Van de Kamp to Open Lincoln Inquiry

Atty. Gen. John K. Van de Kamp announced Monday that he intends to launch “a far-reaching, two-pronged civil and criminal investigation” into the troubled, Irvine-based Lincoln Savings & Loan.

The decision to move ahead with a full-fledged investigation follows several months of congressional and legislative hearings into the events that led to a federal takeover of Lincoln last April after the collapse of the S&L;’s parent company, American Continental Corp. Salvaging Lincoln could cost taxpayers more than $2 billion--making it the most expensive S&L; bailout in history.

Earlier this month, Van de Kamp was asked by Assemblyman Patrick Johnston (D-Stockton) to investigate Lincoln. But the attorney general hesitated, citing a conflict between his role as the state’s top prosecutor and his job as attorney for the state of California.

Van de Kamp described the conflict “as a delicate matter because of legal barriers against taking actions counter to a clients’ interests.” On the one hand, he has an obligation to prosecute possible government wrongdoers. But he may also have to defend the actions of the same individuals in a suit filed against the state and others by more than 22,000 small investors in American Continental.

Those investors--many of them Southern California retirees--bought an estimated $200 million in American Continental bonds through the S&L;’s branches. When the company entered bankruptcy proceedings, the bonds became virtually worthless.

“My office is representing the California Department of Savings and Loan and the Department of Corporations in civil litigation where the state Treasury faces a potential liability of a quarter of a billion dollars,” Van de Kamp said two weeks ago. At the same time, he noted that he had begun a criminal investigation into allegations that unlicensed employees of Lincoln had sold the bonds in violation of state law.

Duane Peterson, a spokesman for Van de Kamp, said the attorney general will spell out the details of his investigation at a press conference today.

Peterson said that it took “lots of legal research and some innovative thinking” to resolve Van de Kamp’s conflict-of-interest problem but that the issue had been resolved.

Van de Kamp’s decision adds to the horde of civil and criminal investigations already under way.

Among those probing possible criminal wrongdoing are the FBI in Phoenix, Los Angeles and Washington, and a federal grand jury in Los Angeles. The Securities and Exchange Commission, which has both civil and criminal powers, also is investigating allegations involving stock trading and public disclosures of financial information.

In the bankruptcy in Phoenix, a U.S. District Court there has appointed an examiner to look into possible mismanagement of American Continental and 11 Lincoln subsidiaries that also are in bankruptcy.

Besides the state Assembly, the U.S. House Banking Committee has held public hearings as part of its investigation into Lincoln’s collapse. And attorneys for the small investors continue to obtain information as part of their pretrial discovery process.