SENT BY:Xerox Telecopier 7321 :11-13-90: 5:24PM : 2135537525 6029574431:# 2 With the 1986 examination moving into its thirteenth month, ACC and Lincoln management became frustrated with the apparent disorganisation and indecision of the examiners and with the FELBB's unlawful public disclosures of confidential examination information. Substantially all of ACC's and Lincoln's transactional documents and corporate records, representing millions of pages, had been repeatedly made available to and copied by the FHLEB, exit interviews had been scheduled and cancelled, and the examination appeared to have no prospect for conclusion. ACC and Lincoln turned to their elected representatives for help. In particular, ACC and Lincoln sought assistance to ascertain the motives and justification for the prolonged examination and if, as ACC and Lincoln perceived, the examination was the product of undue regulatory seal, to bring perspective to the process by suggesting that the FHLEB either & charge violations or complete and conclude the examination. ACC and Lincoln management had visited members of Congress for several months to urge rejection of the "re-regulation" of the savings and loan industry represented by the Direct Investment Regulation. Senator Donald W. Riegle (D-Mich.) listened to ACC's story, conducted his own inquiry and agreed to contact FELBB Chairman Edwin J. Gray to arrange for the Chairman to meet with a bipartisan group of senators who represented ACC's state of organization, Ohio (Sen. John Glenn, D-Ohio), ACC's principal SENT BY Xerox Telecopier 7321 :11-13-90: 5:25PM : 2135537525 602957443:8 3 place of business, Arizona (Sen. Dennis DeConcini, D-Arizona and ACC and Lincoln sought (and certainly received) no special favors in connection with or as a result of these meetings. Indeed, as described below, the primary effect Öf these meetings appears to have been to intensify the wrath of the FILA-87 and to proliferate unfounded public attacks on the integrity of these Senatora On April 20, 1987, Lincoln received the confidential results of the 1986 FHLBB 13-month examination. Lincoln's response, dated June 26, 1987, pointed out numerous factual and accounting errors. FELB-87 never replied. Shortly thereafter, an article appeared in the July 1987 issue of Regardiaʼa, a national publication, which disclosed the contents of the preliminary 1986 Examination Report, including confidential information concerning Lincoln and certain of its customers. The article stated that "the Bank Board has secretly concluded" that "Lincoln is unsafe" and "a threat to its insurer." This article expressly acknowledged its sources to be the preliminary FHLEB 1986 Examination Report and other confidential I. Introduction and xecutive Summary Prior to the 1984 acquisition of Lincoln Savings and Loan Association ("Lincoln"), American Continental Corporation ("ACC") was providing housing and jobs for thousands of Americans. Through their innovative financings and investments, ACC's management had expertly guided ACC for seven years from a debt-laden real estate construction company to a position of preeminence and success among America's home builders. When, in 1983, Congress and the California Legislature invited America's entrepreneurs into the debilitated thrift industry, ACC applied to acquire an ailing Lincoln with visions of many years of future. success. The cornerstone of ACC's application to acquire Lincoln was the ability of its management to remedy the thrift's chronic interest rate mismatches and lack of liquidity. ACC proposed to utilise the expertise of its management and engage in After four months of critiquing -1 SENT BY:Xerox Telecopier 7621 +1:-13-50: 5:26PM ⠀ 2135537525 6029574431:8 6 millions of pages, had been repeatedly made available to and insirens f the copied by the HLBE, exit interviews had been scheduled and Short of lengthy and er unnin lebar whet ACC and incoln turned to their elected representatives but to -106 Senator and make day-to-day reguate ylations even wor diffunct, SENT BY:Xerox Telecopier 7321 11-13-90: 5:29PM : 2135537525 6029574431: 5 R-Arizona), and Lincoln's place of charter and principal place of business, California (Sen. Alan Cranston, D-Calif.). ACC and Lincoln sought (and certainly received) no special favors in connection with or as a result of these meetings. Indeed, as described below, the primary effect of these meetings appears to have been to intensify the wrath of the FALB-87 and to proliferate unfounded public attacks on the integrity of these Senators. On April 20, 1987, Lincoln received the confidential results of the 1986 FHLBB 13-month examination. Lincoln's response, dated June 26, 1987, pointed out numerous factual and accounting errors. a pia-87's only reply was to propose to continue the examination, with a new accounting fire brought in to zeanalyze the_FILB-87's thirteen months of vor) Shortly thereafter, an article appeared in the July 1987 issue of Regardiigis, a national publication, which disclosed the contents of the preliminary 1986 Examination Report, including confidential information concerning Lincoln and certain of its customers. The article stated that "the Bank Board has secretly concluded" that "Lincoln is unsafe' and `a threat to its insurer." This article expressly acknowledged its sources to be the preliminary FHLBB 1986 Examination Report and other confidential internal documents and revealed that the author's six-month |