the Federal Home Loan Bank Board, which had responsibility for overseeing the system that insured the nation’s S&Ls;, is expected to be questioned by the committee about why he refused to accept a 1986 examination of Lincoln that turned up irregularities, delaying regulatory action from mid-1987 until last April.
Keating, who is scheduled to testify Nov. 7, the last of the four hearing dates, issued a statement through a spokesman in Washington saying that he had not decided whether to appear voluntarily.
“He wants to cooperate with the committee to the maximum extent possible but in light of the number and complexity of the legal proceedings in which he is involved, he wants to reflect on this decision,” said the spokesman, Leonard Bickwit, according to Associated Press.
