Lincoln S & L Law Firm to Settle Suits
A prestigious Los Angeles law firm has agreed to pay up to $14.3 million to settle class-action lawsuits filed against it by 22,000 individuals who bought now worthless junk bonds from Lincoln Savings & Loan branches in Southern California.
In announcing the agreement late Monday, the law firm of Parker, Milliken, Clark, O’Hara & Samuelian--one of several defendants in suits filed by bondholders seeking to recover $250 million--said that it does not admit the validity of the claims of misrepresentation filed in the lawsuits, but wants to put an end to its part in the costly litigation.
Among the law firm’s partners are Karl Samuelian, who is Gov. George Deukmejian’s chief campaign fund-raiser, and former state Corporations Commissioner Franklin Tom, who after leaving his state job represented Lincoln and its parent company, American Continental Corp. of Phoenix, before state regulators. Tom was named individually in the two lawsuits and the settlement would bring an end to the actions filed against him and Parker, Milliken.
The announced settlement is the latest development in the scandal surrounding the demise of Irvine-based Lincoln Savings--a financial collapse that has shaken the savings and loan industry as well as the careers of prominent politicians, including five U.S. senators and a host of politically appointed regulators in both California and Washington, D.C.
Under the terms of the settlement, which is still subject to court approval, the law firm’s insurance carriers would pay $4.3 million to the bondholders and up to $10 million more--depending on how much the other defendants in the suits eventually are required to pay.
A brief, written statement from Parker, Milliken described the claims against it as “totally groundless.” However, the firm said that “in continuing to litigate these complex cases, substantial time and resources will be required. We would prefer to continue to devote our full time and attention to maintaining our high caliber of legal service we have provided to our clients. We believe it is in everyone’s best interests to settle these cases at this time and put the matter behind us.”
Ronald Rus, one of several attorneys representing the bondholders, hailed the agreement--the first of its kind in the suits following the collapse of American Continental and the takeover of Lincoln by federal regulators almost a year ago.
“As the first agreement of its kind, it certainly augers well as to what is to come in the future,” Rus said. “It should be viewed with grave concern by the other defendants in the case. They should see there is significant liability potential. Certainly, that’s the conclusion of one group of very astute professionals (Parker, Milliken).”
Among the other defendants named in cases filed with the U.S. District Court in Los Angeles and the Orange County Superior Court are Charles H. Keating Jr., who was chairman of the board of American Continental, and several close business associates.
Also named are the state of California, and a number of legal and accounting firms, which--like Parker, Milliken--were hired by American Continental to win state approval for the junk bond sales and to represent the troubled savings and loan before regulatory agencies.
Lawyers from the firm--including Tom and Samuelian--represented American Continental before state regulators, who gave approval to the sale of the junk bonds through Lincoln’s branches. In their lawsuits, the bond purchasers--many of them Southern California retirees--contended that the defendants were guilty of fraud, misrepresentation and violations of state and federal security laws.
The collapse of Lincoln is among the costliest thrift failures in the country, and could cost taxpayers more than $2 billion. Before the federal takeover last spring, the troubled thrift fought with federal and state regulators over its high-risk investment strategies.
Lincoln owner Keating has repeatedly blamed the failure of the thrift and its parent corporation on the regulators, who tried to limit Lincoln’s speculative real estate investments.
But the blunt-talking businessman also boasted of his own adeptness at using financial support of politicians to enlist their help in protecting his enterprises.
Among the beneficiaries of Keating’s campaign generosity were five U.S. senators who met in 1987 with the head of the Federal Home Loan Bank Board, Ed Gray, who was then considering taking action against Lincoln--two years before the federal takeover of the S&L.;
One of those senators, Democrat Alan Cranston of California, received $47,000 in direct campaign contributions from Keating and his associates and $850,000 for three voter registration groups.
