"Houlihan, Lokey Report" means the report commissioned by the FHLBB from Houlihan, Lokey, Howard & Zukin, Inc. in connection with the FHLBB's 1986 examination of Lincoln.... *House Banking Committee" means the United States House of Representatives Committee on Banking, Finance, and Urban Affairs.. "HPLP" means Hotel Pontchartrain Limited Partnership...... 'IWI' means Insurance West, Inc., a former second-tier subsidiary of Lincoln..... Pace 61 5 56 26 "LAC" means Lincoln Acquisition Corporation, an investment group headed by Spencer Scott.... 94 "LAC Application" means Lincoln Acquisition Corporation Application to Acquire Lincoln.... 94 "Leventhal" means Kenneth Leventhal & Company, Certified Public Accountants..... "Leventhal Report" means the report prepared by Leventhal 127 127 2 ..... 29 "LSAC" means Lincoln Savings Acquisition Corporation, an investment group headed by former Congressman John Rousselot.... 94 *LSAC Application' means Lincoln Savings Acquisition Corporation Application to Acquire Lincoln................ 94 "MOU" means the Agreement and Memorandum of Understanding *New Lincoln' means Lincoln Savings & Loan Association, F.A., a newly federally chartered thrift founded by the FHLBB. 131 1988 ORA Examination Report" means the report issued on *1986 Report means the report issued on April 20, 1987 with respect to issues raised in the FHLBB's regulatory examination of Lincoln commenced in March 1986... ..... 78 53 R000170 1966 Enactment" means the Financial Institutions Operating Plan" means Lincoln's Operating Plan filed with Rece 16 25 "ORPOS means the FHLBB Office of Regulatory Policy Oversight and Supervision..... 6 "Oxford" means Oxford Financial Corporation a direct subsidiary of Lincoln..... 26 "PAC" means Political Action Committee.... 76 "PCP" means Phoenician Commercial Properties, Inc., a direct subsidiary of Lincoln.......... 30 "Petition" means the Petition for the Recusal or 45 ...... "PFC" means Phoenician Financial Corporation, formerly Lincoln Communications Company, a direct subsidiary of Lincoln............. "Provident" means Provident Mortgage Corporation, a direct subsidiary of Lincoln 28 30 "PTS" means Provident Travel Service, Inc., a former subsidiary of Lincoln.... 28 36 "RAP" means Regulatory Accounting Principles....... "RICO" means Racketeer Influenced & Corrupt Organizations statute, 18 USC SS 1961 et seq. "RTC" means Resolution Trust Corporation............. "SEC" means Securities and Exchange Commission..... 134 8 59 *Shapiro and Weinstein Report' means the report of Alan C. Shapiro and Mark I. Weinstein, commissioned by the FHLBB in connection with the 1986 examination............. 60 "Statement" means the Examiner's Preliminary Statement of ...... "Subsidiaries" means Lincoln's eleven direct subsidiaries..... 119 115 R 000171 Расе means the Thrift Financial Reports filed by Lincoln's conservator in June 1989.... 126 "TSP" means Young, Smith & Peacock, Inc., a third-tier subsidiary of Lincoln.......... A 000172 118 Prior to the 1984 acquisition of Lincoln Savings and Loan Association ("Lincoln"), American Continental Corporation ("ACC") was providing housing and jobs for thousands of Americans. Through their innovative financings and investments, ACC's management had expertly guided ACC for seven years from a debt-laden real estate construction company to a position of preeminence and success among America's home builders. When, in 1983, Congress and the California Legislature invited America's entrepreneurs into the debilitated thrift industry, ACC applied to acquire an ailing Lincoln with visions of many years of future success. The cornerstone of ACC's application to acquire Lincoln was its ability to remedy the thrift's chronic interest rate mismatches and lack of liquidity. ACC proposed to utilize the expertise of its management and engage in what the industry considered to be nontraditional transactions to provide matched maturities, liquidity, and profitability. After four months of critiquing ACC's plans and examining its management's ability to implement them, both federal and California state regulators approved ACC's application. In February 1984, ACC paid $šī million in cash and acquired Lincoln. Upon its acquisition of Lincoln, management immediately undertook to implement its projected plans and goals. It rapidly achieved the successful restructuring of Lincoln's liability portfolio by improving Lincoln's retail branch marketing and thus, the nature of its deposits. It successfully restructured Lincoln's corporate organization by divesting ACC of its own profitable real estate operations and transferring them to Lincoln and Lincoln's affiliates. These first steps moved Lincoln toward a substantial reduction of its interest rate risk. ACC and Lincoln refined plans to restructure Lincoln's investment portfolio to further reduce the inherent risks suffered by savings associations and to make Lincoln prosper. Although ACC originally anticipated the maintenance of Lincoln's existing personnel to implement its plans, resignations of officers, both before and after Lincoln's acquisition, as well as ACC's recognition of the inexperience of others, required certain replacements at all levels of employment. Throughout late 1984 and early 1985, ACC and Lincoln communicated extensively with the regulators regarding these planned operations and filed detailed business plans describing their intentions. In late 1984 and early 1985, ACC and Lincoln were ready to implement their finely-honed plans. R000173 With the approval of the California Department of Savings and Loan ("California Department), Lincoln diversified its investments and business activities by forming and capitalizing service corporations. Lincoln itself achieved internal diversification by implementing its planned direct investments in real estate and equity securities. The implementation of Lincoln's plans were phenomenally successful. ACC had brought sophisticated management and profitability to the thrift. Their ideas were simultaneously new and traditional: by hiring the best and the brightest people in a number of customarily unrelated fields, the synergies developed among them would generate profits exceeding those any discipline alone could produce. Thus, to the dismay of many of the old guard" in the thrift industry, Lincoln was catapulted into industry preeminence within its first three years through impressive earnings, a high return on assets, and increased net worth -- a pattern of success reminiscent of ACC's success in the homebuilding industry. Modeling itself on ACC's ethic, Lincoln became an important corporate citizen in Arizona and California. It not only caused affordable housing to become available, it went further into the community and sponsored programs for the needy and encouraged its employees to participate in community life and the political process. Contrary to some media-encouraged publicly-held beliefs, Lincoln did not dictate to its employees which activities they should embrace; but, it did preach that every American should participate in community, civic, charitable and religious endeavors. For its employees and the residents of California and Arizona, until its government-orchestrated demise, Lincoln seemed part of America's best dream. As ACC and Lincoln moved headlong towards greater successes and profitability, their management moved unknowingly into a headstrong group of old-school regulators. When the Reagan Administration was still young, and deregulation and similar philosophies most alive, Lincoln's regulators were apparently satisfied that Lincoln's management was competent to engage in the activities it undertook and that Lincoln was successful. This changed when former Federal Home Loan Bank Board ("FHLBB") Chairman Edwin J. Gray and some of his FHLBB employees wanted to reregulate and control all savings associations, both federal and state-chartered. They intended to do so by forcing such associations to restrict themselves to the very operations and investments that caused the thrift crisis - and Lincoln's own financial difficulties - in the early 1980's. |