Printed for the use of the Committee on Banking, Finance and Urban Affairs Serial No. 101-90 US. GOVERNMENT PRINTING OFFICE Hearing held on: Appendix: March 6, 1990. CONTENTS Page 1 65 Acosta, Fernando R., president, FRA International . Tucson, AZ... Greenberg, Bruce F., principal, Greenberg, Garcia, McCalley and Prosch, sion... Safer. Chris, examiner, San Francisco Region, Office of Thrift Supervision............. Prepared statements: Acosta, Fernando R.... Gonzalez, Henry B.. APPENDIX Greenberg, Bruce D., oral and written with attachments. Seefer, Christopher P.. WITNESSES TUESDAY, MARCH 6, 1990 ADDITIONAL Material Submitted FOR THE RECORD Acosta, Fernando R.: Letter to E.C. Garcia dated May 25, 1988............ 632 Arizona Republic Article, dated December 1, 1989, entitled "Failed thrift posted giveaway profits". Testimony before the United States District Court for the District of 741 720 Garcia, Ernest C.: Deposition before the Securities and Exchange Commission, March 21, 802 Information on loans. 722 Introduction by Chairman Gonzalez... 272 Garcia, Ernest C., relationship with Charles Keating Jr., Lincoln Savings and 693 Gonzalez, Hon. Henry B., statement on Failure of Charles Keating III to 273 Hidden Valley: Charts and information on sales and the Arizona economy. 702 Information on Sham Land Sales vs. Appraised Value and Westcontinen- 697 Maps of Hidden Valley and the Phoenix area 699 Project, overview.. 688 Lach, Hon. Jim, questions to Mr. O'Connell and Mr. Seefer.. er, Christopher P., exhibits and index...... Subpoenas and letters of invitation.......................... Lasting, Charles III, positions with American Continental Corporation 274 950 276 676 83-009 0-95-23 IV SUPPLEMENTAL Material from THE INVESTIGATION OF LINCOLN Savings and Lo. ASSOCIATION American Continental Corporation, Debt Offerings—1986-1988, submitted by Securities and Exchange Commission. Arthur Anderson & Co., letter dated January 22, 1990 Crawford, William J., California Department of Savings and Loan, letter dated January 18, 1990.. Dochow, Darrel, Office of Thrift Supervision, letter dated January 16, 1990. 2641 45 prefer to brief people, brief the committee in private about efforts As to the administrative enforcement-and I, if possible, would there, because ACC does not know what we are doing or not doing. Mr. LEACH. Let me ask another question. As you know, you have a regulatory issue, but there are some charges of securities violations, as well, aren't there? Does the SEC have jurisdiction over this to any degree at all? Mr. BLACK. Yes. Mr. LEACH. Where are they today? Mr. BLACK. Last I knew, they were getting a runaround from ACC, but-they, the SEC, were getting a runaround from ACC. I am sorry. I have got to get my acronyms clear. ACC had not definitively ruled out giving them something. What is happening in Mr. LEACH. Let me stop you for a second. The CHAIRMAN. I think I can answer your question. SEC is still in the investigatory stage. They have not filed-as far as I know, they have not filed cause, but they were investigating. Mr. Breedon, the new chairman, was picking that job up. But as far as I know, they are still on the investigative level. That is SEC. Mr. BLACK. Yes, but that is what Mr. Leach's question went to. What are they doing on the investigative level? My knowledge is 6 months old on that. They were getting the general runaround, not a final refusal to provide documents. What happened, in substantial part, was that this creation of the document depository. Shortly after we got-and I mean within, like, a week after we got the favorable ruling from one District Court Judge, the case was transferred to a different District Court Judge, who made it clear that he did not want anything happening in the way of discovery while he created an overall document depository, not just for his cases, but for all cases nationwide dealing with Lincoln Savings. We can all understand the efficiency that the Judge was seeking. He had originally hoped that the document depository would be a matter of weeks to create. The world being the way it is and the amount of documents involved in this case being the way it is, instead of 6 weeks, it was 6 months to establish the document depository. Bankruptcy courts are very sympathetic to the bank trying to run its operations without interference from "Government bureaucrats"-that was quotation marks around the "Government bureaucrats", and so, there were some interesting litigation tactical decisions that the Federal agency, Office of Thrift Supervision, went through. Many of those do not apply to the administrative en forcement route, where we do not have to go to a different judge outside our system. Mr. LEACH. I appreciate that Let me just ask, very precisely, when, in your enforcement efforts, you find violations of securities law, it is your practice and your legal right and your legal obligation to pass them on to the SBC, is it not? HEADLINE: State agency files suit against Keating, American Continental BYLINE: By DAVE NCHARY UPI Business Writer DATELINE: LOS ANGELES BODY The state Department of Corporations said Friday it has sued former Lincoln Savings and Loan owner Charles Keating Jr. and officers of Lincoln's former parent company, American Continental Corp., for investment fraud. We are alleging that Mr. Keating, American Continental and others masterminded a carefully concealed campaign of fraud and deceit that directly resulted in the defrauding of many thousands of California investors,'' Christine Bender, state commissioner of corporations, said at a news conference. But Kevin Roddy, an attorney in class-action suits filed on behalf of the 23,000 bondholders, called the agency's actions too little and too late. He said Bender is partially at fault for the losses because she allowed the bonda to be sold despite receiving an internal memo advising against the sale. LEVIC' NEVIC@ [EVIC'. 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