Lincoln Seizure Was an ‘Error,’ Executive Says

The president of American Continental Corp. testified Tuesday that the company’s Lincoln Savings & Loan subsidiary was seized “in error” by inexperienced federal thrift regulators.

“We need to restore to the shareholders of American Continental the asset that was seized in error,” said Judy Wischer, American Continental’s president. “We want Lincoln back.”

Wischer’s testimony came during her second day on the stand as a witness for her boss, Charles Keating, in a pretrial hearing on government motions to dismiss a lawsuit Keating filed last May seeking to regain control of Lincoln.

The Irvine thrift was seized by regulators last April after regulators said it had been operated in an unsafe and unsound manner. The government also contends that Lincoln was not operated in compliance with federal regulations.

The rescue of the thrift is expected to cost taxpayers as much as $2.5 billion, making it the nation’s most costly thrift bailout.

Attorneys for Keating, American Continental’s chairman, began presenting their case Monday before U.S. District Judge Stanley Sporkin. They are attempting to convince Sporkin that Lincoln was being operated profitably but fell victim to vindictive regulators who, they contend, caused the thrift’s collapse.

In previous testimony, Wischer insisted that Keating and other American Continental Corp. officials had done no wrong and saved the troubled Lincoln from demise when they acquired it in 1984.

Wischer said Lincoln and American Continental executives faced a steady barrage of unfair and hostile regulators while trying to improve the thrift’s financial health.

She traced the origin of the hostility to Lincoln’s opposition to regulations imposed by the Federal Home Loan Bank Board limiting the amount of direct investments thrifts could make.

Wischer also accused the bank board with assigning the Lincoln case to inexperienced staff members.

“We were assigned to kids who were playing games with us,” she said.