Counsel Tried to Deceive Regulators, Suit Says : Thrift: Information in U.S. District Court accuses ex-Lincoln S&L; attorney of putting false data in files and lying to agencies.
A former in-house attorney for Lincoln Savings & Loan and its parent firm was accused in a criminal filing Friday of conspiring to deceive thrift regulators into thinking that the Irvine thrift’s lending activities complied with regulations.
The U.S. attorney’s office charged in an information filed in U.S. District Court in Los Angeles that Mark S. Sauter, now of Cincinnati, helped to stuff the thrift’s loan files by adding documents after the loans were made and “knowingly and willfully” lied to regulators to cover up the actions.
An information--a criminal pleading in lieu of a formal indictment--typically means a plea bargain has been arranged. Sauter will be arraigned Monday and if a bargain has been reached, plead guilty and seek lenient treatment in return for his testimony against other former executives of Lincoln and its parent firm, American Continental Corp. of Phoenix.
The charges arise from a continuing federal grand jury investigation that has targeted former American Continental Chairman Charles H. Keating Jr. and others. Sauter would be the second high-ranking executive and third defendant to enter into a federal plea bargain.
Lincoln collapsed in April, 1989, a day after American Continental filed for bankruptcy protection. The S&L;’s branches were sold two weeks ago, and the company is being liquidated. Lincoln’s failure is expected to cost taxpayers $2.6 billion.
Any information that Sauter provides to the government would probably cover the actions of another defendant, former American Continental President Judy J. Wischer.
Wischer is widely believed to be the leader of what prosecutors call the “SWAT team” of American Continental employees who went to Lincoln headquarters to fix badly maintained records before regulators could look at them.
In a related criminal case in state court, former Lincoln employee Kathi Richardson testified before a grand jury that Wischer and a host of other employees added and changed documents in Lincoln’s loan files at the thrift’s headquarters, even as regulators were reviewing loan files a floor above.
The federal criminal information charges that in early March, 1986, Sauter and others learned regulators were about to examine Lincoln’s loan files, which “did not meet regulatory standards” and constituted “unsafe and unsound” practices.
The information alleges that “certain officers and directors . . . deliberately created documents for insertion in the loan files,” undated documents among them.
In normal circumstances, credit reports and other documents are supposed to be reviewed by lenders before a loan is made to ensure that a borrower will be able to repay the loan.
Lincoln, however, was making huge loans for acquisition, development and construction on raw land with little or no original documentation, regulators have charged. Keating has acknowledged in previous testimony in a federal court hearing in Washington that credit reports, for example, were not needed or useful for the type of loans Lincoln was making.
Sauter was a corporate counsel for Lincoln and an officer and director of numerous Lincoln subsidiaries. He is one of several dozen defendants in the government’s $2-billion racketeering suit against Keating and others. Sauter is not accused of racketeering in that suit, but he is accused of law fraud, conspiracy, breach of fiduciary duties and gross negligence.
