3 Elderly Women Blame Cranston for ‘Swindle’ : Lincoln S&L;: They fight back tears and tell a panel of being financially ruined after buying the Irvine thrift’s worthless bonds.

Three elderly California women who lost their life savings by investing in uninsured bonds sold at Lincoln Savings & Loan offices told a congressional panel Tuesday that they hold Sen. Alan Cranston (D-Calif.) personally responsible for their loss.

“I felt he was really the one who swindled us,” said Connie Wicksman of West Hills, a 78-year-old immigrant who bought $25,000 of the now-worthless debt securities issued by American Continental Corp., parent company of the Irvine thrift. “It has affected our lives, just devastating us, as it was our life’s savings.”

Sometimes fighting back tears, the three woman told the House Banking Committee that Cranston should bear responsibility for their plight because he intervened with regulators on Lincoln’s behalf after soliciting hundreds of thousands of dollars in contributions from Lincoln owner Charles H. Keating Jr.

“I am ashamed to say I had faith in him (Cranston),” Wicksman said in a soft-spoken British accent. “I told my children he will not let us down. . . . (But) he was taking all this money, and he wasn’t taking care of us.”

The three women are among 24,000 American Continental bondholders, many of them elderly savings and loan customers, who stand to lose more than $200 million as a result of the nation’s biggest thrift failure.

The bondholders’ testimony appeared certain to focus more attention on current investigations into the Lincoln affair.

Richard C. Breeden, recently appointed chairman of the Securities and Exchange Commission, told the committee his agency has stepped up its investigation of Lincoln’s bond sales, doubling the number of staff hours devoted to the probe. But he insisted there was nothing the SEC could have done for the bondholders at the time they were buying the debt securities.

The matter also is being probed by the Justice Department, the Federal Deposit Insurance Corp. and a California legislative committee.

In recent weeks, Cranston has refused to discuss the Lincoln affair with reporters. But his press secretary, Murray Flander, said in response to Tuesday’s testimony that the California senator had no way of knowing about the allegedly fraudulent bond sales when he and four other senators contacted federal regulators in 1987 on Keating’s behalf.

“We have nothing but compassion for these people,” said Flander. “But Alan Cranston didn’t know that there had been a bond sale until Lincoln was closed down last April.”

Lincoln was seized by the federal government last April, a day after it declared bankruptcy. It will cost the nation’s thrift insurance fund an estimated $2 billion to bail out the institution.

Critics contend that the government could have seized Lincoln two years earlier, saving a significant portion of the $2 billion, if the senators had not intervened.

Unlike Lincoln’s certificates of deposits or savings accounts, the American Continental bonds sold at Lincoln’s branch offices were not insured by the Federal Savings and Loan Insurance Corp. But many bondholders contend they were led to believe the bonds would be as safe as a passbook savings account.

Two of the witnesses, Wicksham and Shirley Lampel of Tustin, indicated they had supported Cranston before learning about his actions on behalf of Lincoln. Lampel said she had even hoped that the California senator would be elected President when he sought the nomination in 1984.

“I had no idea this man could be so corrupted,” Lampel said. “I do think he took a brilliant career and threw it out the window. . . . History will not be kind to Alan Cranston.”

Cranston, who already has indicated he will seek reelection at age 76 in 1992, acknowledged recently that his actions on behalf of Lincoln were “stupid, politically.” But Lampel disagreed.

“What Alan Cranston did here was not foolish, it was dishonest,” she insisted. “ . . . For a sizable campaign contribution from Mr. Keating, he was willing to sell his influence.”

American Continental raised $250 million by selling its bonds at Lincoln offices. But unlike most junk bonds, they were not underwritten by Wall Street investment firms, and most of the purchasers were not sophisticated investors.

According to the testimony, American Continental intentionally marketed the bonds to Lincoln customers, many of them elderly depositors who were led to believe that they were buying bonds issued by a federally insured thrift.

Wicksman, who emigrated from England with her husband in 1959, said she was told by a man named Mark Johnson, who identified himself as a “manager” at their local Lincoln branch, that the bonds were “the best and safest investment we could make.” She said he pointed out that Lincoln was insured by FSLIC, but never mentioned that the bonds were not insured.

Lampel, whose eyesight is failing, bought her bonds shortly after the death of her husband. She said the salesman, Don Brier, even picked her up in his car at another thrift where she withdrew the money she had invested. “There was no mention of risk, and I never had any reason to doubt that my money was insured by the government,” she said.

Ramona E. Jacobs of Glendale told the committee how she lost $11,000 in American Continental bonds, including the insurance money awarded to her 25-year-old daughter after a disabling auto accident. She said she was told by a Lincoln teller that the bond was just like an insured certificate of deposit, only with a higher interest rate of 10.5%.

Breeden said the SEC, unlike state and federal thrift regulators, had no authority to prohibit sale of the American Continental bonds at the Lincoln branch offices.

Although the SEC oversees the sale of securities, Breeden said American Continental employees who sold the bonds were not required to register with the SEC as brokers and, therefore, were not subject to the strict ethics code imposed on brokers.

Since 1987, the SEC has been investigating allegations that American Continental filed false information with the agency. But it was not until the firm filed for bankruptcy last April that the agency began to investigate the marketing of the bonds.

Breeden complained that his agency’s efforts to bring Lincoln into compliance with SEC reporting rules were undermined by a May, 1988, “memorandum of understanding” between the Federal Home Loan Bank Board and Lincoln that required no change in the thrift’s reporting. Lincoln attorneys tried to use the memo to persuade the SEC to drop its investigation.

The new SEC chief also accused a prominent accounting firm, Arthur Young & Co., of impeding the SEC probe of Lincoln by supplying the agency with subpoenaed documents that were stamped with copyright warnings designed to obscure the content of the material.

In response, William L. Gladstone, co-chief executive of Ernst & Young, the successor company to Arthur Young, denied that his firm intentionally tried to disrupt the investigation. “We did not stonewall the SEC,” he said.

In 1987, Keating allegedly used an Arthur Young audit to stave off regulatory action against Lincoln. A subsequent audit by Kenneth Leventhal & Co. found fault with Young’s work.

In addition, Jack Atchison, who had headed the Lincoln audit in 1986 and 1987 for Arthur Young, later went to work for Keating as an American Continental executive. Atchison recently refused to testify before the Banking Committee, citing his Fifth Amendment right against self-incrimination.

Gladstone said he has no reason to believe that Atchison violated any law. He also noted that Keating dismissed his accounting firm in 1988 in a disagreement over procedures.