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MEMORANDUM OF INTERVIEW

DAVID STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

and Mr. Smith formally responded to Mr. Stevens in a letter dated March 7, 1989 (Exhibit 3). In the letter, Mr. Smith refers to a December 20, 1985 letter that he wrote to Mr. Greg Anderson, Treasurer for the McCain for Senate Committee, wherein Mr. Smith requested that a campaign check be disbursed in the amount of $959.00 to ACC as reimbursement for two trips made by Senator McCain in 1985. He requested that the check be returned to him for mailing to ACC. It is unclear if this check was ever disbursed. In the March 7. 1989 letter to Mr. Stevens, Mr. Smith indicates that he was not aware of the other trips for which ACC was not reimbursed and assures Mr. Stevens that the appropriate reimbursement would follow.

Mr. Stevens said that there was no activity on the issue until he wrote a letter to Chris Koch, Senator McCain's aide, dated May 12, 1989 (Exhibit 4). Apparently, Mr. Koch requested details relative to Senator McCain's flights in 1984 and 1985 from Mr. Stevens. Mr. Stevens enclosed computer printouts which indicate that ACC provided personal transportation for Senator McCain and his family totalling $1,794.14 in 1984 and $7,884.32 in 1985. The IRS charged Mr. Keating with personal income for $1,794.14 in 1984 and $4,672.22 in 1985. The letter states that ACC argued with the IRS that it was inappropriate to charge Mr. Keating with income personally for the flights taken by the Senator and his family, but they were largely unsuccessful. Mr. Stevens states, “Mr. Keating is becoming very accustomed to receiving unfair treatment from government officials". The issue of reimbursements that the Senator or his staff may have made was still not resolved. Mr.

MEMORANDUM OF INTERVIEW

DAVID STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

Stevens indicates that, "We will be double checking to see if there was any reimbursement with respect to two of the flights in 1985". He also indicates that he had documentation for a reimbursement for $900 for a flight taken by Senator McCain, Mrs. McCain, and Meaghan McCain in August 1986. Mr. Stevens' letter was in response to a phone request from Chris Koch who requested the details of the flights including any documentation ACC had on reimbursements by Senator McCain.

Since there was no evidence of Senator McCain reimbursing ACC for his 1984 and 1985 flights, he sent a letter to Mr. Stevens dated May 15, 1989 (Exhibit 5) stating, "It has always been my policy and directive to my staff to promptly reimburse for such travel. I thought all this travel had been paid for, but I don't have the documentary evidence that this occurred. I deeply regret that this policy apparently had not been complied with in every instance. I also appreciate your prompt assistance in identifying for my staff all such travel in question." Senator McCain enclosed checks in the amount of $1.794.14 and $7.884.32. which agreed to the list that Mr. Stevens sent to Mr. Koch. Senator McCain also wrote. "I was never aware that this situation existed, and I am embarrassed that apparently it did." The checks were written out of Senator McCain's and Cyndi McCain's personal account and signed by Cyndi McCain.

During this time, apparently Dave Stevens requested a member of his staff to search for evidence of reimbursement for the flights by Senator McCain. Exhibit 6, dated May 15.

MEMORANDUM OF INTERVIEW

DAVID STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

1989, is a memo from Peggy Rice to Dave Stevens saying that after exhausting research, she could find no evidence that ACC was ever reimbursed in 1986 for plane usage.

Apparently, Senator McCain's staff continued to search for information on flights taken on ACC aircraft and sent a list to Mr. Stevens dated June 30, 1989 (Exhibit 7). The letter from Senator McCain states, "In a careful review of travel made by me and my family, my staff has compiled a list of flights taken on American Continental aircraft, or paid for by American Continental Corporation, which should have been paid for by me. My policy has always been to reimburse promptly for such travel and I regret this oversight. This travel is in addition to those flights you identified for me in your letter of May 12, 1989, and for which we have fully reimbursed American Continental". The attached list indicates flights from 1984 through 1986 totalling $3,754.60. Senator McCain's personal check was enclosed as reimbursement.

Mr. Stevens stated that between the receipt of Senator McCain's June 30, 1989 letter and the accounting repair tmen! October 1989, someone on his staff discovered two reimbursement checks dated February 25, 1986. The checks were for $550 each, one reimbursing a flight from D.C. to Arizona for Senator McCain, and the other reimbursing a flight from Miami to Arizona for him. In a letter to Mr. Koch, dated October 31, 1989 (Exhibit 8), Mr. Steven's states that he was not aware of these checks at the time that he sent the computer list to Chris Koch of all flights. He says that, "Therefore, it appears that Senator McCain reimbursed ACC twice

MEMORANDUM OF INTERVIEW

DAVID STEVENS

for those two flights".

ATTORNEY WORK PRODUCT
CONFIDENTIAL

Additionally, Mr. Stevens located a check from the McCaîn household account for $900

dated August 18, 1986 (Exhibit 9). This apparently was for reimbursement of Senator McCain's family's trip from Phoenix to Miami on August 23, 1986.

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In summary, Senator McCain used ACC aircraft for personal flights totally $12,093. Of that amount, apparently $15,433 was reimbursed, the majority of which was paid after ACC'y bankruptcy, for a total overpayment of $3,340

The only over payment I suspected was the menit on the two 1485 Flights

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On other matters, Mr. Stevens recalls Senator Riegle's and Senator Cranston's visit to ACC. but does not recall any specifics. He also does not recall any specifics about the February 10, 1988 checks to the Center for Participation in Democracy and the Forum Institute that were given to Senator Cranston upon his visit. Mr. Stevens had no knowledge of the April 1987 meetings between the five Senators and the Federal Home Loan Bank Board Regulators. He was also not aware of any transactions between the Senators and ACC or Lincoln.

Mr. Stevens did state that he recalls discussions between John Rousselot, the former congressman who sought to buy Lincoln prior to ACC's bankruptcy, and Jim Grogan, ACC

MEMORANDUM OF INTERVIEW

DAVID STEVENS

ATTORNEY WORK PRODUCT
CONFIDENTIAL

officer, relative to Mr. Rousselot's solicitation of support for the sale of Lincoln. Mr. Stevens said he has no specific recollection of these discussions. Additionally, he has no knowledge of any discussions that any other ACC or Lincoln official had with any of the Senators regarding support for the proposed sale.

In closing, I asked Mr. Stevens if, in his filing of the various tax returns for ACC and Lincoln's subsidiaries and joint ventures, he was aware of any ownership by any of the Senators of ACC or Lincoln's properties. Mr. Stevens stated that he was only aware of the investment in Fountain Square by Senator McCain's wife and his father-in-law.

Bruce Penczek
Investigator

William N. Jackson
Investigator

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