MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT 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 Anderson. 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 MEMORANDUM OF DAVID E. STEVENS ATTORNEY WORK PRODUCT 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, 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 workin Albert Duarkin, ACC's bankruptcy attorney. e 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 We asked Mr. Stevens if he had contributed to the campaigns of Senators DeConcini, 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 MEMORANDUM OF INTERVIEW DAVID STEVENS ATTORNEY WORK PRODUCT DeConcini, McCain, Glenn, Cranston, and Riegle. He said that he understood that Mr. Keating supported Senator Riegle based upon his receipt of the contribution solicitation letter in February 1987. He also was aware that Mr. Keating and Senator McCain had a personal relationship because of several trips that Senator McCain and his family took with Mr. Keating to the Bahamas. We asked Mr. Stevens to describe the details of these trips. Mr. Stevens stated that the IRS audited ACC's tax return for 1984 and 1985. During this audit, the IRS reviewed the travel records and noted that Senator McCain had taken several flights on ACC aircraft which were determined to be personal in nature. The IRS not only disallowed the deduction on ACC's return, but proposed that income be charged to Mr. Keating's personal return. Mr. Stevens did not think this proposed adjustment to Mr. Keating's personal return was proper and he discussed the handling of this matter with Robert Kielty and Jim Grogan. On January 25, 1989, Mr. Stevens wrote a memo (Exhibit 1) to Bob Kielty regarding airplane charges for Senator McCain. Mr. Stevens attached a schedule detailing the 1985 airplane charges for Senator McCain and his family. The memo indicates four personal trips that the Senator and/or his family took using ACC aircraft, the total charges for which were $7,214.52. Mr. Stevens then informed Jay Smith, a consultant to Senator McCain, about the issue by his letter dated February 17, 1989 (Exhibit 2). The previously mentioned schedule of personal trips was also attached to this letter, and Mr. Stevens indicates that the IRS was proposing to charge Mr. Keating personally with income of $7,214.52. Mr. Smith and Mr. Stevens held a phone conversation to discuss the issue, |