MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT After receipt of Mr. Stevens' May 12, 1989 letter, Mr. Koch again called Mr. Stevens to ask him if he was sure that he had included all flights taken by Senator McCain and his family in the May 12, 1989 letter. Mr. Stevens said that all known flights were included and that his staff was still reviewing 1986 records to determine if any reimbursements had been made on the 1984 and 1985 flights. Mr. Stevens also indicated that he had never personally talked to Senator McCain about this issue. He felt that Senator, McCain was at this point sincere about wanting to reimburse for his and his family's flights and that Senator McCain and his staff were "bending over backwards" in 1989 to make sure that appropriate reimbursement was made. Mr. Stevens said that Senator McCain was reimbursing ACC for Megan McCain's flights even though Mr. Stevens believed there was good basis that these flights did not have to be reimbursed. I asked Mr. Stevens to explain his comments in the second paragraph of his May 12, 1989 letter which states, "As you know, Mr. Keating is becoming very accustomed to receiving unfair treatment from government officials." Mr. Stevens said that this was merely his editorializing and was based on articles he had been reading in the newspaper. Several days thereafter, Senator McCain sent a letter to Mr. Stevens dated May 15, 1989 (Exhibit 12) accompanied by two checks in full payment for flights taken by Senator McCain and his family in 1984 and 1985. These amounts agreed to the schedules sent to Chris Koch by Mr. Stevens on May 12, 1989. Mr. Stevens then stated that he may have received a phone call from Chris Koch prior to MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT Senator McCain's letter to Mr. Stevens dated June 30, 1989 (Exhibit 13). His recollection of this phone call is vague, if it did in fact take place, but it is possible that Mr. Koch again asked him if his letter of May 12, 1989 included all flights taken by Senator McCain and his family. He is unsure if Mr. Koch indicated during this phone call that Senator McCain had found additional flights subject to reimbursement to ACC. He did receive a letter from Senator McCain dated June 30, 1989 (Exhibit 13) in which the Senator listed other flights taken by him and his family on ACC aircraft or on commercial aircraft which was paid by ACC. All items on the attached list were not previously known to Mr. Stevens. He was interested to note that the 1985 flights on Senator McCain's list from Washington to Phoenix matched Senator McCain's flight on April 4, 1985. Apparently, the ACC flight log only noted that Senator McCain traveled on that day and made no mention, of his wife and Charteir baby sitter. Mr. Stevens is still unaware as to who made payment for the flights listed on Senator McCain's schedule. Mr. Stevens said it was possible that ACC, Senator McCain, or Charles Keating could have made those payments, but he is not aware of the actual payeed learned Some four months later, Mr. Stevens was embarrassed that an employee of ACC had copies of 560 discovered two reimbursement checks dated February 25, 1986 for $500 each from Senator McCain (Exhibit 14). He was embarrassed that his search of ACC 1986 records had failed copies of the Checks were not found before to discover these checks and was especially troubled thanSenator McCain had made a full disclosure around this time stating that no payments had been made for 1985 travel. Mr. Stevens indicated that Julie Collins, ACC Accounting Department staff member, brought MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT the checks to his attention. He recalls that the checks came up in a casual discussion he had with Ms. Collins, and he believes that Senator McCain's published disclosure in the press may have had something to do with Ms. Collins becoming aware that these checks were important. Mr. Stevens called Chris Koch before sending the letter and recalls that Mr. Koch requested that the information be sent to him. Mr. Stevens then recalls learning of the November 1, 1989 press release from Senator McCain which discusses the fact that new information was received from ACC revealing that Senator McCain and his wife had made reimbursement almost four years ago for two trips made by him on ACC corporate aircraft. While Mr. Stevens agrees that the current evidence supports Senator McCain's comments in the press release that, "This shows that I had fully or substantially already paid for three of the five trips that I took on American Continental planes prior to being told earlier this year that there was a travel reimbursement oversight," Mr. Stevens found it curious that the press release only mentioned Senator McCain's travel and not the travel of his family. He was also surprised that Senator McCain had distributed this information to the press without bothering to discuss it with Mr. Stevens. Mr. Stevens believed that he should have been consulted prior to the press release as a courtesy. Mr. Stevens also received a memo from Nora A. Bailey dated October 13, 1989 (Exhibit 15). Ms. Bailey simply states, "I see from the attached your good efforts failed." The attached was a Washington Post article dated October 12, 1989 which reported Senator McCain's travel reimbursement to ACC. Mr. Stevens stated that Nora Bailey was a tax attorney for Ivins, Phillips & Barker in Washington who represented ACC and who worked MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT with Mr. Stevens in connection with the 1984 and 1985 IRS audit. Mr. Stevens does not apparently It was after Senator McCain's press release on November 1, 1989, that Mr. Stevens began by his wife, baby sitter, and daughter on the August 29, 1985 flight, yet no reimbursement MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT I then questioned Mr. Stevens about the general policies or practices concerning the personal usage of ACC corporate aircraft. He stated that personal usage of ACC corporate aircraft was generally limited to ACC employees families. He stated that Senator McCain and was all cleared through My Kemba Cixecutive & 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 Biring 1984 when did not Af negime itd Mr. Stevens know of Senator McCain and Mr. Keating's "parting of the unt press acccenty ways" which occurred after the April, 1987 meetings with the regulators." He said that 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 th Hati Wir Kontry. unreed to the 14/8/2 Everall settlement. As to Mr. Stevens' February, 1989 phone discussion with Mr. Smith, he said that he did |