DECLARATION OF MARILYN J. FRIED

1. I am an attorney, licensed to practice law in the state of California and I am a partner in the law firm of Wyman Bautzer Kuchel & Silbert. I have personal knowledge of the facts set forth herein and could competently testify thereto.

2. During the course of the representation of American Continental Corporation, as debtor-in-possession in this Chapter 11 case, I was involved in the preparation of the document entitled Report by American Continental Corporation, Debtor-inPossession, in Aid of Examination and Reorganization.

3. Attached hereto are relevant pages of several drafts of the report dated October 28, 1989; November 15, 1989; November 20, 1989; and November 29, 1989. These excerpts are from drafts of the report which were circulated to members of ACC management during the course of its preparation.

4. I have reviewed the attached documents and recognize the handwritten notes thereon as having been made by me during the time the report was prepared.

I declare under penalty of perjury that the foregoing is true and correct.

SPECIAL COUNSEL

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I.

Introduction

II.

[TO BE PROVIDED]

American Continental Corporation Before the Acquisition of
Lincola Savings and Loan

American Continental Corporation ("ACC") was founded in the late 1960's as a subsidiary of American Financial Corporation ("AFC") based in Cincinnati, Ohio. AFC was a holding company with investments in banks, savings and loan, insurance companies, real estate and publishing. [Flesh out demonstrating scope of management experience]

From 1970 through 1976, ACC was operated principally as real estate construction company under the name "American Continental Homes" with operations in Colorado, Arizona, California, Texas, Illinois and Chie. Toward the end of 1976, Charles I Xeating, Jr. and, among other others, senior members of ACC's management, all of whom had prior employment or business experience with AFC, purchased control of ACC from APC. When they acquired ACC, ACC's net worth was approximately $500,000 on gross assets of approximately $125,000,000. ACC had posted significant losses for the preceding three years (during which time none of the management team that formed ACC was involved in ACC's

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With the examination moving into its thirteenth month, ACC apparent and Lincoln management became frustrated with the disorganization, indecision and inadequate communication of and from the regulators and with the FHLBB's unlawful public disclosures about the examination. By that time, all of ACC's and Lincoln's transactional documents and corporate records had been made several times available to the regulators, in some cases interviews had been scheduled and cancelled the still the examination appeared to have no prospect for conclusion.

ca, exit times, and

ACC and Lincoln therefore sought the assistance of their elected representatives in the Federal government to help them to (1) ascertain the justification and motives for the continued examination, already the longest in industry history, and (2) 18, as ACC and Lincoln perceived, this was a case of oversealousness of the regulators, to help bring some perspective to the process and request that the FHLBB either charge the companies with violations, if violations were alleged to exist, or complete the examination and end the diversion of senior management's attention to the examination before it began to have serious and long-term adverse effects on the companies' operations.

at that

Time

Members of ACC and Lincoln management for several months

had been visiting members of Congress/to urge them to reject the
"re-regulation" of the savings and loan industry represented by

the direct Investment zule.

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Several members of management therefore returned to

Washington D.C. to seek that assistance. Senator Donald W. Riegle
(D-Kich.) agreed to listen to the companies' story, conducted his
own inquiry into the facts, and then agreed to contact FHL8B
Chairman Edwin J. Gray and arranged for the Chairman to meet with
a bipartisan group of senators who represented ACC's place of
organization, Ohio (Sen. John Glenn, D-Ohio), ACC's principal

place of business, Arizona (Sen. Dennis DeConc
DeConcione, D-Arizona and

Sen. John McCain, R-Arizona), and Lincoln's place of charter and
principal place of business, California (Sen. Alan Cranston,
D-Calif.), and then also arranged a meeting with the

-San-Francisco-FELE

vever,

ACC and Lincoln sought (and certainly received) no special Loras a revult of favors in connection with this meeting. Indeed, as described further below, the primary effect of these meetings appeared to be to generate the increased wrath of the fan-Franeteco-FELE. additional result of these meetings, the FELBB Enforcement Review Committee (comprised of Darrel Dochow, Executive Director of the FHLEB Office of Regulatory Affairs, Rosemary Stewart, Director of the FHLBB Office of Enforcement, Karl A. Hoyle, FHLEB Executive Director of Public Affairs, and George M. Barclay, President of the Federal Home Loan Bank of Dallas) initiated an investigation of acc;and Lincoln's allegations with respect to the 1986 examination. It is interesting to note, however, in light of subsequent events, that when reporters questioned the FHLBB abut comments by the press secretary for one of the Senators, to the

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mmtim nd dom nnn nd

management had expertly guided acc for seven veaza from

liquidity, and profitability. After four months of critiquing

them, both federal and California state authorities approve

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