Van de Kamp to Launch Probe of Lincoln Savings

Atty. Gen. John K. Van de Kamp announced Monday that he intends to launch “a far-reaching, two-pronged civil and criminal investigation” into troubled 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 following the collapse of the S&L;’s parent company, American Continental Corp. Salvaging the Irvine-based 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 customers of Lincoln.

Those customers--many of them Southern California retirees--bought an estimated $250 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.