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I.

Introduction

II.

[TO BE PROVIDED]

merican Continental Corporation Before the Acquisition of Lincoln 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 a real estate construction company under the name "American Continental Homes" with operations in Colorado, Arizona, California, Texas, Illinois and Ohio. Toward the end of 1976, Charles H Keating, 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 AFC. 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 mess than once, exit

interviews had been scheduled and cancelled three times, and
dftkruej
still the examination appeared to have no prospect for conclusion.

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) if, as ACC and Lincoln perceived, this was a case of overzealousness 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.

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 rule.

direct ¿nvestm

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Several members of management therefore returned to Washington D.C. to seek that assistance. Senator Donald W. Riegle (D-Mich.) agreed to listen to the companies' story, conducted his own inquiry into the facts, and then agreed to contact FHLBB 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 DeConcený, 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

ACC and Lincoln sought (and certainly received) no special
(mas a result of

favors in connection with this meeting. Indeed, as described
further below, the primary effect of these meetings appeared to be
Բ
B
to generate the increased wrath of the San-Francisco-FILE. As an
however,
additional result of these meetings, the FHLBB 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, FHLBB 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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Prior to the time American Continental Corporation ("ACC") Acquired Lincoln Savings and Loan Association ("Lincoln"), ACC was providing housing and jobs for thousands of Americans. Through their innovative and derivative financings and investments, ACCLE management had expertly guided ACC for seven years

debt-laden real estate construction company to a position of

minence 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.

The cornerstone of Acc's application to acquire Lincoln was the ability of its management to remedy the thrift's chronie interest zate mismatches and lack of liquidity. ACC proposed to

lise the expertise of its management and engage in 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 authorities approved

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examination information.

Substantially all of ACC's and Lincoln's

transactional documents and corporate records, representing
millions of pages, had been repeatedly made available to and
copied by the FHLEB, exit interviews had been scheduled and
cancelled, and the examination appeared to have no prospect for
conclusion.

ACC and Lincoln turned to their elected representatives for help. In particular, ACC and Lincoln sought assistance to ascertain the motives and justification for the prolonged examination and if, as ACC and Lincoln perceived, the examination was the product of undue regulatory seal, to bring perspective to the process by suggesting that the FHLBB either charge violations or complete and conclude the examination. ACC and Lincoln management had visited members of Congress for several months to urge rejection of the "re-regulation" of the savings and loan industry represented by the Direct Investment Regulation. Senator Donald W. Riegle (D-Mich.) listened to ACC's story, conducted his own inquiry and agreed to contact FHLBB Chairman Edwin J. Gray to arrange for the Chairman to meet with a bipartisan group of senators who represented ACC's state of organisation, Ohio (Sen. John Glenn, D-Ohio), ACC's principal place of business, Arizona (Sen. Dennis DeConcini, 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.).

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