Deukmejian Ally Objected to S&L; Probe in Memo

Gov. George Deukmejian’s top campaign fund-raiser complained to a Cabinet member in a September, 1988, memo about “hardball tactics” used by state thrift regulators in their investigation of Lincoln Savings & Loan.

The memo from Los Angeles attorney Karl M. Samuelian is the first evidence that Samuelian approached the regulators’ bosses in Sacramento at the state Business, Transportation and Housing Agency to gain favorable treatment for Lincoln Savings.

Lincoln’s failure last year has spawned a major congressional inquiry, an FBI criminal probe and a federal taxpayer bailout that is expected to cost more than $2 billion.

Samuelian, representing Lincoln, addressed the memo to John Geoghegan, secretary of the Business, Transportation and Housing Agency, which oversees the state Department of Savings and Loan. Geoghegan said the memo failed to win any official favors for the thrift.

“I would appreciate it if you would take a few minutes to review the enclosed recent correspondence between Lincoln Savings and the Department of Savings and Loan,” Samuelian said in the Sept. 23, 1988, memo. “It is unfortunate that the relationship has deteriorated to the point of the Department using the ‘hardball’ tactics evidenced by this correspondence.”

Details of the memo were published Tuesday in the Sacramento Bee, which obtained a copy of the document through the state Public Records Act. The Business, Transportation and Housing Agency had refused to release copies of the correspondence cited by Samuelian, saying it was proprietary information.

Geoghegan said Monday that he “never did anything” about the memo. He said he did not respond to Samuelian or call Savings and Loan Commissioner William Crawford about the complaint.

Crawford confirmed that Geoghegan never talked to him about the Samuelian memo or his handling of the Lincoln case. “No one ever called me from BTH and said you’re being too tough,” Crawford said.

Seth Aronson of O’Melveny & Myers in Los Angeles, an attorney for Samuelian, said a “regular function of BTH is to hear concerns or complaints from constituents such as regulated companies or trade associations.”

At the time the memo was written, the state Department of Savings and Loan had assigned an examiner to review records of Lincoln’s parent, American Continental Corp. of Phoenix. That probe led to questions about multimillion-dollar losses on unsecured real estate loans and ultimately the value of uninsured corporate securities or “junk bonds” being sold by American Continental to investors.

However, Geoghegan said Monday he believes that the concerns Samuelian was raising in his memo “had to do with disagreements on how Lincoln was handling assets and the value of some real estate. I don’t think that the (junk bond) sales were part of that issue,” he added.