INVESTIGATION OF LINCOLN SAVINGS & LOAN HEARING BEFORE THE COMMITTEE ON BANKING, FINANCE AND HOUSE OF REPRESENTATIVES ONE HUNDRED FIRST CONGRESS FIRST SESSION PART 5 NOVEMBER 21, 1989 Printed for the use of the Committee on Banking, Finance and Urban Affairs SPECIAL COUNSEL 74 I do not know if anyone recalls to the contrary. Mr. ANNUNZIO. Ms. Stewart, can you add to that? Ms. STEWART. I know there were at least two inspector general inquiries into leaked Lincoln information. And neither was conclusive about the source of the leaks. Mr. ANNUNZIO. Now, Ms. Stewart, I was interested-and that is what lead me to that question-in the portion of your testimony that dealt with leaks of confidential information at the Bank Board. You said you wrote a memo to Chairman Gray complaining about leaks, and you were told that the Chairman was mad at you because he was the source of the leaks. Would you please expand on that statement. What was he leaking? Who was he leaking to? In your opinion, did Chairman Gray ever leak confidential information such as examination reports? Ms. STEWART. The specific disclosure that I described was in December 1986, in which information from the still ongoing examination of Lincoln was delivered to a member of the press. It appeared in a Wall Street Journal article on Christmas week of 1986. That was the specific disclosure that I complained of in my memo of early January 1987 to Mr. Gray. I was told shortly after sending that memo by the then acting general counsel, Harry Quillian, that my memo had caused quite a stir, that Chairman Gray and his chief of staff were very angry about it, because it was indeed Mr. Gray who had authorized the disclosure. Mr. ANNUNZIO. Mr. Smuzynski, were you ever asked to provide any information? And if you were, who did you give the information to? Mr. SMUZYNSKI. I cannot hear you, sir. Mr. ANNUNZIO. Mr. Smuzynski, were you ever asked to provide information? And if you did, who did you give the information about Lincoln to? Mr. SMUZYNSKI. I have been asked for a lot of information on Lincoln. And I normally supply it. Mr. ANNUNZIO. While you were giving information on Lincoln, 2 days after you were given the information, it showed up in the press. Do you recall that? Mr. SMUZYNSKI. Yes, I do. Mr. ANNUNZIO. Who asked you about that information? Mr. SMUZYNSKI. Well, the parties here are. Mr. Black and the others at the table I believe is what you are referring to. I was requested by Mr. Black to provide information to him on the possibility of a large violation of a direct investment violation. This was in December of 1986. That information was not in Washington. I called San Francisco district, was provided the information over the phone, and provided it to Mr. Black, who had a legitimate interest in that information. Mr. ANNUNZIO. Mr. Black, can you add to that statement? Mr. Black, did you leak that information? You are under oath. Now, remember, you are under oath. Mr. BLACK. Yes, sir, I do not have to be reminded of that. I am under oath. And I never made any unauthorized release of information. 75 What is being asked about is the following circumstances: Mr. Henkel, as his first substantive act as a Board member, made a proposal as an amendment to the direct investment rule. His proposal would have eliminated Lincoln's $600 plus million violation of the direct investment rule. After that Board meeting, I informed first Board member White and his special assistant, and then_Chairman Gray, of what this Henkel proposal would have done. I then went back to my office. I was later called up to the offices of Chairman Gray. And there was an ongoing television conversation with Ken McClean, who was the chief staffer to Senator Proxmire. And I was asked to explain by Mr. McClain what had gone on at this Board meeting. I then ended up going over, at Mr. McClain's request, and briefing Mr. McClain in person. They wanted to know the dollar amount of this violation. I do not remember when I got it from Al. I have no reason to believe that I did not. There was at that time a statement of supervisory concern. It was in writing, and it had been given to the institution already as to those numbers. Mr. ANNUNZIO. You made a statement that you never leaked any unauthorized information. Did you ever leak any authorized? Mr. BLACK. As part of my job, I released tons of information. And everyone at this table releases tons of information about institutions. Mr. ANNUNZIO. That are authorized? Mr. BLACK. Yes. And they are not leaks, as anyone uses the terms as I know it. The CHAIRMAN. The time of the gentleman has expired. Mr. PARRIS. Thank you, Mr. Chairman. Mr. Dochow, on page 33 of your testimony, you talk about a meeting on October 27, 1988, with Mr. Crawford, the California regulator for this industry. And you say, among other things, we talked about the stopping of the selling of ACC subordinated debt to Lincoln's customers. This is the junk bonds from ACC that were being sold in every branch of Lincoln throughout California. And you all had discussed it, I gather, in that meeting. Is that correct? Mr. DOCHOW. Yes, Congressman. At that meeting on October 27, we talked about several things, one in particular was whether or not we could stop the sale of ACC's debt, period. The State commissioner had already stopped the use of Lincoln facilities to sell that debt. Mr. PARRIS. I understand. You've already testified to that. The question was whether we can use the facilities of the savings and loan or whether the State has that authority. And the reason I am asking about this, Mr. Dochow, is that I have in my possession here an interoffice memo dated June 16, 1987, from Mr. Smuzynski to Mr. O'Connell. And both of these gentlemen you have referred to as senior regulators, good guys. Mr. O'Connell has a long and varied involvement in this industry in various ways. His father was a former prominent person in the savings and loan league, he on the regulatory side. |