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MEMORANDUM OF DAVID E. STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

I then questioned Mr. Stevens about the general policies or practices concerning the

and was all cleared through Mr Keann

personal usage of ACC corporate aircraft. He stated that personal usage of ACC,corporate
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aircraft was generally limited to ACC employees families. He stated that Senator McCain
was one of only a few non-ACC affiliated individuals who used ACC corporate aircraft for
personal reasons. For ACC employees, the value of personal flights taken by them and
family members were included as compensation on the employees W-2. After Mr. Stevens
arrived, he made it a practice to contact non-ACC individuals taking personal flights in
order to determine the individual's tax identification number for the issuance of a 1099.
Mr. Stevens indicated that this was not a practice in 1984 and 1985 and thus Senator
McCain was neither billed for the unpaid flights nor was a 1099 issued. Additionally, a
1099 would not have been necessary for Senator McCain's 1986 flights in that Mr. Stevens
believed at that time that the Senator had fully reimbursed ACC for his and his family's
flights.

Prior to firing of 1984 when mat per to the not

did

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Ar negimenid Mr. Stevens know of Senator McCain and Mr. Keating's "parting of the ways" which occurred after the April, 1987 meetings with the regulators." He said that cunt press acccents although he kept Mr. Keating informed through memos of the income tax issue relating to personal usage of ACC aircraft, there was no direction given by Mr. Keating, or any

other executive, relative to how to handle the issue of Senator McCain's flights, He also does not have copies of the aforementioned memos.

in the

Spring

Wait! Wir Kenting unreed to the 1148/49 Overall se tlement.

As to Mr. Stevens' February, 1989 phone discussion with Mr. Smith, he said that he did

MEMORANDUM OF DAVID E. STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

not consider that Mr. Smith was Senator McCain's campaign manager and that he may know have been only concerned about Senator McCain's flights during his campaign. He also had no understanding that Senator McCain would, from time to time, book personal travel on commercial flights through the American Continental Travel Agency and make reimbursement directly to that company.

Prior to joining ACC, Mr. Stevens worked in the Tax Department of Arthur Andersøn. and during this period, he signed off on ACC's tax returns as a paid preparer. While the subject of the deductibility of personal use of ACC's corporate aircraft came up through his reviews, Arthur Anderson was never requested to review this issue specifically.

I asked Mr. Stevens if any of the other Senators involved in the current hearing used ACC aircraft for personal use. He shared with me a letter that he sent to me on June 7, 1990 (Exhibit 16). A schedule of flights taken by Senator and Mrs. DeConcini in 1984 was attached. His memo states that Mr. Keating was charged with income for this 1984 flight. but since the tax impact was not significant, he did not further investigate these flights with Senator DeConcini's office and has never contacted the Senator to locate reimbursement. I have no record of having received this letter.

Mr. Stevens indicated that, other than the Fountain Square project, he was not aware of any other joint ventures or business transactions involving ACC, its subsidiaries, and any of the Senators. He stated that there is nothing that he is aware of that would lead him

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MEMORANDUM OF DAVID E. STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

to believe that the investment by Senator McCain's wife and her father in Fountain Square

was improper.

Mr. Stevens did note that one of his staff members, Trey Maxwell, reviewed the deductibility of the $850,000 in contributions by ACC to Senator Cranston's voter registration groups. Mr. Stevens recalled that Mr. Maxwell's conclusion was that these payments did qualify as deductions and were claimed as such. He has no documentation regarding this review.

Mr. Stevens again stated that he was very active in the proposed sale of Lincoln in the spring of 1989 and knew that phone calls were being made to various Senators in hopes of garnering their support. However, he again stated that he has no details about any specific phone calls or other discussions that ACC officials had with any Senators.

Bruce Penczek,
Investigator

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On June 7, 1990, Bill Jackson and I interviewed David Stevens, Director of Income Taxes

for American Continental Corporation (ACC). Also present during the interview was

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Mr. Stevens is a CPA and was employed by Arthur Andersøn from 1979 through 1985 as a tax accountant. From 1981 through 1985, ACC was a tax client of Arthur Anderson and Mr. Stevens reviewed ACC's tax returns which were prepared by his staff. He would also research tax questions that were posed by ACC personnel. In December of 1985, Mr. Stevens was offered a job by ACC but, instead, left Arthur Anderson for Lewis Homes for a 9 month period. In September 1986, he became Director of Income Taxes for ACC. He was also Vice President of Taxation for Lincoln Savings. Mr. Stevens was responsible for income tax planning, tax return preparation, income tax audits, and issuing opinions on tax

MEMORANDUM OF INTERVIEW

DAVID STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

We asked Mr. Stevens if he had contributed to the campaigns of Senators DeConcini, McCain, Cranston, Glenn or Riegle, and Mr. Stevens indicated that he received a letter in February, 1987 from Charles Keating encouraging his financial support of Senator Riegle. a specitic He indicated that the letter was not heavy handed in any way, did not suggest contribution. amounts, and he did not receive any follow-up calls. He did contribute $500 in February 1987 to Senator Riegle and this was the only instance in which he made a personal contribution to the Senators. He gave his copy of the solicitation letter to the Los Angeles Grand Jury and he did not retain a copy.

The only other area that Mr. Stevens was involved in, relating to political contributions, was to determine, in connection with preparing ACC's income tax return, if the contributions were deductible. He stated that he was not involved in any decision making relative to whether it was appropriate to contribute, nor does he recall any instance where Mr. Keating or other officials sought his guidance prior to making political contributions. Mr. Stevens indicated that his dealings with the deductibility of political contributions was "after the fact". He indicated that Trey Maxweil, a staff member, made the initial determination on the deductibility of political contributions which were reviewed and approved by Mr. Stevens.

We asked Mr. Stevens to describe his knowledge of Mr. Keating's relationship with Senators

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