I am writing concerning my testimony before the Senate Ethics Committee on December 10, 1990. I have reviewed the videotape and feel a need to emphasize a few points to clarify the record. During cross examination, I indicated that I had wished that I had written my letter dated October 26, 1990 differently. This has been misinterpreted in many press accounts, and I want to make sure the Committee under stands what I meant. What I was trying to say is that I wished that I had left my opinion out of the letter and restricted it to the facts and the analysis. It is the responsibility of the Committee to draw conclusions from the facts, not mine. Like any citizen, I have my own opinion, but I am not an investigator, a prosecutor, or an adjudicator. The central facts stated in the letter which formed the basis for my conclusions have not been contradicted. These facts are summarized on the computer schedule labeled as Exhibit 597. Briefly stated, here are the applicable facts reflected on the exhibit and supporting documentation: 1. Mr McCain and his family took several flights on ACC corporate aircraft and chartered aircraft. 2. Prompt reimbursement was made for only one of the flights (August of 1986). The reimbursement check indicates payment for J. McCain. Mr. McCain's internal documentation indicates that the check "covers John's flight on the American Continental corporate plane" (see page 25 of the transcript of Chris Koch's testimony on November 20, 1990). Although family members were on that flight, there is no indication of any contemporaneous reimbursement for them. 3. Somewhat delayed reimbursement was made in February of 1986 with respect to two 1985 flights. Again, the checks indicate payment only "for John." Although Mrs. McCain wrote the checks and accompanied Mr. McCain on the flights (along with a babysitter), there is no indication of an effort at 4. No reimbursement was made for any of the other flights until after ACC filed for Chapter 11 and Lincoln was taken into conservatorship. This happened about three months after I first contacted someone who I considered to be an authorized representative of the Senator. As for my original conversation with Mr. Smith, I wish that I could remember it verbatim. I do recall that I was frustrated because it appeared to me that I was not going to get any help from him on flights taken by family members. I did not understand exactly what his position was, but I expected him to make the appropriate contact with the Senator. By the time he responded in March, it was too late to change the outcome of the IRS audit. I noticed that a copy of the March 7, 1989 letter was sent to McCain's office. Since it was too late for my purposes and since my original goal was not necessarily to obtain reimbursement but to settle an IRS audit, I decided to let the matter drop unless they got back with me. I am By the way, the March 7, 1989 letter by Mr. Smith says "If there were other trips made by Senator McCain that not aware of..., I can assure you that our intention would be to arrange appropriate reimbursement. To me, that statement does not show an evidence of intent to reimburse for family members. Once again, I have nothing to gain personally by making sure that you understand these facts. Nobody put me up to this. I was merely fulfilling a duty I thought I had as a citizen to share information aware of. that I thought you should be cc. Senator Warren Rudman Mr. Robert Bennett Sincerely, Dand Mean David E. Stevens 1091 1002 ANALYSIS BY WILLIAN K. BLACK OF THE AGREEMENT AND MEMORANDUN OF UNDERSTANDING (HOU) Entering into a NOU was contrary to Bank Board policy set by its office of Enforcement ("OE"). MOU's are not even listed as either a formal or informal enforcement remedy under current enforcement policy. Appendix A. All the factors that indicate the appropriate severity of an enforcement remedy pursuant to that policy were present in the case of Lincoln. 14. The Agreement and MOU Limited the Bank Board's Powers First, the Agreement" apparently authorized what The NOU between Lincoln and the Bank Board is Appento this analysis. The Agreement between these parties on the same date as the NOU is Appendix C. to sell a project and purchase a "replacement" direct investment. (Lincoln achieved this result through subtle legal draftsmanship of paragraph 8(a) of the Agreement. The key clause is: "the dollar amount.") Every other thrift could only grandfather specific projects. If those projects were sold, the thrift could no longer claim grandfathering treatment for the dollar amount of the project sold. The Agreement also gave Lincoln the opportunity to seek a waiver of the rule so that it would not have to dispose of its more than $600 million in unlawful direct investments and could in fact increase its direct investments to over $2 billion dollars. Appendix C, paragraph 10. Another clause apparently barred the Bank Board from requiring Lincoln to increase its net worth due to the excessive risk of its direct investments. Id., paragraph 8(a). The NOU gave up the Bank Board's authority to use any of the findings of the San Francisco district's 1906 examination to take "any administrative or enforcement" action against Lincoln, ACC, and all of their officers, directors, employees and agents (e.g., outside accountants). Appendix B, paragraph 2, and the final "Whereas" clause of the NOU. This grant of immunity was unprecedented. continues to prejudice OTS', and perhaps FDIC's efforts, to enforce the law. Compounding the problem is the fact that the NOU is so poorly drafted (from OTS' perspective, not It SPECIAL COUNSEL Lincoln's) that it covers not simply whatever is contained Worse still, Lincoln claims that the Bank Board The new examination will not rehash the findings Again, the language is sloppy at best. What did In addition to the rehash" language, however, Another problem with the immunity granted is that The Bank Board's future ability to take prompt and 3. the Bank Board's negotiators (Ns. Stewart and Mr. Dochow). The parties will make every effort in good faith Naturally, as the new examiners found probleme Each of the provisions described limiting the Bank Bank Board's attorneys (08 and Office of General Counsel) as The NOU also placed an unprecedented limit on the The final restriction on the Bank Board is in the accompanying side letter from Ma. Stewart to Lincoln. Appendix D. This, too, was unprecedented in informing 5. |