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TESTIMONY OF
■
u 1UWQ
fip.T v. b lyoy
fed er a l d e p o s it
INSURANCE
L. W I L L I A M S E I D M A N
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
W A S H I N G T O N , D.C.
ON
LINCOLN SAVINGS AND LOAN AS SO CI AT IO N OF CA LIFORNIA
BEFORE THE
C O M M I T T E E O N BA NK IN G, F I N A N C E A N D U R B A N A F F A I R S
U N I T E D STATES HOUSE OF R E PR ES EN TA TI VES
R o o m 2128,
10 :0 0 A.M.
O c t o b e r 17, 1989
Rayburn House Office Building
co r po r a tio n
Good morning,
Mr.
C h a i r m a n a n d m e m b e r s of t h e C o m m i t t e e .
I
a m p l e a s e d t o b e h e r e t o d a y t o p r o v i d e i n f o r m a t i o n r e l a t i n g to
t h e L i n c o l n S a v i n g s a n d L o a n A s s o c i a t i o n of C a l i f o r n i a .
T h e F D I C is v i t a l l y i n t e r e s t e d in L i n c o l n S a v i n g s .
i n s u r e r of t h r i f t s ,
Corporation
As the
a n d as t h e m a n a g e r of t h e R e s o l u t i o n T r u s t
( " RT C" ), we are es pe ci al ly anxious to see that
l o s s e s r e l a t i n g to L i n c o l n are r e d u c e d t o a m i n i m u m .
We have
r e c e n t l y f i l e d s u i t to r e c o v e r m o n i e s w e b e l i e v e a r e d u e
L i n c o l n ' s e s t a t e a n d t h e RTC.
(A c o p y of t h e c o m p l a i n t is b e i n g
p r o v i d e d as an A t t a c h m e n t . )
Y o u h a v e r e q u e s t e d us to a d d r e s s f o u r s p e c i f i c c o n c e r n s .
T h e s e are:
(1) t h e f i n a n c i a l c o n d i t i o n of t h e i n s t i t u t i o n at the
time FDIC was appointed conservator;
(2)
t h e p r i o r m a n a g e m e n t of t h e i n s t i t u t i o n ;
F D I C ' s a s s e s s m e n t of
(3) p r a c t i c e s b y p r i o r
m a n a g e m e n t t h a t c o n t r i b u t e d to t h e i n s t i t u t i o n ' s
(4)
fa i l u r e ;
and
F D I C ' s a n a l y s i s of t h e s u p e r v i s o r y h i s t o r y of L i n c o l n
S a v i n g s w i t h an e m p h a s i s on h o w f u t u r e s u p e r v i s o r y e f f o r t s c a n
be improved.
B e f o r e a d d r e s s i n g t h e s e s p e c i f i c areas,
we would
l i k e to p r o v i d e s o m e b a c k g r o u n d w i t h r e s p e c t to t h e F D I C ' s
i n v o l v e m e n t in L i n c ol n.
-
2
-
L i n c o l n S a v i n g s w a s p l a c e d in c o n s e r v a t o r s h i p o n A p r i l
1989.
14,
A t t h a t t i m e a t e & m h e a d e d b y t h e F D I C w a s p l a c e d in
L i n c o l n as p a r t of t h e o v e r a l l p l a n t o c o n s e r v e a s s e t s w i t h i n
t h e t h r i f t i n d u s t r y a n d to p r e p a r e i n s o l v e n t t h r i f t s for
eventual sale or dissolution.
Prior to that date the Federal
Home Loan Bank Board was re sponsible for the r e gu la ti on and
o v e r s i g h t of L i n c o l n .
L i n c o l n w a s p l a c e d in c o n s e r v a t o r s h i p
a f t e r a f i n d i n g b y t h e B a n k B o a r d t h a t it w a s o p e r a t i n g in an
unsafe and u n s o u n d manner.
Subsequently,
L i n c o l n w a s f o u n d to
be i n s o l v e n t .
U p o n e n t e r i n g L i n c ol n,
o u r g o a l — as it w a s in e a c h
c o n s e r v a t o r s h i p — w a s to:
o
E s t a b l i s h c o n t r o l a n d o v e r s i g h t of t h e i n s t i t u t i o n
o
Promote co nf id en ce and ma in t a i n cust om er services
o
E v al ua te the institution's co ndition and identify and
a c c o u n t for l o s s e s
o
R e c o m m e n d v i a b l e a l t e r n a t i v e s for c o s t c o n t r o l s a n d for
t h e l e a s t c o s t r e s o l u t i o n of t h e c a s e
1.
T H E F I N A N C I A L C O N D I T I O N OF T H E I N S T I T U T I O N A T T H E T I M E F D IC
WAS A P P O I N T E D CO NS ER VA TO R
In s u m m ar y,
at t h e t i m e w e b e c a m e c o n s e r v a t o r ,
we found
L i n c o l n to b e i n s o l v e n t d u e t o s u b s t a n t i a l r e s e r v e s
t h a t h a d to b e r e c o r d e d .
for l o s s e s
Lincoln was insolvent on a liquidity
b a s i s as w e l l b e c a u s e it w a s u n a b l e t o m e e t its o b l i g a t i o n s as
t h e y c a m e due.
In a c c o r d a n c e w i t h n o r m a l p r a c t i c e ,
appointed conservator,
upon being
we reviewed Lincoln's financial
s t a t e m e n t s to a d j u s t t h e m as r e q u i r e d a n d to p r o v i d e a p p r o p r i a t e
v a l u a t i o n r e s e r v e s on a g o i n g c o n c e r n ba sis.
We also made a
p r e l i m i n a r y e s t i m a t e of t h e r a n g e of lo ss on a l i q u i d a t i o n b a s i s
(i.e.
e s t i m a t e d l o ss to t h e R T C ) .
Lincoln's major problems
n o n - e a r n i n g loans;
included
(1) a p o r t f o l i o of
(2) a re al e s t a t e i n v e s t m e n t p o r t f o l i o ,
c o n s i s t i n g p r i m a r i l y of i n v e s t m e n t s
in r a w land;
(3)
investments
in h i g h - y i e l d a n d p r i v a t e l y - p l a c e d b o n d s a n d e q u i t i e s w i t h
s i g n i f i c a n t c r e d i t q u a l i t y p r o b l e m s a n d i n t e r e s t - r a t e risk;
(4)
and
a $1.5 b i l l i o n m i s m a t c h b e t w e e n i n t e r e s t - b e a r i n g a n d
i n t e r e s t - e a r n i n g as se ts ,
r e s u l t i n g in a s e v e r e l i q u i d i t y
problem.
W h e n L i n c o l n w a s p l a c e d i n to c o n s e r v a t o r s h i p ,
t h e y e a r e n d i n g D e c e m b e r 31,
the books
for
1988 h a d n o t b e e n c l o s e d p e n d i n g
c o m p l e t i o n of t h e i n d e p e n d e n t a u d i t b y T o u c h e R o s s & Co m p a n y ,
Certified Public Accountants.
Regula to ry financial statements,
-4-
as of F e b r u a r y 28,
1989,
h a d b e e n s u b m i t t e d in l a t e M a r c h to th e
S t a t e of C a l i f o r n i a D e p a r t m e n t of S a v i n g s a n d L o a n a n d t h e
F e d e r a l H o m e L o a n B a n k Board.
T h e l a s t i n t e r n a l S t a t e m e n t of
C o n d i t i o n for Lincoln Savings and Loan A s s o c i a t i o n be f o r e the
c o n s e r v a t o r s h i p w a s as of F e b r u a r y 28,
1989.
T h e a t t a c h e d T a b l e s h o w s t h e a d j u s t m e n t s w e m a d e for
v a l u a t i o n reserves.
C o l u m n D is a b a l a n c e s h e e t on a
c o n s o l i d a t e d b a s i s p r e p a r e d by p r i o r m a n a g e m e n t as of
F e b r u a r y 28,
1989.
C o l u m n E a d j u s t s for a p p r o p r i a t e r e s e r v e s ,
losses and income reversals.
These adjustments were based upon
e s t i m a t e s of v a l u e of L i n c o l n ' s a s s e t s m a d e b y t h e F D I C u s i n g
all
i n f o r m a t i o n a v a i l a b l e at t h a t time.
process,
million.
A s p a r t of t h i s
t h e l o a n lo s s r e s e r v e h a d t o b e i n c r e a s e d b y $289
T h e r e s e r v e s a g a i n s t c a r r y i n g v a l u e s of r e a l e s t a t e
assets were
i n c r e a s e d b y $432 m i l l i o n .
B a s e d u p o n th ese,
o t h e r a d j u s t m e n t s r e f l e c t e d in t h e Table,
and
Lincoln was insolvent
b y a p p r o x i m a t e l y $800 m i l l i o n at t h e t i m e w e w e r e a p p o i n t e d
conservator.
As more information becomes available
new appraisals —
s u c h as
reserves and other ad ju st me nt s will be updated
accordingly.
L i n c o l n ' s c o n s o l i d a t e d lo a n p o r t f o l i o o n A p r i l
1 4 th
c o n s i s t e d of o n l y a b o u t $70 m i l l i o n in t r a d i t i o n a l s i n g l e f a m i l y
m o r t g a g e l o a n s a n d c o n s u m e r loans,
commercial
$370 m i l l i o n in s e c u r e d
l o a n s a n d $1 b i l l i o n in a c q u i s i t i o n ,
d e v e l o p m e n t and
-5-
construction
additional
("ADC")
loans.
L i n c o l n a l s o w a s c o m m i t t e d t o an
$560 m i l l i o n in A D C l o a n d i s b u r s e m e n t s .
A p p r o x i m a t e l y $2 50 m i l l i o n
(15 p e r c en t)
of L i n c o l n ' s l o a n
p o r t f o l i o w a s c o m p o s e d of l o a n s m a d e t o p u r c h a s e r s o f r e al
estate from Lincoln and Lincoln subsidiaries.
The April
non-accrual
14 l o a n r e c o r d s r e f l e c t e d $60 m i l l i o n in
loans
(i.e.
l o a n s on w h i c h i n t e r e s t i n c o m e w a s n o t
recognized until actual receipt by L i n c o l n ) .
loans made
A r e v i e w o f all
it c l e a r t h e r e w e r e a n u m b e r of a d d i t i o n a l
s h o u l d b e c a r r i e d on a n o n - a c c r u a l basis.
loans that
An additional
m i l l i o n in l o a n s w a s t h e r e f o r e c h a n g e d to n o n - a c c r u a l
$250
status.
I n v e s t m e n t s in re al e s t a t e a p p r o x i m a t e d $1 .0 b i l l i o n .
This
l e v e l of i n v e s t m e n t w a s t h e r e s u l t of an a g g r e s s i v e i n t e r n a l
land ac qu is it io n and develo pm en t program.
i n v e s t m e n t s w e r e large,
M a n y of t h e s e
as d e m o n s t r a t e d b y si x p r o j e c t s ,
w i t h an i n v e s t m e n t of o v e r $50 m i l l i o n each,
of $1 00 m i l l i o n each.
of raw,
three
a n d t h r e e in e x c e s s
T h e s t r a t e g y w a s to a c q u i r e l a r g e p a r c e l s
v a c a n t l a n d to b e z o n e d a n d s u b s e q u e n t l y d e v e l o p e d in
m a s t e r - p l a n n e d c o m m u n i t i e s p r o v i d i n g a v a r i e t y of l a n d uses.
A s of A p r i l
Arizona,
Colorado,
$100 m i l l i o n ,
14,
L i n c o l n ' s real e s t a t e i n v e s t m e n t s in
a n d T e x a s w e r e a p p r o x i m a t e l y $700 m i l l i o n ,
a n d $1 50 m i l l i o n ,
respectively.
The investments
-
6
-
in A r i z o n a w e r e m a d e d u r i n g t h e p e r i o d f r o m 1985 t o 1987 w h e n
t h e r e a l e s t a t e m a r k e t w a s strong.
investments
a n d 1985,
S u b s t a n t i a l l y all t h e
in C o l o r a d o a n d T e x a s w e r e a c q u i r e d d u r i n g l a t e 1984
t h e p e a k of t h o s e r e al e s t a t e m a r k e t s .
with each project was upon development activities.
The emphasis
F e w f o rm al
b u s i n e s s p l a n s a d d r e s s i n g t h e u l t i m a t e d i s p o s i t i o n of t h e
p r o p e r t y w e r e in pl ace.
e s t a t e grew,
A s t h e le ve l of i n v e s t m e n t in re a l
t h e l a c k of m a r k e t i n g plans,
d e t e r i o r a t i n g re al e s t a t e ma r k e t ,
coupled with a
m a d e it d i f f i c u l t t o g e n e r a t e
s a l e s s u f f i c i e n t t o c o v e r t h e c a r r y i n g c o s t s of t h e s e as se ts .
D e s p i t e t h e s e facts,
only minimal reserves against carrying
v a l u e s of a s s e t s e x is te d.
T h e r e w e r e f e w c u r r e n t a p p r a i s a l s an d
m a r k e t s t ud ie s.
On April
14,
1989,
m y r i a d of s e c u r i t i e s ,
$646 m i l l i o n ,
million.
Lincoln's investment portfolio included a
i n c l u d i n g h i g h y i e l d b o n d s w i t h a c o s t of
a n d e q u i t y i n v e s t m e n t s w i t h a c o s t of $429
A p p r o x i m a t e l y $500 m i l l i o n of t h e s e i n v e s t m e n t s w e r e
in i l l i q u i d p r i v a t e p l a c e m e n t s e c u r i t i e s .
These securities
p o s s e s s a h i g h e r p r o b a b i l i t y of d e f a u l t t h a n r a t e d b o n d s a n d
s o m e t i m e s a r e d i f f i c u l t t o sell.
L i n c o l n ' s p o r t f o l i o a l s o i n c l u d e d m o r t g a g e - b a c k e d a n d U.
g o v e r n m e n t s e c u r i t i e s w i t h a b o o k v a l u e of $ 1 . 8 5 b i l l i o n .
t h e s e s e c u r i t i e s w e r e liquid,
While
$1 .7 6 b i l l i o n w a s p l e d g e d as
collateral against various borrowings and other transactions.
S.
-7-
A p p r o x i m a t e l y $830 m i l l i o n of t h e s e s e c u r i t i e s w e r e p l e d g e d
a g a i n s t b o r r o w i n g s in w h i c h t h e d e c l a r a t i o n of b a n k r u p t c y b y
L i n c o l n ' s s u b s i d i a r i e s c o n s t i t u t e d de f a u l t .
A s a r e su lt ,
this
collateral was liquidated by the v a ri ou s b r ok er ag e houses,
p r e v e n t i n g an o r d e r l y l i q u i d a t i o n of t h e s e assets.
L i n c o l n s u b s i d i a r i e s c o n t a i n i n t e r e s t s in o p e r a t i n g
entities;
A m e r i c a n F o u n d e r s L i f e I n s u r a n c e C o m p an y,
a n d P e a c o c k b r o k e r a g e firm,
Ho tel.
the Phoenician Re so rt and Crescent
E v a l u a t i o n of t h e s e e n t i t i e s
internal
r e c o rd s,
o u t s i d e ex pe rt s,
investment bankers.
("ACC"),
p o s s e s s i o n on A p r i l
is b e i n g d o n e u s i n g b o t h
actuarial
firms,
and
T h i s p r o c e s s h a s b e e n h a m p e r e d for s o m e of
t h e e n t i t i e s b y t h e h o l d i n g co mp an y,
Corporation
Young Smith
American Continental
w i t h h o l d i n g s u b s i d i a r y r e c o r d s in t h e i r
14.
O n S e p t e m b e r 29, w e o b t a i n e d a c o u r t
o r d e r g i v i n g us a c c e s s to t h e r e c o r d s of t h e s u b s i d i a r i e s a n d we
w i l l be e x a m i n i n g t h e m o n c e a c c e s s is o b t a i n e d .
Lincoln Savings and Loan was ex pe ri en ci ng a severe liquidity
c r i s i s on t h e d a t e of c o n s e r v a t o r s h i p .
It w a s u n a b l e t o m e e t
its o b l i g a t i o n s as t h e y b e c a m e d u e b e c a u s e o f d e p o s i t o u t f l o w s ,
l o s s e s a n d a l a c k of l i q u i d assets.
F u r t he r,
difficult
in a w e l l - l a i d p l a n d e s i g n e d t o m a k e it m o r e
for t h e r e g u l a t o r s t o c a r r y o u t t h e i r d u t i e s as
-
conservator,
8
-
t h e p a r e n t h o l d i n g co mp an y,
ACC,
h a d f i l e d for
b a n k r u p t c y f o r i t s e l f a n d 11 of L i n c o l n ' s s u b s i d i a r i e s t h e d a y
b e f o r e L i n c o l n w a s p l a c e d in c o n s e r v a t o r s h i p .
The bankruptcy
f i l i n g s r e m o v e d t h e s u b s i d i a r i e s as a s o u r c e o f f u n d s a n d no
c o n t i n g e n c y p l a n s for f u n d i n g ex i s t e d .
On April
17th,
Lincoln
S a v i n g s w a s t h e f i r s t of o n l y t w o i n s t i t u t i o n s in t h e n a t i o n t o
e n t e r t h e n e w l y e s t a b l i s h e d J o i n t L e n d i n g P r o g r a m of t h e F e d e r a l
Reserve,
the Federal Home Loan Bank and the Federal Savings and
Loan Insurance Corporation.
A s w e p r e v i o u s l y stated,
practice,
in a c c o r d a n c e w i t h o u r n o r m a l
a r e v i e w w a s c o n d u c t e d to e s t i m a t e t h e l o s s t h a t w o u l d
be i n v o l v e d in a l i q u i d a t i o n of L i n c ol n.
This estimate differs
f r o m o u r a c c o u n t i n g a d j u s t e d e s t i m a t e in t h a t it t a k e s i n to
a c c o u n t l i q u i d a t i o n a n d l i t i g a t i o n costs,
ho ld in g and sales
c o s t s a n d o t h e r f a c t o r s i n v o l v e d in l i q u i d a t i o n .
That estimate
s h o w s an a n t i c i p a t e d l o ss in t h e r a n g e of $1.5 b i l l i o n t o $2.0
billion.
T h e e s t i m a t e w i l l be a d j u s t e d w i t h f u r t h e r r e v i e w of
i n f o r m a t i o n as it b e c o m e s a v a i l a b l e .
2. A N D 3.
FDIC'S AS SE S S M E N T OF THE PRIOR M A N A G E M E N T OF LINCOLN
A N D P R A C T I C E S OF P R I O R M A N A G E M E N T T H A T C O N T R I B U T E D T O LINCOLN'_S_
FAILURE
P r i o r t o t h e F D I C ' s a p p o i n t m e n t as c o n s e r v a t o r of Li n c o l n ,
m u c h of L i n c o l n ' s t o p m a n a g e m e n t o c c u p i e d d u a l p o s i t i o n s as
-9-
e m p l o y e e s of b o t h A C C an d Li nc ol n.
Their salaries were
a p p o r t i o n e d on a s e t p e r c e n t a g e b a s i s b e t w e e n A C C a n d Li nc ol n.
I m m e d i a t e l y p r i o r to t h e d a t e of t h e c o n s e r v a t o r s h i p ,
m a n y of
these dual status mana ge rs resigned their Lincoln p o si ti on s and
be came full-time AC C employees.
These resignations continued
for s e v e r a l d a y s a f t e r t h e c o n s e r v a t o r s h i p w h e n L i n c o l n
e m p l o y e e s w e r e i n t e r v i e w e d b y t h e F D I C a n d its a g en ts .
T h e F D IC
sought to d e te rm in e who perf or me d what roles and w h e t h e r any
r e m a i n i n g L i n c o l n e m p l o y e e s w e r e c u l p a b l e of w r o n g d o i n g or w o u l d
cooperate
in t h e F D I C ' s
investigation.
T h ro ug h the interview process,
employees,
and by w o rk in g wi th remaining
t h e F D I C f o u n d e v i d e n c e of c u l p a b l e b e h a v i o r o n the
p a r t of an i n n e r c i r c l e of L i n c o l n ' s f o r m e r m a n a g e m e n t .
t h o s e i n d i v i d u a l s h a v e b e e n n a m e d as d e f e n d a n t s
S o m e of
in t h e R I C O and
f r a u d c a s e f i l e d b y t h e RTC.
O n S e p t e m b e r 15th,
L i n c ol n,
t h e RTC,
a c t i n g as c o n s e r v a t o r for
f i l e d a l a w s u i t a g a i n s t C h a r l e s H. K e a t i n g ,
Jr.
and
other co rporate officers and insiders char gi ng that th ey devised
a n u m b e r of c o m p l e x a n d i n t e r r e l a t e d s c h e m e s to d i v e r t a s s e t s of
L i n c o l n to t h e i r p e r s o n a l be n e f i t ,
Lincoln's
insolvency.
u l t i m a t e l y c o n t r i b u t i n g to
The money which the defendants siphoned
o u t of L i n c o l n c a m e p r i m a r i l y f r om d e p o s i t o r s w h o s e a c c o u n t s are
-
10
insured by the federal government.
d a m a g e s of $1 .1 b i l l i o n —
-
The suit seeks actual
and portions could be t r ip le d un de r
r a c k et ee ri ng statutes.
T h e R T C ' s c o m p l a i n t a l l e g e s t h e f o r m e r m a n a g e m e n t of L i n c o l n
c o n t r i b u t e d s i g n i f i c a n t l y t o its i n s o l v e n c y b y s t r u c t u r i n g s h a m
t r a n s a c t i o n s w h i c h e n a b l e d t h e m to s i p h o n c a s h o u t of L i n c o l n
for t h e i r p e r s o n a l b e n e f i t .
Lincoln relied upon high cost
b r o k e r e d d e p o s i t s to s u s t a i n r a p i d gr ow th .
Investments focused
l a r g e l y on h i g h - r i s k a s s e t s w i t h u n c e r t a i n e a r n i n g p o w e r s u c h as
r a w l a n d or o t h e r s p e c u l a t i v e i n v e s t m e n t s s u c h as c o r p o r a t e
e q u i t i e s a n d j u n k bo nd s.
C e r t a i n of t h o s e i n v e s t m e n t s w e r e u s e d
by Li ncoln's m a n a g e m e n t to structure ce rt ai n inside tr an sa ct io ns
w h i c h w e r e r e p o r t e d as t h o u g h t h e y c r e a t e d l a r g e p r o f i t s .
However,
wh e n the transa ct io ns were pr op e r l y analyzed,
gains
re ported by Lincoln we re illusory and had to be reversed.
W e b e l i e v e t h a t l i n k e d t r a n s a c t i o n s w e r e i n s t i t u t e d in w h i c h
ce rt ai n pa rt ie s received benefits to enable Lincoln to report
sham profits.
As a r e s u l t of t h e i r i m p r o p e r i n f l a t i o n of
L i n c o l n ' s a n d A C C ' s bo oks,
t h e i n s i d e r s of L i n c o l n ' s f o r m e r
m a n a g e m e n t w e r e a b l e to f u n d e x c e s s i v e s a l a r i e s a n d d i v i d e n d s
f r o m A C C a n d r e a p f r a u d u l e n t p r o f i t s o n t h e s a l e of A C C stock.
M a n y of t h e s e m a j o r t r a n s a c t i o n s a p p e a r t o h a v e b e e n
o r c h e s t r a t e d d i r e c t l y b y Mr.
K e a t i n g a n d a f e w i n s i de rs ,
-
11
-
c o m p l e t e l y a v o i d i n g t h e u s e of u n d e r w r i t i n g s t a f f s e m p l o y e d by
the association.
M a n y m a j o r l o a n s w e r e m a d e on a n o n - r e c o u r s e
b a s i s a n d w i t h i n a d e q u a t e s e c u ri ty .
We believe that the schemes used by the defendants involved
both intentional
fraudulent m i sd ee ds and ne gligent activity.
Elaborate misrepresentations,
abuses,
including sophisticated accounting
w e r e u s e d t o d e c e i v e t h e p u b l i c a b o u t t h e t r u e n a t u r e of
the b u s i n e s s b e i n g f u n d e d by L i n c o l n ' s d e p o s i t o r s .
deception employed numerous
fraud,
mail
fraud,
The
false statements c o ns ti tu ti ng wire
b a n k f r a u d a n d s e c u r i t i e s fraud.
Because the
d e f e n d a n t s e m p l o y e d a p a t t e r n of s u c h a c t i v i t y in f u r t h e r a n c e of
t h e i r f r a u d u l e n t sc he me s,
the RTC has sought ad ditional relief
u n d e r t h e a n t i - r a c k e t e e r i n g la w s of A r i z o n a a n d t h e U n i t e d
St at es .
T h i s w h i c h w o u l d e n t i t l e t h e R T C to t r e b l e d a m a g e s as
an a d d i t i o n a l r e m e d y d e s i g n e d to d e t e r f u t u r e m i s c o n d u c t b y
others,
a n d t o p r o v i d e a m o r e a d e q u a t e r e m e d y for t h e o v e r a l l
l o s s e s w h i c h ar e a n t i c i p a t e d .
The schemes wh ic h caused Lincoln's failure r e qu ir ed the
c o n t r i b u t i o n s of m a n y i n d i v i d u a l s .
and o f f i c e r s ,
Certain Lincoln directors
w h i l e p e r h a p s n o t t h e m s e l v e s d i r e c t l y e n g a g e d in
f r a u d , o w e d a d u t y of c a r e t o L i n c o l n w h i c h t h e y b r e a c h e d b y
f a i l i n g t o l o o k o u t for L i n c o l n ' s b e s t i n t e r e s t s a n d e x e r c i s e
independent judgement.
damages
the comp la in t also seeks
for t h e n e g l i g e n t c o n d u c t on t h e p a r t of t h e s e
individuals.
Consequently,
-
12
-
T h e R T C h a s n o t c o m p l e t e d its i n v e s t i g a t i o n of L i n c o l n .
believe that substantial additional
We
i n v e s t i g a t i o n is w a r r a n t e d
a n d m a y r e s u l t in t h e f i l i n g of a d d i t i o n a l c i v i l a c t i o n s or
allegations,
additional
i n c l u d i n g f r a u d a c ti on s.
S o m e of t h e a r e a s of
i n v e s t i g a t i o n a n d p o t e n t i a l c a u s e s of a c t i o n w h i c h w e
b e l i e v e w a r r a n t f u r t h e r r e v i e w r e l a t i n g t o L i n c o l n in cl ud e:
1.
L i a b i l i t y of a c c o u n t a n t s .
2.
L i a b i l i t y of a p p r a i s e r s in a p p r a i s i n g t h e r e al e s t a t e
held,
s o l d a n d p u r c h a s e d b y L i n c ol n,
its d i r e c t a n d
indirect subsidiaries and h o ld in g companies.
3.
L i a b i l i t y of a t t o r n e y s in t h e i r c o u n s e l i n g of a n d
a d v i c e to A C C a n d Li nc ol n.
4.
L i a b i l i t y of i n v e s t m e n t b r o k e r s a n d s e c u r i t i e s
brokers.
5.
L i a b i l i t y of b o r r o w e r s ,
borrowers,
including possible straw
a n d k i c k —b a c k s o r s i d e d e a l s w h i c h t h o s e
b o r r o w e r s m a y h a v e re c e i v e d .
6.
Additional
f r a u d u l e n t or s h a m r e a l e s t a t e
t r a n s a c t i o n s n o t i n c l u d e d in t h e R I C O C o m p l a i n t .
-1 3-
7.
T r a n s a c t i o n s r e l a t i n g to i n v e s t m e n t s in a n d s a l e s of
s e c u r i t i e s a n d j u n k bonds.
8.
T h e f r a u d u l e n t sale,
t r a n s f e r or d i v e r s i o n of
c o r p o r a t e a s s e t s or o p p o r t u n i t i e s of L i n c o l n .
9.
A d d i t i o n a l t r a n s a c t i o n s r e l a t i n g t o t h e d i v e r s i o n of
L i n c o l n ' s a s s e t s for t h e p e r s o n a l b e n e f i t of i n s i d e r s
a n d t h e i r a s s o c i a t e s as w e l l as for u s e in m a k i n g
political contributions.
4a.
FDIC'S AN ALYSIS OF THE SU PE RV IS OR Y H I ST OR Y OF LINCOLN
SAVINGS
T h e F D I C d i d n o t a t t e m p t to e v a l u a t e p a s t s u p e r v i s o r y
a c t i v i t i e s e x c e p t t o r e v i e w r e p o r t s w h i c h m i g h t be u s e f u l
r o l e as c o n s e r v a t o r .
Ho w e v e r ,
in ou r
certain information can be gained
f r o m t w o e x a m i n a t i o n s of L i n c o l n p r i o r t o c o n s e r v a t o r s h i p .
T h e e a r l i e r R e p o r t of E x a m i n a t i o n ,
d a t e d M a r c h 12,
1986,
c o mp le te d jointly by the San Francisco Federal Home Loan Bank
a n d t h e C a l i f o r n i a D e p a r t m e n t of S a v i n g s a n d L o a n f o u n d t h e
following:
(1)
$1.2 b i l l i o n in d i r e c t i n v e s t m e n t s v i o l a t e t h e
l i m i t a t i o n on d i r e c t i n v e s t m e n t s by $ 5 9 9 , 9 0 0 , 0 0 0 .
-14-
(2)
S e r i o u s d e f i c i e n c i e s in p o l i c i e s a n d p r o c e d u r e s for
i n v e s t m e n t in c o r p o r a t e d e b t a n d e q u i t y s e c u r i t i e s ,
l a c k of d i v e r s i f i c a t i o n ,
including
p o o r u n d e r w r i t i n g a n d a b s e n c e of
w r i t t e n u n d e r w r i t i n g standards,
e v i d e n c e of h i g h r i s k a n d
d i s r e g a r d of p r u d e n t i n v e s t m e n t .
(3) N u m e r o u s d e f i c i e n c i e s
in r e al e s t a t e i n v e s t m e n t
u n d e r w r i t i n g s t a n d a r d s s u c h as a p p r a i s a l s ,
studies and ca sh -f lo w projections,
l a c k of f e a s i b i l i t y
a n d h i g h l e v e l s of
concentrations.
(4) N u m e r o u s d e f i c i e n c i e s in re a l e s t a t e l o a n fu nd in g,
including heavy concentrations
concentrations
in r a w l a n d in A r i z o n a ,
in l o a n s t o on e b o r r o w e r ,
heavy
r e al e s t a t e l o a n s
granted without proper underwriting standards and numerous
documentation deficiencies.
(5) N o n - c o m p l i a n c e w i t h g e n e r a l l y a c c e p t e d a p p r a i s a l
standards.
(6)
S u b s t a n t i a l a n d w e l l - d e f i n e d w e a k n e s s e s r e s u l t i n g in
substandard loan classifications that total
$47,100,000.
(7) E i g h t l o a n s to o n e g r o u p t o t a l l i n g $ 7 9 , 0 0 0 , 0 0 0
re c l a s s i f i e d from loans to joint v e n t u r e s and th e reversal of
$2.8 m i l l i o n in r e c o g n i z e d income.
-1 5-
(8)
F a i l u r e to f o l l o w t h e A s s o c i a t i o n ' s C o m m u n i t y
R e i n v e s t m e n t A c t plan.
(9) R e v e r s a l of i m p r o p e r l y c a p i t a l i z e d i n t e r e s t a n d
i m p r o p e r l y c a p i t a l i z e d ex pe n s e s .
(10)
I n a d e q u a t e a n d n o n - e x i s t e n t re co rd s.
(11)
I m p r o p e r a n d s p e c u l a t i v e t r a d i n g in o p t i o n s a n d f o r w a r d
commitments.
(12)
E n g a g i n g in real p r o p e r t y t r a n s a c t i o n s w i t h a f f i l i a t e
p e r s o n s w i t h o u t r e c e i v i n g a p p r o v a l of t h e P r i n c i p a l S u p e r v i s o r y
Agent.
Wh il e our m i ss io n did not include ev al ua ti ng Li ncoln's
s u pe rv is or y history,
in o r d e r t o r e s p o n d t o t h e q u e s t i o n
a d d r e s s e d to us b y t h e C o m m i t t e e ,
I asked our professional
e x a m i n a t i o n s t a f f t o r e v i e w t h e 1986 R e p o r t of E x a m i n a t i o n of
Lincoln and to indicate how we might have reacted to the
f i n d i n g s if it h a d b e e n an i n s t i t u t i o n u n d e r o u r s u p e r v i s i o n .
T h e y t o l d m e t h a t t h e M a r c h 12,
1986 R e p o r t of E x a m i n a t i o n
de pi c t e d an in stitution that w a rr an te d immediate e n f o rc em en t
ac ti on .
O w n e r s h i p of t h e a s s o c i a t i o n h a d c h a n g e d a b o u t o n e y e a r
be fo re and this Re po rt documents that the institution had been
t r a n s f o r m e d f r o m a t r a d i t i o n a l a s s o c i a t i o n to a h i g h - g r o w t h ,
-1 6-
risky operation.
My staff indicated that had we ma de such
f i n d i n g s in o n e of o u r o w n i n s t i t u t i o n s ,
w e w o u l d h a v e s o u g h t an
i m m e d i a t e c e a s e - a n d - d e s i s t o r d e r to s t o p t h e h a z a r d o u s
operations.
A new ex amination was un dertaken by the Federal Home Loan
B a n k B o a r d a n d r e p o r t e d on J u l y 11,
1988.
This examination
r e v e a l e d a l a r g e i n c r e a s e in c l a s s i f i e d a s s e t s w h e n c o m p a r e d
w i t h c l a s s i f i c a t i o n s f r o m t h e p r e v i o u s M a r c h 12,
1986
e x a m i n a t i o n as s h o w n b y t h e fo l l o w i n g :
E x am in at io n Date
Substandard
Doubtful
Loss
Total
7-11-88
3-12-86
706,501,099
39.600.000
-
0
34,365,375
-
7.500.000
59.635.377
47.100.000
800,501,851
T h e R e p o r t of E x a m i n a t i o n d a t e d J u l y 11,
1988 s t a t e d that:
" W h i l e t h e i n s t i t u t i o n m e t its r e g u l a t o r y c a p i t a l
r e q u i r e m e n t at t h e e x a m i n a t i o n date,
the specific losses
i d e n t i f i e d c o u p l e d w i t h t h e r e g u i r e m e n t to r e v e r s e c e r t a i n
t r a n s a c t i o n s r e n d e r t h e i n s t i t u t i o n s a b i l i t y t o m e e t its f u t u r e
net w o rt h requirement questionable.
In a n y e v e n t it is t h e
r e c o m m e n d a t i o n of t h i s e x a m i n a t i o n t h a t an i n d i v i d u a l m i n i m u m
n e t w o r t h r e q u i r e m e n t be e s t a b l i s h e d for Li n c o l n .
This
-1 7-
r e c o m m e n d a t i o n is b a s e d u p o n th e le ve l of p r o b l e m as s e t s ,
the
v o l u m e of a c t i v i t y in a s s e t s p o s s e s s i n g a h i g h e r d e g r e e of
i n h e r e n t r i s k t h a n t h a t of t h e m o r e t r a d i t i o n a l
f i n a n c i n g of
si ng le-family dwellings and concentrations with in these
categories."
( e m p h a s i s added)
T h e R e p o r t a l s o stated:
"T he le ve l of p r o b l e m a s s e t s is
s i g n i f i c a n t at o v e r 12 p e r c e n t of t o t a l a s s e t s a n d f o u r a n d
o n e - h a l f t i m e s ca p i t a l .
Further ex ac er ba ti ng the situ at io n and
r i s k t o c a p i t a l a r e t h e c o n c e n t r a t i o n s as w e l l as t h e n u m e r o u s
investments that are illiquid and where the future perf or ma nc e
of t h e a s s e t s
is n o t w i t h i n t h e c o n t r o l of m a n a g e m e n t . "
B a s e d on t h e o p i n i o n of o u r p r o f e s s i o n a l
s u p e r v i s o r y staff,
immediate supervisory action was warranted.
Our review upon beco mi ng co ns er va to r less than one ye ar
l a t e r f o u n d L i n c o l n i n s o l v e n t b y a p p r o x i m a t e l y $800 m i l l i o n .
Thus,
e i t h e r t h e 1988 R e p o r t d i d n o t r e v e a l t h e t r u e c o n d i t i o n
of L i n c o l n o r l a r g e l o s s e s w e r e t a k e n d u r i n g t h e i n t e r v e n i n g
p e r i o d as a r e s u l t of t h e m a n n e r in w h i c h t h e t h r i f t h a d b e e n
operating.
4b.
FUTURE SUPERVISORY EFFORTS
T h e F D I C k n o w s of no f o o l - p r o o f s o l u t i o n s for p r e v e n t i n g
a n o t h e r t h r i f t c r i s i s or for p r e v e n t i n g a r e c u r r e n c e of t h e
-1 8-
L i n c o l n S a v i n g s a n d L o a n losses.
W h a t w e c a n offer,
however,
ar e t h r e e f u n d a m e n t a l p r i n c i p l e s of s o u n d s u p e r v i s i o n t h a t h a v e
s e r v e d w e l l o v e r o u r 5 5 - y e a r hi s t o r y .
First,
a n d t h i s s h o u l d c o m e as n o s u r p r i s e ,
the FDIC
b e l i e v e s the industry must be well capitalized.
Capital
industry's natural shock absorber.
is t h e
Well-capitalized
i n s t i t u t i o n s a r e b e t t e r a b l e to a b s o r b losses,
a d j u s t to
c h a n g i n g e n v i r o n m e n t s a n d t a k e a d v a n t a g e of o p p o r t u n i t i e s as
t h e y arise.
the public,
A d e q u a t e c a p i t a l l e v e l s a l s o i n s t i l l c o n f i d e n c e in
p e r m i t h e a l t h y gr ow th ,
f r o m i n s u r a n c e losses.
and cushion the go vernment
W e b e l i e v e o w n e r s of i n s t i t u t i o n s w h o
s t a n d t o g a i n f r o m t h e s u c c e s s of an i n s t i t u t i o n s h o u l d h a v e
e n o u g h of t h e i r o w n c a p i t a l at r i s k so t h a t t h e y s t a n d to feel
t h e l o s s if t h e i n s t i t u t i o n fails.
Cl e a r l y ,
the recent thrift
c r i s i s h a s s h o w n t h a t an u n d e r c a p i t a l i z e d i n d u s t r y is a
d e s t a b i l i z e d i n d u st ry .
T h e r e is no b e t t e r w a y t o i n s t i l l
s t a b i l i t y t h a n t o r e q u i r e o w n e r s to m a i n t a i n r e a s o n a b l e c a p i t a l
in t h e
capital
institution.
levels
N o t h i n g in r e c e n t h i s t o r y i n d i c a t e s t h a t
in th r i f t s ,
or b a n k s , a r e t o o h i g h u n d e r p r e s e n t
standards.
S e co nd ,
financial
i n s t i t u t i o n s m u s t b e r e q u i r e d t o a d h e r e to
proper accounting standards which reveal true financial
condition.
T h e p r a c t i c e of " p a p e r i n g o v e r "
l o s s e s or i n f l a t i n g
-1 9-
pr of it s t h ro ug h acco un ti ng changes leads in evitably to costly
r e a l i t y at a f u t u r e time.
Fu r t h e r ,
m i s l e a d i n g a c c o u n t i n g a l l o w s i n s t i t u t i o n s w i t h no
re al c a p i t a l t o o p e r a t e on a c c o u n t i n g - c r e a t e d i l l u s o r y c a p i t a l
—
t h u s in e f f e c t e l i m i n a t i n g c a p i t a l s t a n d a r d s a n d a l l o w i n g
u n l i m i t e d gr o w t h .
T h e u s e of a c c o u n t i n g g i m m i c k s in t h e e a r l y
1 9 8 0 s p r o v e d a v e r y e x p e n s i v e l e s s o n i n d e e d for t h e A m e r i c a n
taxpayers.
Th ird,
is tough,
a s u p e r v i s o r y s t a f f a n d p r o g r a m m u s t b e in p l a c e t h a t
fair,
responsive,
political pressures.
i n d u s t r y i n d e p e n d e n t a n d f r ee of
T h e i m p o r t a n c e of t h e r e g u l a t o r s '
independence cannot be overstated.
E f f e c t i v e s u p e r v i s i o n p r o t e c t s t h e pu b l i c .
financial
It a l s o p r o t e c t s
i n s t i t u t i o n s t h a t are c o i n s u r e r s in t h e f u n d a n d ar e
o p e r a t i n g in a s a f e - a n d - s o u n d m a n n e r .
be a d v e r s a r i a l ,
Such s u pe rv is io n need not
b u t it m u s t be " u n i n f l u e n c a b l e ."
F I R R E A h a s r e d u c e d t h e l i k e l i h o o d of t h e r e c u r r e n c e of c a s e s
s i m i l a r to Li n c o l n .
It p r o v i d e s for i m p r o v e d c a p i t a l s t a n d a r d s ,
t o ug he r o p er at in g standards and stiffer p e na lt ie s
for those
m a n a g e r s w h o w o u l d v i o l a t e t h e i r p o s i t i o n s of trust..
law p r ov id es
The new
fo r s t r o n g e r r e g u l a t o r y o v e r s i g h t of t h e i n d u s t r y
-
20
-
w i t h a n i n d e p e n d e n t O f f i c e of T h r i f t S u p e r v i s i o n as t h e p r i m a r y
F e d e r a l r e g u l a t o r a n d t h e F D I C as t h e b a c k u p F e d e r a l s u p e r v i s o r .
W h i l e m u c h h a s b e e n d o n e t o t r y t o a v o i d t h e p r o b l e m s of the
past by recent legislation,
as a l w a y s t h e m o s t i m p o r t a n t f a c t o r
t o c a r r y o u t t h e i n s u r e r ' s m a n d a t e is t h e e x i s t e n c e of a
p r o f e s s i o n a l l y trained,
staff.
competent and independent supervisory
T h a t s t a f f m u s t b e a u t h o r i z e d t o c a r r y o u t its m a n d a t e
of s u p e r v i s i o n of f i n a n c i a l
influence.
i n s t i t u t i o n s w i t h o u t f e a r of o u t s i d e
If L i n c o l n t e a c h e s us an y t h i n g ,
it t e l l s u s t h a t
t h i s g r o u p of g o v e r n m e n t e m p l o y e e s m u s t b e fr ee t o t a k e a c t i o n
n e c e s s a r y to m a i n t a i n safety and soundness.
Th ey are the
e s s e n t i a l t h i n b l u e l i n e p r o t e c t i n g t h e f i n a n c i a l s y s t e m a n d the
t a x p a y e r f r o m b i l l i o n d o l l a r i n s u r a n c e losses.
Preliminary
Unaudited
LINCOLN SAVINGS AND LOAN ASSOCIATION
FINANCIAL INFORMATION
(S-OOO'a)
ASSETS
Cash and Cash Equivalant»
Investment securities« net
Mortgege~8ecked Securities
loans and Other Receivables« net
Real Estate Inventories« net
Property« buildings and
Equipment, net
Prepaid Expenses and Other Assets
Excess of Cost over Nat
Assets Acquired
A
February 29,
1064
S
14,456
25,451
211,771
668,074
65,556
Comparative Consolidated Statements
of Financial Condition________
B
c
February 28,
June 30,
1986
1988
S
867,723
712,875
1,889
929,944
632,143
S
154,125
1,709,164
1,379,198
1,405,431
907,161
D
February 28,
1989*
S
145,143
1,931,805
1,432,316
1,521,083
1,009,481
E
FDIC
Estimated
Value et
February 28, 1989
S
145,143
1,850,327
1,432,404
1,232,147
605,157
15,921
23,150
41,961
43,423
330,106
86,618
364,316
98,099
285,053
97,173
98.443
104.389
102.290
96.996
53.245
Î1J.UÆ
1
S
833,187
0
$1,411,182
1,074,390
$2,173,531
1,545,648
$2,409,065
1,861,546
$2,409,065
1,861,546
20,615
217.208
81,609
618.829
402,668
1.889.831
446,798
502,557
. 1.693,563
5-811-698
6-399.724
6.466.733
262.395
___1?9,51.5
LIABILITIES AND SHAREHOLDER'S EQUITY
Tina t Savings Deposits
Brokered Deposits
Accortts Payable and Other
Liabilities
Borrowings
1,971.910
Shareholder's Equity
51-592
Si.122.602
m
-148.337
h Æ i , &
$6,599,239
1766.084)
$5.700.649
ATTACHMENT
LAWSUIT
TABLE OF CONTENTS
I.
THE PARTIES
....................................................
A.
Th e P l a i n t i f f ..........................................
1
B.
The Defendants
. ...................................
5
...................................
25
II.
JURISDICTION AND VENUE
III.
S U M M A R Y OF P L A I N T I F F ’S A C T I O N ........................
A.
B.
C.
IV.
1
T h e S c h e m e and A r t i f i c e To D e f r a u d Old
L i n c o l n and the R e g u l a t o r y A u t h o r i t i e s .
. .
25
-..........
26
B r e a c h e s of F i d u c i a r y D u t i e s by Old
L i n c o l n ' s D i r e c t o r s and O f f i c e r s
..................
29
D e f e n d a n t s ' M o t i v e s for Illegal,
F r a u d u l e n t , and I m p r u d e n t T r a n s a c t i o n s
33
FACTS UN D E R L Y I N G CLAIMS
FORRELIEF
............
......................
36
A.
The ACC En terprise
. .................................
36
B.
A c q u i s i t i o n and M a i n t e n a n c e of C o n t r o l
of O l d L i n c o l n t h r o u g h a S c h e m e and
A r t i f i c e To D e f r a u d Ol d L i n c o l n
and the R e g u l a t o r y A u t h o r i t i e s
....................
38
1.
C.
The Regula to ry Structure
P r o t e c t i n g the D e p o s i t Ba se
T a r g e t e d by the A C C E n t e r p r i s e ...............
38
2.
T a r g e t i n g of Old L i n c o l n .......................
41
3.
A c q u i s i t i o n of Old L i n c o l n ....................
42
4.
E x p a n s i o n of the A C C E n t e r p r i s e To
I n c l u d e Old L i n c o l n and Its S u b s i d i a r i e s
44
. .
5.
M a i n t a i n i n g C o n t r o l of O l d L i n c o l n ..........
46
6.
O p e r a t i o n of Old L i n c o l n .......................
51
Th e F r a u d u l e n t T a x P l a n ..............................
53
1.
O v e r v i e w of the F r a u d u l e n t
T a x P l a n ............
53
2.
3.
4.
5.
6.
7.
D.
D e c e i t u p o n the R e g u l a t o r y A u t h o r i t i e s To
O b t a i n A p p r o v a l of F r a u d u l e n t T a x Pl-an . . .
56
H i d d e n V a l l e y S c h e m e and A r t i f i c e
To D e f r a u d - T a x P l a n A s p e c t s
. . . . . . .
63
(a)
Garcia Purchase
66
(b)
C o n t i n e n t a l / A d o b e Purchase.. .............
67
(c)
R i ch mo nd Am er i c a n Homes Purchase.
68
(d)
M. D. C.
(e)
Hamilton Purchase
(f)
Emerald Homes Purchase
(g)
HVPLP Purchase
(h)
National Realty Purchase
(i)
Gascon Development Purchase
(j)
U.S.
...............
. . .
P u r c h a s e ......................
69
.........................
. . . . . . . .
.
70
71
72
...............
.............
H o m e P u r c h a s e ................
73
74
74
Crowder Water Ranch Scheme
an d A r t i f i c e - T a x P l a n A s p e c t s . ............
75
R a n c h o V i s t o s o S c h e m e and
Arti fi ce - Tax Plan Aspects
81
. ................
Continental Ranch Scheme
a n d A r t i f i c e - T a x P l a n A s p e c t s ............
86
T h e R a c k e t e e r i n g D e f e n d a n t s ' A t t e m p t s To
C o n c e a l the F r a u d P r a c t i c e d U n d e r the
T a x P l a n ...........................................
87
F r a u d u l e n t L o a n s for the B e n e f i t
of I n s i d e r s a n d A f f i l i a t e d P e r s o n s
1.
. . . . .
Hotel Po nt ch ar tr ai n Scheme
and A r t i f i c e - I n s i d e r L o a n s
t ............
. . . . . . . .
90
2.
R a n c h o V i s t o s o S c h e m e an d A r t i f i c e Straw7 B o r r o w e r and I n s i d e r L o a n A s p e c t s
on the R a n c h o V i s t o s o L o a n s ..................... 1°°
3.
Crowder Water Ranch Scheme
and A r t i f i c e - D i v e r s i o n
of F u n d s to C. V. N a l l e y ............... ..
1C ±
4.
E.
M a n i p u l a t i o n of S t o c k T r a n s a c t i o n s as
a S c h e m e a n d A r t i f i c e To D e f r a u d Old
............... ..
L i n c o l n a n d To B e n e f i t I n s i d e r s
1.
2.
3.
F.
G.
V.
Continental Ranch/R.A. Homes
S c h e m e and A r t i f i c e - S t r a w
B o r r o w e r a n d I n s i d e r L o a n A s p e c t s ............ 102
D i v e r s i o n to A C C of P r o f i t s
f r o m t h e S a l e of M e m o r e x S t o c k
107
.............107
A b u s e of tie A C C E m p l o y e e S t o c k
O w n e r s h i p P l a n for th e B e n e f i t of
th e K e a t i r g F a m i l y a n d O t h e r I n s i d e r s
. . .
Ill
V i o l a t i o n of 18 U. S. C. § 1954
in F u r t h e r a n c e of t h e S c h e m e
and A r t i f i c e To D e f r a u d .......................115
C o n d u c t i n g th e B u s i n e s s and A f f a i r s
of th e A C C E n t e r p r i s e T o S i p h o n
an d D i v e r t th e P r o f i t s an d A s s e t s
of O l d L i n c o l n to B e n e f i t the
K e a t i n g F a m i l y a n d o t h e r I n s i d e r s ..................
116
U s e of th e U.S. M a i l s and W i r e s in
F u r t h e r a n c e of t h e S c h e m e a n d
A r t i f i c e To D e f r a u d .............................. .
117
.
C L A I M S F O R R E L I E F ........................................... 13 6
A.
B.
C O U N T I - V i o l a t i o n of 18 U . S. C. § 1962(c) by
C o n d u c t i n g or P a r t i c i p a t i n g in the C o n d u c t
of t h e A f f a i r s of th e A C C E n t e r p r i s e
t h r o u g h a P a t t e r n of R a c k e t e e r i n g A c t i v i t y
. . .
136
C O U N T II - V i o l a t i o n of 18 U.S.C.
§ 1962(b) by A c q u i r i n g or M a i n t a i n i n g an
I n t e r e s t in and C o n t r o l of O l d L i n c o l n
t h r o u g h a P a t t e r n of R a c k e t e e r i n g A c t i v i t y
139
. . .
C.
C O U N T III - V i o l a t i o n of 18 U . S. C. § 1962(a)
by R e c e i v i n g I n c o m e D e r i v e d f r o m a P a t t e r n
of R a c k e t e e r i n g A c t i v i t y and I n v e s t i n g It
in O p e r a t i o n of t h e A C C E n t e r p r i s e ............... 140
D.
C O U N T IV - V i o l a t i o n of 18 U.S.C.
§ 1 9 6 2 (d) by C o n s p i r i n g To V i o l a t e R I C O
..........
141
E.
C O U N T V - C o m m i s s i o n of R a c k e t e e r i n g
U n d e r A . R . S . § 1 3 - 2 3 0 1 . D . 4 ............................142
F.
C O U N T VI - I l l e g a l C o n t r o l of an E n t e r p r i s e
in V i o l a t i o n of A. R.S. § 1 3 - 2 3 1 2 . A.
............ 145
G.
COUNT VII - Co nducting o r _
P a r t i c i p a t i n g in the A f f a i r s of an
E n t e r p r i s e t h r o u g h R a c k e t e e r i n g in
V i o l a t i o n of A. R. S. § 1 3 - 2 3 1 2 . B ..................... 146
H.
C O U N T V I I I - C o m m o n L a w F r a u d .......................... 147
I.
C O U N T IX - C i v i l C o n s p i r a c y ............................. 148
J.
C O U N T X - B r e a c h of Net
W o r t h M a i n t e n a n c e A g r e e m e n t ............... •
• ; •
149
K.
C O U N T XI - A l t e r E g o .....................................I 50
L.
C O U N T XII - B r e a c h of F i d u c i a r y D u t i e s .............. 152
M.
C O U N T X I I I - G r o s s N e g l i g e n c e ...........................156
N.
COUNT XIV - Joint and Several
L i a b i l i t y of t h e S p o u s a l D e f e n d a n t s
O.
...............
C O U N T XV - C o n s t r u c t i v e T r u s t ....................... 157
VI.
D A M A G E S ............................ ...........................
VII.
PRAYERS
VIII.
J U R Y D E M A N D .............................................
157
FOR RELIEF
159
.......... * ............... ............ 159
161
ATTACHMENT A
C H A R L E S H. K E A T I N G , III
J U D Y J. W I S C H E R
R O B E R T J. K I E L T Y
R O B E R T M. W U R Z E L B A C H E R , JR.
A N D R E W F. L I G G E T
R O B E R T J. H U B B A R D , JR.
A N D R E A. N I E B L I N G
MARK S . SAUTER
G A R Y W. H A L L
W I L L I A M J. K E A T I N G
MARY ELAINE KEATING
K R I S T A K. K E A T I N G
G E O R G E J. W I S C H E R
E L I Z A B E T H A. K I E L T Y
ELIZABETH WURZELBACHER
MICHELLE LIGGET
K A T H L E E N M. H U B B A R D
H E L E N M. N I E B L I N G
M A R Y A. H A L L
FIRST LINCOLN FINANCIAL CORPORATION
M E D E M A H O M E S OF UTAH, INC.
U N I T E D L E A S I N G C O R P O R A T I O N OF DE LAV; A R E
AMERICAN CONTINENTAL MORTGAGE COMPANY
AMERICAN CONTINENTAL RESOURCES CORPORATION
C O N T I N E N T A L FIRE & CASUALTY COMPANY
T A T U M PLACE, INC.
A M E R I C A N C O N T I N E N T A L P R O P E R T I E S , INC.
P A R K D R I V E A P A R T M E N T S , INC.
A. C. C. R E A L ES TA TE , INC.
D U N L A P A P A R T M E N T S , INC.
A M E R I C A N C O N T I N E N T A L F IN’AN CE C O R P O R A T I O N
A M E R I C A N C O N T I N E N T A L F I N A N C E C O R P O R A T I O N II
CONTINENTAL HOME FINANCE CORPORATION
A M ER IC AN HOME FINANCE CORPORATION7
A M E R I C A N H O M E F I N A N C E C O R P O R A T I O N II
A M E R I C A N H O M E F I N A N C E C O R P O R A T I O N 7 III
attachment
P. J o h n O w e n
N a n c y L. S h e l l e d y
M O R R I S O N , H E C K E R , CURTIS,
KUDER & PARRISH
17 00 B r y a n t B u i l d i n g
1102 G r a n d A v e n u e
K a n s a s City, M i s s o u r i
6410 6
(816) 8 4 2 - 5 9 1 0
M i c h a e l C. M a n n i n g
R o b e r t J. I t k i n (State B a r No.
M O R R I S O N , H E CK ER , CURTIS,
KUDER & PARRISH
1600 F i n a n c i a l C e n t e r
3443 N o r t h C e n t r a l A v e n u e
P h oe ni x, A r i z o n a 85012
(602) 2 7 9 - 1 6 0 0
10937)
b
M i c h a e l C. M a n n i n g
R o b e r t J. I t k i n (State B a r No.
M O R R I S O N , H E C K E R , CURTIS,
KUDER & PARRISH
1600 F i n a n c i a l C e n t e r
3443 N o r t h C e n t r a l A v e n u e
P h o e ni x, A r i z o n a 85012
(602) 2 7 9 - 1 6 0 0
10937)
P. J o h n O w e n
N a n c y L. S h e l l e d y
M O R R I S O N , HE CK ER , CURTIS,
KUDER & PARRISH
1700 B r y a n t B u i l d i n g
1102 G r a n d A v e n u e
K a n s a s City, M i s s o u r i
64106
(816) 8 4 2 - 5 9 1 0
A t t o r n e y s for P l a i n t i f f
Re solution Trust Corporation,
as C o n s e r v a t o r for L i n c o l n
S a v i n g s and L o a n A s s o c i a t i o n ,
F.A.
UNITED STATES DISTRICT COURT
D I S T R I C T OF A R I Z O N A
RESOLUTION TRUST CORPORATION,
AS C O N S E R V A T O R F O R L I N C O L N
SAVINGS AND LOAN ASSOCIATION,
F.A. ,
)
)
Civil Action
)
No.
)
)
)
COMPLAINT WITH JURY TRIAL
DEMAND
Plaintiff,
v.
C H A R L E S H. K E AT IN G, JR.;
C H A R L E S H. K E AT IN G, III;
J U D Y J. W I S C H E R ;
ROBERT' J. K I E L T Y ;
R O B E R T M. W U R Z E L B A C H E R , J R . ;
A N D R E W F. LI GG ET ;
R O B E R T J. HU B B A R D , JR.;
A N D R E A. N I E B L I N G ;
.
MARK S . SAUTER ;
G A RY W. HALL;
iI LLjAM J . KE AT IK G ;
)
)
)
)
MARY ELAINE KEATING;
K R I S T A K. K E A T I N G ;
G E O R G E J. W I S C H E R ;
E L I Z A B E T H A. KI E L T Y ;
ELIZABETH WURZELBACHER;
M I C H E L L E LI GG ET ;
K A T H L E E N M. H U B B A R D ;
H E L E N M. N I E B L I N G ;
M A R Y A. HALL;
FIRST LINCOLN FINANCIAL
CORPORATION;
M E D E M A H O M E S O F UTAH, INC.
UNITED LEASING CORPORATION
OF DELAWARE;
AMERICAN CONTINENTAL
M O R T G A G E COMPANY;
AMERICAN CONTINENTAL
RESOURCES CORPORATION;
CONTINENTAL FIRE &
CASUALTY COMPANY;
T A T U M PLACE, INC.;
AMERICAN CONTINENTAL
P R O P E R T I E S , INC.;
P A R K D R I V E A P A R T M E N T S , INC
A . C. C. R E A L ES TATE, INC.;
D U N L A P A P A R T M E N T S , INC.;
AMERICAN CONTINENTAL
FINANCE CORPORATION;
AMERICAN CONTINENTAL
F I N A N C E C O R P O R A T I O N II;
CONTINENTAL HOME FINANCE
CORPORATION ;
AMERICAN HOME FINANCE
CORPORATION ;
AMERICAN HOME FINANCE
C O R P O R A T I O N II; and
AMERICAN HOME FINANCE
C O R P O R A T I O N III,
COMPLAINT
Plaintiff
Resolution
Trust
Corporation,
as
C o n s e r v a t o r for L i n c o l n S a v i n g s and L o a n A s s o c i a t i o n , F . A . , for its
c l a i m s for r e l i e f a g a i n s t d e f e n d a n t s ,
I.
THE P A R T I E S .
A.
The P l a i n t i f f .
1.
The
agency
and
United
States
Congress
Re fo rm ,
(" F I R R E A " ) , Pub.
created
the
problems
RTC
of
L.
to
L o a n B a n k Act,
Federal
of
the
Recovery,
and
to
103
ma na ge ,
lo an
Corporation
United
an d
101-73,
co nt ai n,
(" R T C " )
States
Title
V
created
of
the
Enforcement
Stat.
and
associations
183
d e al
ti tl es ,
Savings
and
rights,
of
its
and
titles,
an d
as sets.
Pursuant
powers,
Lo a n
(1989).
set f o r t h
1989
expeditiously
and
with
Pursuant
assets
Corporation
to
Corporation
respect
Section
501(a)
(M F D I C M )
("FSLIC")
as
F.A., and (b)
is
institution
of
depositors,
institution
FIRREA,
authorized
Federal
to
and
its
Deposit
perform
all
P a r a g r a p h s 2 t h r o u g h 11 d e s c r i b e the
the R T C b e c a m e
in t h i s C o m p l a i n t .
the
accountholders,
to t h a t
(a)
of
and p r i v i l e g e s of t h a t
me m b e r s ,
directors with
in w h i c h
the
Congress
("t h r i f t s " ).
privileges,
Insurance
po we rs ,
r e s p o n s i b i l i t i e s of the RTC.
manner
of
§ 1421 et s e a . . t h e R T C h a s s u c c e e d e d
shareholders,
officers,
Insurance
by
an
Financial
Act
C o n s e r v a t o r for L i n c o l n S a v i n g s and L o a n A s s o c i a t i o n ,
to all
is
of FIRREA, a d d i n g S e c t i o n 21 A to t h e F e d e r a l H o m e
12 U. S. C.
rights,
Trust
pursuant
No.
savings
to S e c t i o n 501(a)
all
Resolution
instrumentality
Institutions
to
states:
empowered to pr osecute
the
claims
2
purposes
T h e F S L I C w a s a c o r p o r a t e i n s t r u m e n t a l i t y and,
of T i t l e
28 of the U n i t e d S t a t e s Code,
for
an a g e n c y of t h e
U n i t e d S t a t e s c r e a t e d b y the U n i t e d S t a t e s C o n g r e s s .
12 U . S . C .
§§
1725(a) , 17 30 (k) (1) (A) .
T h e F S L I C o p e r a t e d at t h e d i r e c t i o n of th e
Federal
Board
Home
17 2 5 ( a ) ,
Loan
Bank
1725(c).
Depression
for
(" F H L B B " ).
12
U. S. C.
§§
1437(b),
T h e F S L I C w a s c r e a t e d in t h e m i d s t of t h e G r e a t
the
purpose
of
stabilizing
the
nation's
thrift
i n d u s t r y a n d p r o m o t i n g e c o n o m i c a l h o m e fi n a n c i n g .
3.
P u r s u a n t t o 12 U. S. C.
§§ 1464 (d) (6) (A) an<3 1729 (c
t h e F H L B B h a d t h e a u t h o r i t y t o a p p o i n t the F S L I C as c o n s e r v a t o r o r
receiver
state
for a n y t h r i f t
law
if t h e F H L B B d e t e r m i n e d t h a t t h e
a n y o n e of them,
4.
Savings
unsafe
under
to
the
violations
in
la ws
1989,
of
of
the
("Old
the
condition
a substantial
un so un d practices.
1328P,
14,
Association
unsound
experienced
due
April
Loan
and
statutory grounds,
or
ex i s t e d .
On
and
chartered
insured by the FSLIC and c h ar te re d under
State
to
rules,
found
Lincoln"),
of
or
of
an
that
its
business
assets
regulations
Lincoln
insured
California,
transact
dissipation
law,
FHLBB
thrift
was
in
and
an
had
and e a r n i n g s
and
unsafe
and
T h e r e f o r e , p u r s u a n t to F H L B B R e s o l u t i o n No. 89-
accordance
with
12
U.S.C.
§§
1 4 6 4 ( d ) ( 6 ) (A)
and
1 7 2 9 (c) (1) (B) (i) (I) , t h e F H L B B a p p o i n t e d t h e F S L I C as C o n s e r v a t o r
f o r O l d Lincoln.
On t h e s a m e date,
as t h e m a n a g i n g a g e n t
5.
On
t h e F H L B B d e s i g n a t e d t h e F D IC
(" Ma n a g i n g Agent")
August
2,
1989,
for t h e C o n s e r v a t o r .
the
FHLBB
replaced
the
C o n s e r v a t o r w i t h t h e F S L I C as R e c e i v e r for O l d L i n c o l n p u r s u a n t to
F H L B B R e s o l u t i o n No.
14 6 4 (d)(6)(A)(i),
FHLBB
also
A p r i l 14,
1464 (d)(6)(D),
found
1989,
8 9 - 2 1 6 3 P a n d in a c c o r d a n c e w i t h
that
Old
and
Lincoln
12 U. S.C.
1729 (c) (1) (B) (i ) (I ) .
was
in so lv en t,
and co ntinuing thereafter,
at
§§
The
least
as
of
in t h a t its a s s e t s w e r e
le ss t h a n its o b l i g a t i o n s to its c r e d i t o r s a n d ot he rs .
The FHLBB
t h e n d i r e c t e d t h e F S L I C as R e c e i v e r to l i q u i d a t e O l d Li n c o l n .
The
FHLBB, p u r s u a n t to R e s o l u t i o n s Nos. 8 9 - 2 1 6 4 P t h r o u g h 8 9 - 2 1 6 SP, a l s o
d i re ct ed the FSLIC to organize
known
as
Lincoln
Lincoln"),
of
Savings
a new
and
federal mutual
Loan
t h r i f t to be
Association,
F.A.
("New
a u t h o r i z e d t h e c h a r t e r i n g of N e w L i n c o l n a n d i n s u r a n c e
accounts
L i n c o l n to
at
it,
enter
and
authorized
in to a p u r c h a s e
the
and
FSLIC
as R e c e i v e r
for Ol d
assumption transaction with
N e w L i n c o l n b y e x e c u t i n g an A c q u i s i t i o n A g r e e m e n t w i t h N e w Lincoln.
6.
Due to t h e i n s o l v e n c y of O l d L i n c o l n a n d b y v i r t u e
of t h e p u r c h a s e and a s s u m p t i o n t r a n s a c t i o n d e s c r i b e d
5,
New
Lincoln
therefore,
with
in s o l v e n t .
pursuant
12 U . S. C.
for N e w
is
in
the
August
to R e s o l u t i o n No.
§ 1464(d)(6)(B)
Li n c o l n ,
described
On
On
effective upon
resolutions
August
3,
p o s s e s s i o n of O l d L i n c o l n and,
Acquisition
Li n c o l n ,
purchased
Agreement
consummation
identified
1989,
and
the
FHLBB,
in a c c o r d a n c e
of the
in
the
the
FSLIC
FSLIC,
right,
5,
and
for th e C o n s e r v a t o r .
as
Receiver
as
title,
and
took
e x e c u t e d an
Receiver
P u r s u a n t to t h i s A g r e e m e n t ,
all of the R e c e i v e r ' s
transactions
paragraph
immediately thereafter,
between
a n d N e w Li nc ol n.
89-2169P
1989,
a p p o i n t e d th e F S L I C as C o n s e r v a t o r
d e s i g n a t e d t h e F D I C as M a n a g i n g A g e n t
7.
2,
in p a r a g r a p h
for
Ol d
New Lincoln
interest
in and
to
Old
Lincoln's
subsidiaries
assuming
re su lt ,
including
as sets,
("Lincoln
each
of
its
first-tier
Subsidiaries")
substantially
all
of
Old
Lincoln's
liabilities.
As' a
N e w L i n c o l n a c q u i r e d t h e c l a i m s and c h o s e s in a c t i o n w h i c h
form the
bases
for this
Complaint.
Lincoln then was implemented,
Managing Agent
The
conservatorship
for N e w
a n d t h e F D I C c o m m e n c e d a c t i n g as t h e
fo r t h e C o n s e r v a t o r .
8.
By
virtue
of
th e
foregoing
matters,
on
August
1989, u p o n t h e e f f e c t i v e n e s s of its a p p o i n t m e n t as C o n s e r v a t o r for
New Lincoln,
t h e C o n s e r v a t o r s u c c e e d e d b y o p e r a t i o n of law to all
t h e as se ts ,
ri gh ts ,
a n d its m e m b e r s ,
1729 (b) , b y
C.F.R.
and
directors,
virtue
maintain
of
12
an d p r i v i l e g e s of N e w L i n c o l n
a n d of f i c e r s ,
U. S. C.
§
p u r s u a n t to 12 U . S . C .
1729 (c) (1) (B) (i) (II) , a n d
any
As
ex ercised the
§
12
FI RR EA ,
the
RTC,
titles,
powers,
damages
in
which
Agent
for
the
New
L i nc ol n,
its
p u r s u a n t to 12 C.F.R.
Conservator,
the
FD I C
f o r e g o i n g r i g h t s an d p o w e r s on b e h a l f of t h e FSLIC.
In
accordance
as
the
with
Sections
successor
privileges,
N e w Li n c o l n ,
party
proceedings
Managing
9.
Lincoln,
le ga l
or its m e m b e r s h a v e an in te re st ,
54 8. 2 (f) .
real
po we rs ,
§ 547.7, an d a l s o b e c a m e a u t h o r i z e d to in s t i t u t e , p r o s e c u t e ,
creditors,
§
ti tl es ,
in
and assets,
212(a)
interest
and
to
the
of
rights,
cl aims,
of Old
a n d t h e F S L I C as t h e i r C o n s e r v a t o r s ,
is the
in i n t e r e s t to t h i s
including
501(a)
action and
is e n t i t l e d t o r e c o v e r
for i n j u r i e s s u s t a i n e d by O l d Li nc ol n.
10.
The
RTC,
as th e
statutory
successor
to t h e FSLIC,
a p p e a r s as p l a i n t i f f in its c a p a c i t y as C o n s e r v a t o r for N e w L i n c o l n
to r e c o v e r d a m a g e s
s u s t a i n e d b y O l d L i n c o l n and N e w
L i n c o l n as a
c o n s e q u e n c e of t h e c o n d u c t a l l e g e d he rein.
11.
the
RTC
Pursuant
itself
has
to
Sections
authority
to
212(a)
sue
and
and
501(a)
of FIRREA,
ha s
succeeded
to
th e
F S L I C ’s a u t h o r i t y to sue.
12.
9,
1989,
of
the
At
all
th e FHLBB,
FSLIC
t h r o u g h its A g e n c y Group,
with
negotiations,
t i m e s p e r t i n e n t h e r e t o an d p r i o r to A u g u s t
respect
to
applications,
all
and
de
facto
B.
The D e f e n d a n t s .
13.
Certain
directors,
af fi li at ed persons,
dealings
(as de f i n e d ,
defendants
of f i c e r s ,
communications,
other
de fe nd an ts and the ACC Enterprise
was the known agent
in t h i s
de
involving
the
infra) .
action
facto
contracts,
were
officers,
directors,
af fi l i a t e s ,
a n d / o r c o n t r o l l i n g p e r s o n s of O l d Li nc ol n,
the
Lincoln Subsidiaries, Old Lincoln's parent holding companies, First
Lincoln
Financial
Corporation
Continental Corporation
all
of
the
Li n c o l n ,
voting
issued
wh ic h,
in
securities
corporation,
shareholder
but
American
("ACC"), a n d s u b s i d i a r i e s of ACC.
A C C ow ns
outstanding
turn,
of
is
Charles
an d
and
ow ns
Ol d
holds
Jr.
all
controlled
H.
Ke at in g,
and
Jr.
L i n c ol n" )
voting
of
Lincoln.-
m e m b e r s and o t h e r a s s o c i a t e s .
Keating,
("First
the
issued
ACC
is
dominated
through his
Th e i m m e d i a t e
( " K e a t i n g Fa m i l y " ) ,
securities
and
a
by
of
First
outstanding
publicly
its
held
principal
immediate
family
f a m i l y of C h a r l e s H.
as d e f i n e d in 12 C.F.R.
§ 561.30,
in e x c e s s of f i f t y p e r c e n t of t h e i s s u e d a n d o u t s t a n d i n g
v o t i n g s e c u r i t i e s of A C C and c o n t r o l l e d t h e a f f a i r s of O l d L i n c o l n
a n d t h e L i n c o l n S u b s i d i a r i e s p r i o r to A p r i l
14.
United
On A p r i l 13,
States
Bankruptcy
14,
1989.
1989, A C C s o u g h t t h e p r o t e c t i o n of the
Court
for
th e
District
of
Arizona
by
f i l i n g a v o l u n t a r y p e t i t i o n for r e o r g a n i z a t i o n u n d e r C h a p t e r 11 of
the
Bankruptcy
Code,
11 U. S. C.
§
1101
et
seq.
Since
April
13,
1989, t h e r e f o r e , A C C h a s b e n e f i t e d f r om th e a u t o m a t i c s t a y p r o v i d e d
in 11 U . S . C .
§ 362 (a) ; b u t for t h a t stay, A C C w o u l d h a v e b e e n n a m e d
as a d e f e n d a n t he re in ,
p u r s u a n t to 11 U . S. C.
a n d the R T C m a y s e e k r e l i e f f r o m t h a t s t a y
§ 362(d)
in o r d e r to j o i n A C C as a d e f e n d a n t
a n d t o l i t i g a t e its c l a i m s a g a i n s t A C C in t h i s
15.
is a c i t i z e n
Defendant
Charles
of t h e S t a t e
Christi,
Paradise
attorney
and,
of A r i z o n a
Valley,
according
H.
Arizona
to
th e
K e a t in g,
forum.
Jr.
r e s i d i n g at
85253.
pertinent
( " K e a t i n g Jr.")
6447 N o r t h
Keating
corporate
Jr.
P a lo
is
books
an
and
r e c o r d s , h e l d th e f o l l o w i n g f o rm al p o s i t i o n s as d i r e c t o r or o f f i c e r
of
ACC,
its
affiliates
and
affiliated
pe r s o n s ,
and/or
Lincoln
Su b s i d i a r i e s (collectively, "Affiliates") during the indicated time
periods:
ACC, P r e s i d e n t , 1 9 8 2 - 1 9 8 3 ;
ACC, C h a i r m a n of t h e B o a r d / P r e s i d e n t , 1984;
ACC, C h a i r m a n of the B o a r d / C E O , 1 9 8 5 - 1 9 8 7 ;
ACC, D i r e c t o r , 19 8 2 - 1 9 8 7 , 1989;
A m e r i c a n C o n t i n e n t a l R e s o u r c e s C o r p o r a t i o n , Di r e c t o r ,
1985;
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., D i r e c t o r , 1986;
T h e C r e s c e n t H o t e l Group, P r e s i d e n t , 1 9 8 7 - 1 9 8 9 ;
T h e C r e s c e n t H o t e l Group, D i r e c t o r , 19 85 - 1 9 8 6 , 1 9 8 8 - 1 9 8 9 ;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e Co m p a n y , D i r e c t o r ,
1985-1986 ;
C r e s c e n t H o l d i n g s , Inc., P r e s i d e n t , 1 9 8 7 - 1 9 8 8 ;
C r e s c e n t H o l d i n g s , Inc., D i r e c t o r , 1 9 8 7 - 1 9 8 8 ;
A m e r i c a n F o u n d e r s Li fe I n s u r a n c e C o m p an y, D i r e c t o r , 1986;
1
C r e s c e n t H o t e l s O p e r a t i n g C o r p o r a t i o n , D i r e ct or , 19871988 ;
C r e s c e n t H o t e l s O p e r a t i n g C o r p o r a t i o n , D i r e c t o r , 19871988 ;
T h e P h o e n i x R e s o r t C o r p o r a t i o n , P r e s i d e n t , 19 8 7 - 1 9 8 8 ;
T h e P h o e n i x R e s o r t C o r p o r a t i o n , Di re c t o r , 19 8 7 - 1 9 8 8 ;
The Phoenix Crescent Corporation, President, 1987-1988;
The Phoenix Crescent Corporation, Director, 1987-1988;
C r e s c e n t R e g i o n a l C o r p o r a t i o n , P r e s i d e n t , 1988;
C r e s c e n t R e g i o n a l C o r p o r a t i o n , D i r e ct or , 1 9 8 7 - 1 9 8 8 ;
C r e s c e n t of W a s h i n g t o n C o r p o r a t i o n , P r e s i d e n t , 1988;
C r e s c e n t of W a s h i n g t o n C o r p o r a t i o n , D i r e c t o r , 1 9 8 7 - 1 9 8 8 .
.
Keating
within
Jr.,
the
therefore,
meaning
of
was
12
an
affiliated
C.F.R.
d o m i n a n c e of ACC, m o r e o v e r ,
§
person
561.29.
By
of
Old
virtue
Lincoln
of
hi s
K e a t i n g Jr. c o n t r o l l e d O l d L i n c o l n and
the Lincoln Subsidiaries.
A t all t i m e s p e r t i n e n t he re to ,
Keating
Jr. w a s a de f a c t o d i r e c t o r and o f f i c e r of O l d L i n c ol n.
16.
Defendant
Charles
H.
Keating,
III
("Keating
is a c i t i z e n of th e S t a t e of A r i z o n a r e s i d i n g at 6513 E a s t E x e t e r
Boulevard,
Scottsdale,
A r i z o n a 85251.
c o r p o r a t e b o o k s a n d re co rd s,
positions
as
director
or
A c c o r d i n g to t h e p e r t i n e n t
K e a t i n g III h e l d t h e f o l l o w i n g fo rm al
officer
of
ACC,
Old
Li nc ol n,
and
the
f o l l o w i n g A f f i l i a t e s d u r i n g the i n d i c a t e d t i m e p e r i o d s :
ACC, V i c e P r e s i d e n t , 1 9 8 2 - 1 9 8 4 ;
ACC, E x e c u t i v e P r e s i d e n t , 1 9 8 5 - 1 9 8 6 ;
ACC, E x e c u t i v e V i c e P r e s i d e n t a n d T r e a s u r e r , 1987;
ACC, D i r e c t o r , 1 9 82 -1 98 7, 1989;
M e d e m a H o m e s of Utah, Inc., D i r e c t o r , 1 9 8 6 - 1 9 8 7 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co m p a n y , Pr es i d e n t ,
1987-1988 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, Di re ct or ,
1987-1988 ;
A m e r i c a n C o n t i n e n t a l R e s o u r c e s C o r p o r a t i o n , Di re ct or ,
1985-1986 ;
P a r k D r i v e A p a r t m e n t s , Inc., V i c e P r e s i d e n t , 19 84 - 1 9 8 7 ;
P a r k D r i v e A p a r t m e n t s , Inc., D i r e c t o r , 1 9 8 4 - 1 9 8 7 ;
A . C. C. R e a l Es ta te , Inc., D i r e c t o r , 1 9 8 4 - 1 9 8 7 ;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n , D i r e ct or , 1987;
American
Continental
Finance
Corporation
II,
Vice
P r e s i d e n t , 1587;
III")
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, Di re ct or ,
19 87 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n , D i r e c t o r , 1987;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II, P r e s i d e n t , 1987;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II, Di r e c t o r , 1987;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III, D i r e c t o r , 1987;
L i n c o l n , C h a i r m a n of t h e Board, 1 9 8 4 - 1 9 8 6 ;
L i n c o l n , Director, 1984-1987;
West,
Inc.,
Vice
President/Secretary
an d
Insurance
Treasurer, 1984-1985;
S S F L C , S e c r e t a r y a n d T r e a s u r e r , 1989;
S S F L C , D i r e c t o r , 1989;
A M C O R Funding Corporation, Executive Vice President,
1987-1989 ;
A M C O R F u n d i n g C o r p o r a t i o n , Di r e c t o r , 1 9 8 7 - 1 9 8 9 ;
Ph oe ni ci an Financial C o r p o r a t i o n , President, 1984-1985;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , V i c e P r e s i d e n t , 1985;
1989 ;
Phoenician Financial Co rp or at io n, Treasurer
Phoenician Financial C o r p o r a t i o n , D i r e c t o r , 1984-1987
1989 ;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc. , V i c e P r e s i d e n t ,
19871988 ;
P h o e ni ci an Commercial Properties, I n c . P r e s i d e n t ,
19881989
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , I n c . Di r e c t o r , 1989
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , V i c e P r e s i d e n t , 1989 ;
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , D i r e c t o r , 1989;
A M C O R In ve st me nt s Corporation, Vice President, 1984-1985;
A M C O R Invest me nt s Corporation, President, 1985-1987;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , C h a i r m a n of the Board,
1988-1989 ;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , D i r e c t o r , 19 85 -1 98 7,
1988-1989 ;
C r es ce nt Lending Corporation, President, 1987-1989;
C r e s c e n t L e n d i n g C o r p o r a t i o n , Di r e c t o r , 1 9 8 7 - 1 9 8 9 ;
LINFIN Corporation, President, 1987-1989 ;
LINFIN Corporation, Director, 1987-1989;
C a s t l e M e a d o w s , Inc., V i c e P r e s i d e n t , 19 88 -8 9;
C a s t l e M e a d o w s , Inc., D i r e c t o r , 1989;
CR ES FI N Corporation, Vice President, 1987-1988;
C R E S F I N C o r p o r a t i o n , P r e s i d e n t and S e c r e t a r y , 1989
CR ES FI N Corporation, Director, 1987-1989;
E s t r e l l a S t a r R e a l E s t a t e C o r p o r a t i o n , C h a i r m a n of the
B o a r d s 19 88 - 1 9 8 9 .
Estr el la Star Real Estate Corporation, D i r e c t o r ,
1988-1989;
P. F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N . V . , M a n a g i n g
D i r e c t o r , 1987;
Director,
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e Group,
1986 ;
A M C O N I n s u r a n c e Group, Di r e c t o r , 1 9 8 6 - 1 9 8 7
R a n c h o E s t r e l l a Re al E s t a t e C o r p o r a t i o n , V i c e Pr e s i d e n t ,
1987 ;
R a n c h o E s t r e l l a R e a l E s t a t e C o r p o r a t i o n , C h a i r m a n of
the B o a r d and V i c e P r e s i d e n t , 1988;
A m e r i c a n F o u n d e r s L i fe I n s u r a n c e Company, A s s i s t a n t V i c e
President, 1987-1988;
A m e r i c a n F o u n d e r s L i f e I n s u r a n c e Company, D i r e c t o r ,
19 8 7 - 1 9 8 8 .
Keating
III,
therefore,
was
an
w i t h i n t h e m e a n i n g of 12 C.F.R.
he re to ,
Keating
III w a s
affiliated person
§ 561.29.
of
Old
Lincoln
A t all t i m e s p e r t i n e n t
e i t h e r a d i r e c t o r or a de
facto director
an d a de f a c t o o f f i c e r of O l d Li nc ol n.
17.
D e f e n d a n t J u d y J. W i s c h e r
("Wischer")
is a c i t i z e n
of t h e S t a t e of A r i z o n a r e s i d i n g at 6216 N o r t h 4 7 t h Place, P a r a d i s e
.Valley,
Arizona
85253.
Wischer
is a c e r t i f i e d p u b l i c
accountant
and,
a c c o r d i n g to the p e r t i n e n t c o r p o r a t e b o o k s a n d re co rd s,
the
following
Lincoln
and
f o rm al
th e
positions
following
as
director
Affiliates
during
or
the
officer
of
indicated
held
Old
time
periods:
ACC, E x e c u t i v e V i c e P r e s i d e n t an d T r e a s u r e r , 1 9 82 -1 98 4;
ACC, P r e s i d e n t , 1985;
ACC, P r e s i d e n t and C h i e f O p e r a t i n g O f f i c e r , 19 86 -1 98 7;
ACC, Di r e c t o r , 19 82 -1 98 7, 1989;
M e d e m a H o m e s of Utah, Inc., D i r e c t o r , 1979;
U n i t e d L e a s i n g Corp. of D e l a w a r e , 1 9 8 2 - 1 9 8 7 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e C o mp an y, S e c r e t a r y , 1980;
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, T r e a s u r e r ,
1987-1988;
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, D i r e c t o r , 1978,
1980, 1 9 8 2 - 1 9 8 8 ;
A m e r i c a n C o n t i n e n t a l R e s o u r c e s C o r p o r a t i o n , Di re ct or ,
1 9 8 3 - 1984, 1987;
C o n t i n e n t a l F i re a n d C a s u a l t y Co mp an y, T r e a s u r e r , 1983;
C o n t i n e n t a l F i re and C a s u a l t y C o m p an y, D i r e c t o r , 1983;
F i r s t L i n c o l n F i n a n c i a l C o r p o r a t i o n , S e c r e t a r y and Ch ie f
F i n a n c i a l O f f i ce r, 1988;
F i r s t L i n c o l n F i n a n c i a l C o r p o r a t i o n , D i r e c t o r , 1988;
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., D i r e c t o r ,
1 9 8 4 - 1985, 1987;
A. C. C. Re al Estate, Inc., V i c e P r e s i d e n t , 1979;
A . C . C . R e a l Es ta te , Inc., V i c e P r e s i d e n t a n d T r e a s u r e r ,
19 80 ;
A . C . C . R e a l Es ta te , Inc., D i r e c t o r , 1 9 7 9 - 1 9 8 0 ;
American Continental Finance Corporation, Vice
President, 1984-1987;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, V i c e
President, 1984-1986;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, C h a i r m a n
of t h e Board, 1987;
Continental Home Finance Corporation, Vice President,
1982-1985 ;
C o n t i n e n t a l H o m e F i n a n c e C o r p o r a t i o n , P r e s i d e n t , 1987;
Co nt in en ta l Home Finance Corporation, Director,
19821987 ;
American Home Finance Corporation, Executive Vice
P r e s i d e n t & T r e a s u r e r , 1982;
A m er ic an Home Finance Corporation, Vice President,
19831985, 1987;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n , D i r e c t o r , 1982
Executive Vice
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
P r e s i d e n t , 1982;
Vice President,
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
1983-1985 ;
T r e a s u r e r , 1987;
American Home Finance Corporation
Vice President,
American Home Finance Corporation
1983-1985 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III, D i r e c t o r ,
19831985 ;
President, and Chief
Li n c o l n , C h a i r m a n of t h e B o a r d
E x e c u t i v e O f f i c e r , 1984;
Lincoln, President, 1985-1986;
Li n c o l n , Di re c t o r , 1 9 8 4 - 1 9 8 9 ;
I n s u r a n c e West, Inc., D i r e c t o r , 1 9 8 4 - 1 9 8 9 ;
S S F L C , Di re c t o r , 1984, 1 9 8 6 - 1 9 8 9 ;
A M C O R F u n d i n g C o r p o r a t i o n , S e c r e t a r y , 1984;
A M C O R F u n d i n g C o r p o r a t i o n , S e c r e t a r y a n d T r e a s u r e r , 1985
A M C O R Funding Corporation, Director, 1984-1988;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , V i c e P r e s i d e n t and
Treasurer, 1984-1985;
Ph oenician Financial Corporation, Treasurer, 1986-1987
P h oe ni ci an Financial Corporation, Director, 1984-1986;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , I n c ., P r e s i d e n t ,
19841985 ;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , I n c ., Di re c t o r , 1984 ;
Chief
President
and
AMCOR
Investments
Corporation,
E x e c u t i v e Of f i c e r , 1984;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , P r e s i d e n t , 1985;
A M C O R Investments Corporation, Director, 1984-1986;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , I n c . , D i r e c t o r ,
19851986 ;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., T r e a s u r e r ,
1984-1985 ;
n
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., Di r e c t o r ,
1984-1986?
P.F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N . V . , M a n a g i n g
Director, 1985-1987?
C o n t i n e n t a l F i d e l i t y Li f e I n s u r a n c e Co mp an y, Di re ct or ,
19 84 - 1 9 8 5 .
Wischer,
t h e r e f o r e , w a s an a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
t h e m e a n i n g of 12 C.F.R.
§ 561.29.
A t all t i m e s p e r t i n e n t he reto,
W i s c h e r w a s e i t h e r a d i r e c t o r or de f a c t o d i r e c t o r a n d an o f f i c e r
or a de f a c t o o f f i c e r of O l d Li nc ol n.
18.
of
the
State
Paradise
D e f e n d a n t R o b e r t J.
of
Valley,
Kielty
Arizona
residing
at
Arizona
85253.
Kielty
8714
a c c o r d i n g to th e p e r t i n e n t
corporate books
following
as d i r e c t o r
formal
positions
("Kielty")
North
is
an
is a c i t i z e n
65 th
attorney
and r e c o rd s,
or o f f i c e r
Street,
and,
h e l d th e
of O l d L i n c o l n
a n d th e f o l l o w i n g A f f i l i a t e s d u r i n g t h e i n d i c a t e d t i m e pe r i o d s :
ACC,. S e c r e t a r y and G e n e r a l C o un se l, 1982 ?
ACC, S e c r e t a r y , 1983?
ACC, S e n i o r V i c e P r e s i d e n t , S e c r e t a r y an d G e n e r a l
Co u n s e l , 1 9 8 4 - 1 9 8 7 ?
ACC, S e c r e t a r y , 1989?
ACC, Di r e c t o r , 19 8 2 - 1 9 8 7 , 1989?
M e d e m a H o m e s of Utah, Inc., D i r e c t o r , 1979, 1981?
U n i t e d L e a s i n g Corp. of D e l a wa re , P r e s i d e n t and
Secretary, 1982-1983;
U n i t e d L e a s i n g Corp. of De la w a r e , P r e s i d e n t , 1 9 84 -1 98 6;
U n i t e d L e a s i n g Corp. of De l a w a r e , P r e s i d e n t and C h a i r m a n
of t h e Board, 1987?
U n i t e d L e a s i n g Corp. of D e l a wa re , D i r e c t o r , 1982 -1 98 5,
1987 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e C o m p an y, V i c e P r e s i d e n t
and Secretary, 1982-1985?
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, S e c r e t a r y , 1986?
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, Di r e c t o r ,
19 82 - 1 9 8 3 , 1 9 8 5 - 1 9 8 8 ?
American Continental Resources Corporation,
Di re ct or ,
198 3 ?
C o n t i n e n t a l Fi re and C a s u a l t y Co mp an y, V i c e P r e s i d e n t
and S e c r e t a r y , 1983?
C o n t i n e n t a l Fi re and C a s u a l t y C o mp an y, D i r e c t o r , 1983;
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., D i r e c t o r , 1986?
11
A . C. C. R e a l Es ta te , Inc., V i c e P r e s i d e n t and S e c r e t a r y ,
1979-1981 ;
A . C . C . R e a l Es ta te , Inc., D i r e c t o r , 1 9 7 9 - 1 9 8 1 , 1 9 8 4 - 1 9 8 7 ;
A m e r i c a n C o n t in en ta l Finance Corporation, Vi ce President,
1983-1986;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n , Di r e c t o r ,
1 9 8 3 - 1987;
American
Continental
Finance
Corporation
II,
Vice
President, 1984-1986;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, D i r e c t o r ,
1 9 8 4 - 1987;
Continental Home Finance Corporation, Secretary,
1982-1987;
Co ntinental Home Finance Corporation, Director,
1982-1987;
A m er ic an Home Finance Corporation, Vice President,
19821985;
Vice President,
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
19831985 ;
Director,
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
1983-1985 ;
Vice President,
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
1983-1987 ;
L i n c ol n, V i c e P r e s i d e n t , 1 9 8 5 - 1 9 8 7 ;
L i n c ol n, D i r e c t o r , 19 84 - 1 9 8 5 , 1 9 8 7 - 1 9 8 9 ;
I n s u r a n c e West, Inc., S e c r e t a r y , 1 9 8 4 - 1 9 8 7 ;
I n s u r a n c e West, Inc., D i r e c t o r , 1984;
S S F L C , D i r e c t o r , 1984, 1986;
A M C O R Funding Corporation, President, 1984-1987
AM C O R Funding Corporation, Director, 1984-1986;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , V i c e P r e s i d e n t , 1984
Ph oe ni ci an Financial C o r p o r a t i o n , Pr esident and Vice
' P r e s i d e n t , 1985
Phoenician Financial C o r p o r a t i o n , President, 1986-1987
■P h ■
■ic
■ia
J n IF i_________
oen
nancial Corporation, Director, 1984-1986;
A M C O R Investments Corporation, Vice President, 1984-1985;
AM C O R Investments Corporation, Director, 1985-1986;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc., S e c r e t a r y ,
1985-1987;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc., Di re c t o r ,
1985-1986 ;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., P r e s i d e n t , 1987
Director,
F i r s t L i n c o l n F i n a n c i a l Se rv i c e s , Inc.
1984-1987 ;
P.F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N.V., M a n a g i n g
Director, 1985-1986;
Director,
Continental Fidelity Life Insurance Company
1984-1988;
a m c o n I n s u r a n c e Group, Di r e c t o r , 1 9 8 6 - 1 9 8 8 .
Kielty,
therefore,
w a s an a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
the m e a n i n g of 12 C.F.R.
§ 561.29.
A t all t i m e s p e r t i n e n t hereto,
K i e l t y w a s e i t h e r a d i r e c t o r or a de f a c t o d i r e c t o r an d o f f i c e r or
de f a c t o o f f i c e r of O l d Li nc ol n.
19.
Defendant
Robert
M.
Wurzelbacher,
Jr.
(" W u r z e l b a c h e r " ) is a c i t i z e n of t h e S t a t e of A r i z o n a r e s i d i n g at
2214 E a s t B e t h a n y H o m e Road,
th e p e r t i n e n t
Ph oe ni x, A r i z o r a 85016.
corporate books
and
re co rd s,
A c c o r d i n g to
W u r z e l b a c h e r held the
f o l l o w i n g f o r m a l p o s i t i o n s as d i r e c t o r or o f f i c e r of t h e f o l l o w i n g
A f f i l i a t e s d u r i n g t h e i n d i c a t e d t i m e pe r i o d s :
ACC, V i c e P r e s i d e n t , 1984;
ACC, S e n i o r V i c e P r e s i d e n t , 1 9 8 5 - 1 9 8 7 ;
ACC, D i r e c t o r , 1 9 8 2 - 1 9 8 7 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e C o mp an y, Di r e c t o r ,
1984-1985;
A m e r i c a n C o n t i n e n t a l R e s o u r c e s C o r p o r a t i o n , Pr e s i d e n t ,
1984-1987|
A m e r i c a n C o n t i n e n t a l R e s o u r c e s C o r p o r a t i o n , D i r e ct or ,
1984-1987;
C o n t i n e n t a l F i r e and C a s u a l t y C o m p an y, D i r e c t o r , 1983;
T a t u m Place, Inc., P r e s i d e n t , 1 9 8 4 - 1 9 8 7 ;
T a t u m Place, Inc., D i r e c t o r , 1 9 8 4 - 1 9 8 7 ;
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., P r e s i d e n t ,
1984-1987;
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., Di r e c t o r ,
1 9 8 4 - 1987;
P a r k D r i v e A p a r t m e n t s , Inc., P r e s i d e n t , 1 9 8 4 - 1 9 8 7 ;
P a r k D r i v e A p a r t m e n t s , Inc., D i r e c t o r , 1 9 8 4 - 1 9 8 7 ;
D u n l a p A p a r t m e n t s , Inc., P r e s i d e n t , 1 9 8 4 - 1 9 8 7 ;
D u n l a p A p a r t m e n t s , Inc., Di re c t o r , 1 9 8 4 - 1 9 8 7 ;
SSFLC, Di re c t o r , 1989;
A M C O R F u n d i n g C o r p o r a t i o n , S e c r e t a r y , 1989;
A M C O R F u n d i n g C o r p o r a t i o n , Di r e c t o r , 1989;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , P r e s i d e n t , 1989;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , D i r e c t o r , 1989;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., V i c e P r e s i d e n t ,
1 9 8 5 - 1988 i
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., V i c e P r e s i d e n t ,
S e c r e t a r y and T r e a s u r e r , 1989;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., Di r e c t o r ,
1984-1989l
P r o v i d e n t M o r t a a g e C o r p o r a t i o n , S e c r e t a r y , 1989;
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , D i r e c t o r , 1989;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , C h a i r m a n of the B o a r d
a n d CEO, 1987;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , CEO, 1 9 8 8 - 1 9 8 9 ;
AM C O R Investments Corporation, Director, 1987-1989;
C r e s c e n t L e n d i n g C o r p o r a t i o n , S e c r e t a r y , 1989;
C r e s c e n t L e n d i n g Corporation,* D i r e c t o r , 1989;
C a s t l e M e a d o w s , Inc., V i c e P r e s i d e n t , 1 9 8 7 - 1 9 8 8 ;
Castle Meadows,
Inc.,
President,
Vice Pres id en t and
S e c r e t a r y , 1989;
C a s t l e M e a d o w s , Inc., D i r e c t o r , 1989;
T h e C r e s c e n t H o t e l Group, V i c e P r e s i d e n t , 1 9 8 4 - 1 9 8 6 ;
T h e C r e s c e n t H o t e l Group, P r e s i d e n t a n d V i c e P r e s i d e n t ,
1987 ;
T h e C r e s c e n t H o t e l Group, S e c r e t a r y an d T r e a s u r e r , 1989;
T h e C r e s c e n t H o t e l Group, D i r e c t o r , 1 9 8 4 - 1 9 8 9 ;
C R E S F I N C o r p o r a t i o n , P r e s i d e n t a n d CEO, 1989;
C R E S F I N C o r p o r a t i o n , Di r e c t o r , 1989;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc., T r e a s u r e r ,
1984 ;
The
Crescent
Hotel
Group
of
Michigan,
Inc.,
Vice
President and Treasurer, 1985-1986;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc., C h a i r m a n of
t h e Board, P r e s i d e n t , V i c e P r e s i d e n t an d T r e a s u r e r ,
1987;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc., C h a i r m a n of
t h e Board, 1 9 8 8 - 1 9 8 9 ;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , I n c . , D i r e c t o r ,
1985-1989;
Phoenician
Construction
Corporation,
President
and
Treasurer, 1987-1989;
Phoe ni ci an Co ns tr uc ti on C o r p o r a t i o n , Director, 1987-1989;
E s t r e l l a S t a r R e a l E s t a t e C o r p o r a t i o n , C h a i r m a n of the
B o a r d a n d CEO, 1 9 8 7 - 1 9 8 8 ;
E s t r e l l a S t a r R e a l E s t a t e C o r p o r a t i o n , CEO, 1989;
E s t r e l l a S t a r R e al E s t a t e C o r p o r a t i o n , Di r e c t o r ,
1987-1989;
A M C O R C o n t i n e n t a l , Inc., D i r e c t o r , 1988;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e C o mp an y, D i r e ct or ,
1985-1989;
A M C O N I n s u r a n c e Group, D i r e c t o r , 1 9 8 6 - 1 9 8 8 ;
R a n c h o E s t r e l l a R e a l E s t a t e C o r p o r a t i o n , C h a i r m a n of the
B o a r d a n d CEO, 1 9 8 7 - 1 9 8 8 ;
Ra nc ho Estr el la Real Estate Corporation, Director,
1987-1988.
W u r z e l b a c h e r , therefore,
w i t h i n the me an in g
of
was
an a f f i l i a t e d p e r s o n
12 C.F.R.
§ 561.29.
At
of O l d
Lincoln
all t i m e p e r t i n e n t
he reto, W u r z e l b a c h e r w a s a de f a c t o d i r e c t o r a n d a de f a c t o o f f i c e r
of O l d Li n c o l n .
20.
of
the
State
Paradise
D e f e n d a n t A n d r e w F.
of
Arizona
Valley,
accountant
residing
Arizona
and,
85253.
according
to
Ligget
at
10301
Ligget
the
("Ligget")
North
was
pertinent
a
is a c i t i z e n
48th
Place,
certified
public
corporate
books
and
re c o r d s , h e l d t h e f o l l o w i n g f o rm al p o s i t i o n s as d i r e c t o r or o f f i c e r
of O l d
Lincoln and the
following Affiliates
during
th e
indicated
time periods:
ACC, V i c e P r e s i d e n t , 1984;
ACC, C h i e f F i n a n c i a l Of fi ce r, 1 9 8 5 - 1 9 8 7 ;
ACC, D i r e c t o r , 1989;
L i n c ol n, Di r e c t o r , 1 9 8 5 - 1 9 8 9 ;
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , S e c r e t a r y and
T r e a s u r e r , 1988;
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , V i c e P r e s i d e n t an d
T r e a s u r e r , 1989;
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , D i r e c t o r , 1989;
AM C O R Investments Corporation, Vice President, 1984-1985;
O x f o r d F i n a n c i a l C o r p o r a t i o n , T r e a s u r e r , 19 85 - 1 9 8 6 .
Li gg et ,
therefore,
w a s an a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
t h e m e a n i n g of 12 C.F.R.
§ 561.29.
A t all t i m e s p e r t i n e n t he re to ,
L i g g e t w a s e i t h e r a d i r e c t o r or a de f a c t o d i r e c t o r and a de fa ct o
o f f i c e r of O l d Li nc ol n.
21.
citizen
of
Paradise
the
Defendant
State
Va l l e y ,
of
Robert
Arizona
Arizona
85253.
J.
Hu b b a r d ,
residing
and
corporate books
following
formal
as d i r e c t o r
("Hubbard")
4723
is
to the p e r t i n e n t
and the
at
Hubbard
according
positions
Jr.
an
Saguaro
or o f f i c e r
Place,
attorney
r e co rd s,
of O l d
is a
and,
h e l d the
Lincoln
f o l l o w i n g A f f i l i a t e s d u r i n g the i n d i c a t e d t i m e p e r i o d s :
ACC, Vice President, 1982-1987;
ACC, Director, 1982-1986, 1989;
1988 ;
P a r k D r i v e A p a r t m e n t s . Inc,
D
r
o
c
i
H
p
n
f
Ì
1
9
8
6
Lincoln
Lincoln, Director, 1985-1987;
I n s u r a n c e West, Inc., V i c e P r e s i d e n t , 19 8 6 - 1 9 8 9 ;
I n s u r a n c e West, Inc., D i r e c t o r , 1 9 8 6 - 1 9 8 9 ;
S S F L C , P r e s i d e n t , 1989;
S S F L C , Director, 1 9 8 9 ; ^
A M C O R F u n d i n g C o r p o r a t i o n , P r e s i d e n t , 1989;
A M C O R F u n d i n g C o r p o r a t i o n , Di r e c t o r , 1989;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , S e c r e t a r y , 1989
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , D i r e c t o r , 1989;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., D i r e c t o r , 1989
P r o v i d e n t M o r t g a g e C o r p o r a t i o n , D i r e c t o r , 1989;
A M C O R Investments Corporation, Se cretary and Treasurer,
1989;
A M C O R I n v e s t m e n t s C o r p o r a t i o n , D i r e c t o r , 1989;
C r e s c e n t L e n d i n g C o r p o r a t i o n , T r e a s u r e r , 1989;
C r e s c e n t L e n d i n g C o r p o r a t i o n , D i r e c t o r , 1989;
L I N F I N C o r p o r a t i o n , V i c e P r e s i d e n t a n d T r e a s u r e r , 1989;
L I N F I N C o r p o r a t i o n , Di re c t o r , 1989;
C a s t l e M e a d o w s , Inc., Di r e c t o r , 1989;
T h e C r e s c e n t H o t e l Group, P r e s i d e n t , 1989;
T h e C r e s c e n t H o t e l Group, D i r e c t o r , 1989;
C R E S F I N C o r p o r a t i o n , Di r e c t o r , 1989;
Continental
Fidelity
Life
Insurance
Co m p a n y ,
Vice
P r e s i d e n t , 1987;
Co ntinental Fidelity Life Insurance C o m p a n y , President
an d V i c e P r e s i d e n t , 1988;
C o n t i n e n t a l F i d e l i t y L i fe I n s u r a n c e C o m p an y, P r e s i d e n t
1989 ;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e C o m p an y, D i r e c t o r ,
1986-1989 ;
A M C O N I n s u r a n c e G r o u p , V i c e P r e s i d e n t , 1986;
A M C O N I n s u r a n c e G r o u p , P r e s i d e n t an d V i c e President
1987 ;
A M C O N I n s u r a n c e Group, C h a i r m a n of t h e B o a r d and
P r e s i d e n t , 1988;
A M C O N I n s u r a n c e Group, Di r e c t o r , 1 9 8 6 - 1 9 8 8 ;
C r e s c e n t H o l d i n g s , Inc. , V i c e P r e s i d e n t , 1988;
C r e s c e n t H o l d i n g s , Inc. , D i r e ct or , 1988;
A m e r i c a n F o u n d e r s Li fe I n s u r a n c e C o mp an y, P r e s i d e n t and
C h i e f E x e c u t i v e Of f i c e r , 1987;
A m e r i c a n F o u n d e r s L i f e I n s u r a n c e C o m p an y, C h a i r m a n of the
Board, P r e s i d e n t an d C h i e f E x e c u t i v e O f f i c e r ,
1988-1989;
A m e r i c a n F o u n d e r s L i f e I n s u r a n c e C o mp an y, D i r e c t o r ,
19 8 6 - 1 9 8 9 ;
C r e s c e n t H o t e l s O p e r a t i n g C o r p o r a t i o n , D i r e c t o r , 1988,
T h e P h o e n i x R e s o r t C o r p o r a t i o n , Di r e c t o r , 1988;
T h e P h o e n i x C r e s c e n t C o r p o r a t i o n , V i c e P r e s i d e n t , 1988;
T h e P h o e n i x C r e s c e n t C o r p o r a t i o n , D i r e ct or , 1988;
I £
C r e s c e n t R e g i o n a l C o r p o r a t i o n , Di r e c t o r , 1988;
C r e s c e n t of W a s h i n g t o n C o r p o r a t i o n , D i r e c t o r , 1988.
Hubbard,
therefore,
w a s an a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
t h e m e a n i n g of 12 C.F.R.
§ 561.29.
Hubbard
director
was
a
de
facto
A t all t i m e s p e r t i n e n t hereto,
and
a
de
facto
officer
of
Old
Lincoln.
22.
citizen
of
Paradise
Defendant
the
State
Valley,
accountant
and,
of
Andre
A.
Niebling
(" Ni eb li ng ")
Arizona
residing
at
6000
Arizona
85253.
Niebling
is
a certified
according
to
th e
pertinent
Berneil
corporate
Lane,
public
books
and
r e co rd s, h e l d t h e f o l l o w i n g fo rm al p o s i t i o n s as d i r e c t o r or o f f i c e r
of O l d
Lincoln
a n d th e
following Affiliates
d u r i n g th e
indicated
time periods:
ACC, V i c e P r e s i d e n t , 1 9 8 2 - 1 9 8 4 ;
ACC, S e n i o r V i c e P r e s i d e n t and T r e a s u r e r , 1 9 8 5 - 1 9 8 6 ;
ACC, D i r e c t o r , 1 9 8 2 - 1 9 8 6 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e C o m p an y, C h a i r m a n of t h e
Board, 1 9 8 4 - 1 9 8 5 ;
A m e r i c a n C o n t i n e n t a l M o r t g a g e Co mp an y, P r e s i d e n t , 1986;
A m e r i c a n Continental Finance Corporation, President,
1984-1985 ;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n , Di re c t o r ,
1984-1986 ;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, C h a i r m a n of
th e Board, 1984;
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II, Di re c t o r ,
1984-1986;
C o n t i n e n t a l H o m e F i n a n c e C o r p o r a t i o n , D i r e ct or ,
1984-1986 ;
C o n t i n e n t a l H o m e F i n a n c e C o r p o r a t i o n , C h a i r m a n of the
Board and President, 1984-1985;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n , P r e s i d e n t , 1986;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n , D i r e ct or , 1 9 8 4 - 1 9 8 6 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II, P r e s i d e n t ,
1984-1986 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II, Di r e c t o r ,
1984-1986 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III, C h a i r m a n of the
B o a r d and P r e s i d e n t , 1 9 8 4 - 1 9 8 5 ;
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III, P r e s i d e n t . 1986;
is
a
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III/ Di re ct or ,
1984-1986;
Lincoln, Exec ut iv e Vice President and Vice President,
1984 ;
L i n c ol n, C h a i r m a n of t h e Board, C h i e f E x e c u t i v e O f f i c e r
and Vice President, 1985-1986;
Li n c o l n , C h a i r m a n of t h e Board, C h i e f E x e c u t i v e O f f i c e r
a n d V i c e P r e s i d e n t , 1985;
Li n c o l n , C h a i r m a n of t h e B o a r d a n d C h i e f E x e c u t i v e
Officer, 1986-1987 ;
Li n c o l n , C h a i r m a n of t h e Board, 1988 I
Li n c o l n , C h a i r m a n of t h e Board, 1987 I
L i nc ol n, D i r e c t o r , 1 9 8 4 - 1 9 8 7 ;
I n s u r a n c e West, Inc., Di re ct or , 1 9 8 1 - 1 9 8 4 ;
SSFLC, D i r e c t o r , 1984, 1 9 8 6 - 1 9 8 7 ;
A M CO R Funding Corporation, Vice President, 1984-1987;
A M C O R Funding Corporation, Director, 1984-1987;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , V i c e P r e s i d e n t and C F O
1984-1985;
Provident M o rt ga ge Corporation, Treasurer, 1984-1987;
Provident M o rt ga ge Corporation, Director, 1984-1987;
Crescent Lending Corporation, President, 1985-1987;
Crescent Lending Corporation, Director, 1985-1987;
LINFIN Corporation, President, 1985-1987;
LINFIN Corporation, Director, 1985-1987;
CRESFIN Corporation, President, 1986-1987;
CRESFIN Corporation, Director, 1986-1987;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., P r e s i d e n t ,
1984-1987;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., D i r e c t o r ,
1984-1987 ;
P.F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N.V., M a n a g i n g
Di r e c t o r , 1 9 8 5 - 1 9 8 7 ;
C o n t i n e n t a l F i d e l i t y L i fe I n s u r a n c e Co m p a n y , D i r e ct or ,
1984-1985;
A m e r i c a n F o u n d e r s L i f e I n s u r a n c e C o m p an y, A s s i s t a n t V i c e
P r e s i d e n t , 1987;
A m e r i c a n F o u n d e r s Li f e I n s u r a n c e C o m p an y, D i r e ct or ,
19 86 - 1 9 8 7 .
N i e b l i n g , t h e r e f o r e , w a s an a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
the meaning
ab ove,
of
12 C F.R.
Niebling was
§ 561.29.
either
During his
a d i r e c t o r or a de
service described
f a c t o d i r e c t o r and
an o f f i c e r or a de f a c t o o f f i c e r of O l d L i n c o l n .
23 .
the
State
of
D e f e n d a n t M a r k S. S a u t e r
Ohio
residing
at
49 80
(" S a u t e r " ) is a c i t i z e n of
Springs
Grove
Avenue,
Cincinnati,
the
Ohio
pertinent
f o rm al
45231.
corporate
positions
as
books
director
f o l l o w i n g A f f i l i a t e s dur
Sauter
is an a t t o r n e y and,
and
or
r e co rd s,
officer
of
held
Old
a c c o r d i n g to
the
following
Lincoln
and
the
g the indicated time periods:
U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e , Di re c t o r , 1986;
L i n c ol n, V i c e P r e s i d e n t , C o r p o r a t e C o u n s e l an d A s s i s t a n t
S e c r e t a r y , 1984;
L i n c ol n, V i c e P r e s i d e n t an d A s s i s t a n t S e c r e t a r y , 1985;
L i n c ol n, V i c e P r é s i d a n t , S e c r e t a r y a n d A s s i s t a n t
S e c r e t a r y , 1986;
L i nc ol n, V i c e P r e s i d e n t , S e c r e t a r y a n d G e n e r a l Co un se l,
1987 ;
I n s u r a n c e West, Inc., S e c r e t a r y , 1 9 8 6 - 1 9 8 7 ;
S S F L C , Di r e c t o r , 1 9 8 6 - 1 9 8 7 ;
A M C O R F u n d i n g C o r p o r a t i o n , A s s i s t a n t S e c r e t a r y , 1985;
A M C O R Funding Corporation, Se cretary and A s si st an t
S e c r e t a r y , 1985;
AM CO R Funding Corporation, Secretary, 1986-1987;
A M C O R Funding Corporation, Director, 1986-1987;
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n , S e c r e t a r y , 19 84 -1 98 7;
Phoeni ci an Financial Corporation, Director, 1984-1987;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., S e c r e t a r y ,
1985-1987;
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc., Di r e c t o r ,
1985-1986 ;
C r e s c e n t L e n d i n g C o r p o r a t i o n , V i c e P r e s i d e n t and
Secretary, 1985-1987;
Crescent Lending Corporation, Director, 1985-1987;
LINFIN Corporation, Vice Pr esident and Secretary,
1 9 8 5 - 1987 ;
LINFIN Corporation, Director, 1985-1987;
T h e C r e s c e n t H o t e l Group, S e c r e t a r y , 1 9 8 4 - 1 9 8 7 ;
T h e C r e s c e n t H o t e l Group, Di r e c t o r , 1 9 8 4 - 1 9 8 6 ;
CRESFIN Corporation, Vice President and Secretary,
1 9 8 6 - 1987 ;
CRESFIN Corporation, Director, 1986-1987;
O x f o r d F i n a n c i a l C o r p o r a t i o n , V i c e P r e s i d e n t and
Secretary, 1984-1987;
Oxford Financial Corporation, Director, 1984-1987;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc.', S e c r e t a r y ,
1 9 8 4 - 1985 ;
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , I n c . , Di re ct or ,
1 9 8 5 - 1987;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., V i c e P r e s i d e n t ,
1985 ;
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., V i c e P r e s i d e n t
and A s s i s t a n t S e c r e t a r y , 1 9 8 6 - 1 9 8 7 ;
1 G
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc., D i r e ct or ,
1986-1987;
P.F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N.V., M a n a g i n g
Director, 1986-1987;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e Co mp an y, D i r e c t o r ,
1984 ;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e C o mp an y, S e c r e t a r y ,
1987 ;
C o n t i n e n t a l F i d e l i t y L i f e I n s u r a n c e Co m p a n y , V i c e
Pr esident and Secretary, 1984-1986;
A M C O N I n s u r a n c e Group, S e c r e t a r y , 1 9 8 6 - 1 9 8 7 .
S a u t e r , therefore,
w a s a n a f f i l i a t e d p e r s o n of O l d L i n c o l n w i t h i n
the meaning
C.F.R.
ab ove,
of
12
§ 561.29.
During
his
tenure
described
S a u t e r w a s a de f a c t o d i r e c t o r a n d a n o f f i c e r or a de f a c t o
o f f i c e r of O l d L i n c ol n.
24.
State
of
Valley,
D e f e n d a n t G a r y W. H a l l
Arizona
residing
A r i z o n a 85018.
the p e r t i n e n t
at
6326
("Hall")
North
is a c i t i z e n of the
38th
St re et ,
H a l l is a m e d i c a l d o c t o r and,
corporate
books
at all r e l e v a n t t i m e s and,
a n d re co rd s,
therefore,
was
a c c o r d i n g to
a director
he r e t o ,
Hall
was
a
de
of A C C
w a s an a f f i l i a t e d p e r s o n of
O l d L i n c o l n w i t h i n th e m e a n i n g of 12 C.F.-R. § 561.29.
pertinent
Paradise
facto
director
A t all t i m e s
and
a
de
fact o
o f f i c e r of O l d L i nc ol n.
25.
Defendant
W i l l i a m J.
a c i t i z e n of t h e S t a t e of M i c h i g a n .
and,
a
according
director
of
approximately
person
ACC
March
f r om
25,
§ 56 1.29.
W. J.
approximately
1987,
("W.
and,
D u r i n g hi s
J.
Ke a t i n g " )
February
therefore,
and
re co rd s,
27,
1986
was
an
was
through
affiliated
such time wi t h i n the m e an in g
of
s e r v i c e as a d i r e c t o r of ACC,
W.
K e a t i n g a l s o w a s a de f a c t o d i r e c t o r of O l d Li nc ol n.
is
K e a t i n g is an a t t o r n e y
corporate books
of O l d L i n c o l n t h r o u g h o u t
12 C. F.R.
J.
to t h e p e r t i n e n t
Keating
26.
K e a t i n g Jr. is th e f a t h e r of K e a t i n g III and fa th er -
i n - l a w of W u r z e l b a c h e r , Hu b b a r d ,
a n d Hall.
K e a t i n g Jr.
and W. J.
K e a t i n g are b r o t h e r s .
27.
The
Defendants")
a c t s an d
individual
are n a m e d h e r e i n
omissions
defendants'
as d e f e n d a n t s
of w h i c h p l a i n t i f f
spouses
because
complains were
("Spousal
the wrongful
d o n e by t h e
d e f e n d a n t s n a m e d in p a r a g r a p h s 15 t h r o u g h 22, i n c l u s i v e , a n d 24 for
the
benefit
Spousal
of
and
on b e h a l f
of t h e i r m a r i t a l
communities.
The
D e f e n d a n t s are:
28.
(a)
M a r y E l a i n e K e a t in g,
(b)
K r i s t a K. K e a t in g,
w i f e of K e a t i n g III;
(c)
G e o r g e J. W i s c h e r ,
h u s b a n d of W i s c h e r ;
(d)
E l i z a b e t h A.
(e)
E l i z a b e t h (Keating)
Wurzelbacher;
(f)
H e l e n M. N i e b l i n g ,
(g)
K a t h l e e n M.
Hubbard;
(h)
M i c h e l l e Ligget,
(i)
M a r y A.
Defendant
Kielty,
w i f e of Ki e l t y ;
Wurzelbacher,
w i f e of
w i f e of N i e b l i n g ;
(Keating)
Hubbard,
w i f e of
w i f e of Li g g e t ;
(Keating)
First
w i f e of K e a t i n g Jr.;
Hall,
Lincoln
and
w i f e of Hall.
is
a
corporation
i n c o r p o r a t e d a n d e x i s t i n g u n d e r the laws of t h e S t a t e of C a l i f o r n i a
with
its p r i n c i p a l p l a c e of b u s i n e s s
29.
corporation
of
Utah
Arizona.
Defendant
Medema
in t h e S t a t e of Ar i z o n a .
Homes
of
Utah,
Inc.
is
a
i n c o r p o r a t e d and e x i s t i n g u n d e r t h e laws of the S t a t e
with
its
principal
place
of
business
in
th e
State
of
D e f e n d a n t U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e is
30.
a c o r p o r a t i o n i n c o r p o r a t e d a n d e x i s t i n g u n d e r t h e laws of t h e S t a t e
of D e l a w a r e w i t h
its p r i n c i p a l
place
of b u s i n e s s
in t h e
S t a t e of
Arizona.
31.
D e f e n d a n t A m e r i c a n C o n t i n e n t a l M o r t g a g e C o m p a n y is
a c o r p o r a t i o n i n c o r p o r a t e d a n d e x i s t i n g u n d e r t h e la ws of t h e S t a t e
of C o l o r a d o w i t h
its p r i n c i p a l
place
of b u s i n e s s
in t h e S t a t e
of
Arizona.
32 .
Defendant American Continental Resources Corporation
is a c o r p o r a t i o n
i n c o r p o r a t e d and e x i s t i n g u n d e r t h e
la w s
of the
S t a t e of A r i z o n a w i t h its p r i n c i p a l p l a c e of b u s i n e s s in t h e S t a t e
of A r i z o n a .
33.
D e f e n d a n t C o n t i n e n t a l F i r e an d C a s u a l t y C o m p a n y is
a c o r p o r a t i o n i n c o r p o r a t e d a n d e x i s t i n g u n d e r t h e l a ws of th e S t a t e
of A r i z o n a
with
its
principal
place
of b u s i n e s s
in th e
State
of
Arizona.
34.
Defendant
incorporated
with
Tatum
Place,
an d e x i s t i n g u n d e r t h e
its p r i n c i p a l
35.
p l a c e of b u s i n e s s
la ws
Inc.
is
a
corporation
of t h e S t a t e
of A r i z o n a
in th e S t a t e of A r i z o n a .
Defendant American Continental
Properties,
Inc.
is
a c o r p o r a t i o n i n c o r p o r a t e d an d e x i s t i n g u n d e r t h e la ws of t h e S t a t e
of
Arizona
with
its p r i n c i p a l
place
of
business
in t h e
State
of
is
a
Arizona.
36.
corporation
Defendant
Park
Drive
Apartments,
Inc.
i n c o r p o r a t e d an d e x i s t i n g u n d e r th e laws of the S t a t e
22
of
Florida
with
its p r i n c i p a l
place
of
business
in t h e
State
of
Arizona.
37.
D e f e n d a n t A.C.C. R e a l Es ta te ,
Inc.
is a c o r p o r a t i o n
i n c o r p o r a t e d a n d e x i s t i n g u n d e r th e la ws of the S t a t e of W a s h i n g t o n
y i t h its p r i n c i p a l p l a c e of b u s i n e s s
38.
in t h e S t a t e of A r i z o n a .
Defendant Dunlap Apartments,
incorporated
and ex isting under the
la ws
y i t h its p r i n c i p a l p l a c e of b u s i n e s s
39.
Inc.
is a c o r p o r a t i o n
of t h e S t a t e of A r i z o n a
in t h e S t a t e of A r i z o n a .
Defendant American Continental Finance Corporation
is a c o r p o r a t i o n
incorporated and existing under the
laws
of the
S t a t e of D e l a w a r e w i t h its p r i n c i p a l p l a c e of b u s i n e s s in t h e S t a t e
of A r i z o n a .
40.
Defendant American Continental
Finance Corporation
II is a c o r p o r a t i o n i n c o r p o r a t e d a n d e x i s t i n g u n d e r t h e laws of the
S t a t e of D e l a w a r e w i t h its p r i n c i p a l p l a c e of b u s i n e s s in the S t a t e
of A r i z o n a .
41.
Defendant
Continental
Home
Finance
Corporation
is
a c o r p o r a t i o n i n c o r p o r a t e d and e x i s t i n g u n d e r t h e la ws of the S t a t e
of D e l a w a r e w i t h
its p r i n c i p a l
p l a c e of b u s i n e s s
in the S t a t e
of
Arizona.
42.
corporation
Defendant
American
Home
Finance
Corporation
is
a
i n c o r p o r a t e d and e x i s t i n g u n d e r t h e la ws of the S t a t e
of D e l a w a r e w i t h
its p r i n c i p a l
place
of '-business in the S t a t e
of
Arizona.
43.
Defendant
American
Home
Finance
Corporation
II
is
a c o r p o r a t i o n i n c o r p o r a t e d and e x i s t i n g u n d e r t h e laws of the S t a t e
of D e l a w a r e w i t h
its p r i n c i p a l
place
of b u s i n e s s
in the S t a t e
of
D e f e n d a n t A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
is
Arizona.
44.
a c o r p o r a t i o n i n c o r p o r a t e d a n d e x i s t i n g u n d e r t h e la ws of t h e S t a t e
of D e l a w a r e w i t h
its p r i n c i p a l p l a c e
of b u s i n e s s
in t h e S t a t e
of
Arizona.
45.
28
The
through
44,
corporate
defendants
inclusive,
ar e
identified
subsidiaries
in p a r a g r a p h s
of
ACC
("ACC
Subsidiaries").
46.
15 t h r o u g h
The
21,
individual
inclusive,
defendants
are
h o l d i n g l e g a l or b e n e f i c i a l
described
individuals
in p a r a g r a p h s
or e n t i t i e s
capable
of
i n t e r e s t s in p r o p e r t y and,
therefore,
e a c h s u c h d e f e n d a n t is a p e r s o n as d e f i n e d b y 18 U . S. C.
§ 1961(3).
47.
defendants
From
February
Keating
Jr.,
W u r z e l b a c h e r , Li gg et ,
culpable
or
constituted
22,
Keating
Hubbard,
negligent
a majority
1984
until
III,
Niebling,
persons
not
both
14,
Wischer,
Hall,
named
of t h e m e m b e r s ,
April
as
Kielty,
Sa ut er ,
and
defendants
f o rm al
1989,
other
herein
and de
facto,
of t h e B o a r d of D i r e c t o r s of O l d L i n c o l n and, t h e r e f o r e ,
controlled
a n d d o m i n a t e d O l d L i n c o l n a n d its b u s i n e s s a f f a i r s and
in te re st s.
During
this
period
of
time,
c o n d u c t d e s i g n e d to c o n c e a l
fraud,
conspiracy,
contract
and
the
such misconduct.
breaches
bases
these
individuals
also
engaged
m
and di d c o n c e a l a c ts of r a c k e t e e r i n g ,
of
f i d u c i a r y du ti es ,
for c l a i m s
and
causes
of
and b r e a c h e s
of
action
on
based
48.
F o r p u r p o s e s of th e c l a i m s p e r t a i n i n g t o t h e A r i z o n a
R a c k e t e e r i n g Act,
a n y pe rs on s,
whose
may
identities
as
i n c l u d i n g t h e d e f e n d a n t s an d o t h e r s
yet
be
unknown,
who
have
conspired
or
a t t e m p t e d t o c o m m i t t h e o f f e n s e s d e s c r i b e d h e r e i n or s o l i c i t e d or
facilitated
them,
all
in
accordance
with
A. R.S.
§ 13-1001-1004,
w i l l b e j o i n t l y a n d s e v e r a l l y l i a b l e as t h o u g h t h e y w e r e p r i n c i p a l
defendants.
The
provisions
of
include "preparatory offenses"
A. R. S.
§ 13-23C1.D.4.
explicitly
as a c t s of r a c k e t e e r i n g s u b j e c t to
r e l i e f u n d e r t h e A r i z o n a R a c k e t e e r i n g Act.
II.
JURISDICTION AND V E N U E .
49.
This
action
arises
under
O r g a n i z e d C r i m e C o n t r o l A c t of 1970,
922
(1970),
18
U.S.C.
§ 1961
Pub.
the
provisions
L. No.
et sea. . and,
91-452,
of
the
84 Stat.
therefore,
fe d e r a l
s u b j e c t m a t t e r j u r i s d i c t i o n e x i s t s p u r s u a n t to 18 U. S. C. §§ 1964(a)
and
(c)
a n d 28 U. S. C.
50.
§ 1331.
T h i s a c t i o n a l s o a r i s e s u n d e r t h e la ws of th e U n i t e d
S t a t e s a n d is b r o u g h t by t h e R T C as t h e s t a t u t o r y s u c c e s s o r to t h e
ri gh ts ,
ti tl es ,
to
FSLIC
the
jurisdiction
a n d 12 U . S. C.
51.
business,
po we rs ,
as
privileges
Conservator;
At
engaged
all
times
assets
therefore,
also exists pursuant
§ 1441A(1)(1),
an d
to
of N e w
federal
28 U. S. C.
§§
as a d d e d b y § 501(a)
relevant
in t o r t i o u s
co nd uc t,
he re in ,
the
transacted
Lincoln
subject
1331
and
matter
and
1345,
of FIRREA.
defendants
their
did
af fa ir s,
a n d / o r r e s i d e d w i t h i n the S t a t e of A r i z o n a .
52.
to 18 U . S. C.
V e n u e is p r o p e r in the D i s t r i c t of A r i z o n a p u r s u a n t
§§ 1965(a)
and
(b) a n d 28 U . S . C .
25
§§ 1391(b)
and
(c).
S U M M A R Y O F P L A I N T I F F 1S AC TI ON .
III.
53.
illegal
This
acts
and
Complaint
breaches
of
details
numerous
fiduciary
duties
fraudulent
committed
by
and
Old
L i nc ol n' s and ACC's dire ct or s and officers, including Old Lincoln's
de facto d i re ct or s and officers.
The transactions reflecting these
m a t t e r s a r e s e t f o r t h c o m m e n c i n g w i t h S e c t i o n IV of t h i s C o m p l a i n t .
The
following
paragraphs
summarize
the
misconduct
of
various
defendants.
Wischer,
A.
T h e S c h e m e a n d A r t i f i c e To D e f r a u d O l d
L i n c o l n a n d the R e g u l a t o r y A u t h o r i t i e s .
54.
Beginning
Ki e l t y ,
in
1983,
Wurzelbacher,
"Rac ke te er in g Defendants")
Keating
Li gget,
Jr.,
Keating
III,
and
Hubbard
(the
conceived a fraudulent scheme to divert
f u n d s f r o m a f e d e r a l l y i n s u r e d t h r i f t to t h e i r ow n u s e an d b e n e f i t .
Niebling,
Sauter
and
Hall
joined
in
and
e n v i s i o n e d by the R a ck et ee ri ng Defendants.
this
scheme
involved
concealing
advanced
The
from the
the
scheme
i m p l e m e n t a t i o n of
regulatory
authorities,
first, t h e t r u e i n t e n t i o n s for a c q u i r i n g O l d L i n c o l n and, next, the
a c t u a l o p e r a t i o n of th e th rift.
with
the
regulatory
stq
required
in
T h e y d i d t h i s to a v o i d c o m p l i a n c e
restrictions
order
to
and
maintain
supervisory
the
oversight which
integrity
of
deposit
i n s u r a n c e . To a d v a n c e t h e i r scheme, th e R a c k e t e e r i n g D e f e n d a n t s and
t h e i r a l l i e s e n g a g e d in a p a t t e r n of d e c e p t i o n to m a s k p r o h i b i t e d
and
sham
transactions
su ff e r e d damages,
f r om
regulatory
scrutiny.
and u l t i m a t e l y N e w L i n c o l n w i l l
26
Old
Lincoln
s u f f e r da ma ge s,
as
a result
of
this
fraudulent
scheme
and
a r t i fi ce .
The
RT C
as
C o n s e r v a t o r for N e w L i n c o l n is e n t i t l e d to r e c o v e r t h o s e da ma ge s.
55.
Defendants'
The
initial
components
of
the
Racketeering
s c h e m e i n c l u d e d th e f o l l o w i n g m a t t e r s :
56.
(a)
P r i o r to 1984, t h e R a c k e t e e r i n g D e f e n d a n t s
c o n t r o l l e d an a s s o c i a t i o n of a p p r o x i m a t e l y
seventeen
corporations
that
comprised
an
e n t e r p r i s e ("the A C C E n t e r p r i s e " ) .
(b)
Keating
Jr.
an d
the
other
Racketeering
D e f e n d a n t s o p e r a t e d t h e A C C E n t e r p r i s e for
t h e i r p e r s o n a l b e n e f i t a n d for t h e p e r s o n a l
b e n e f i t of t h e i r a s s o c i a t e s .
(c)
Th e p r i m a r y fo cu s of t h e A C C E n t e r p r i s e
s p e c u l a t i v e re al e s t a t e t r a n s a c t i o n s .
(d)
In or a b o u t 1983,
K e a t i n g Jr.,
the o t h e r
R a c k et ee ri ng Defendants, and their associates
r e q u i r e d a d d i t i o n a l fu nd s to e x p a n d t h e A C C
Enterprise's
speculative
real
estate
transactions.
(e)
To o b t a i n a s o u r c e of funds, the R a c k e t e e r i n g
Defendants, acting through the ACC Enterprise,
t a r g e t e d O l d L i n c o l n a n d its i n s u r e d d e p o s i t
b a s e for p u r c h a s e .
(f)
Utilizing
ACC,
a
constituent
of
the
ACC
Enterprise,
th e
Racketeering
Defendants
acquired
Old
Lincoln
by
making
material
m i s r e p r e s e n t a t i o n s to t h e FHLBB.
(g)
U p o n its a c q u i s i t i o n , O l d L i n c o l n
i n d i r e c t s u b s i d i a r y of ACC.
Once
ACC
acquired
Old
Li nc ol n,
the
became
was
an
Racketeering
D e f e n d a n t s , d i r e c t l y and i n d i r e c t l y , m a n a g e d th e a f f a i r s of th e A C C
Enterprise
themselves.
to
divert
They
Old
committed
Lincoln's
various
27
deposits
illegal,
and
assets
f r a u du le nt ,
to
and
imprudent
diversion,
acts
in
order
to
accomplish
and
then
to
conceal
this
including:
(a)
Su bm it ti ng false and m i s l e a d i n g bu siness plans
t o th e F H L B B ;
(b)
Exceeding regulatory
investments;
(c)
Concealing
direct
investment
regulation
vi o l a t i o n s by back da ti ng documents;
(d)
Forging certain documents
support misrepresentations;
(e)
Misrepresenting
the
nature
of
certain
i n v e s t m e n t s as l o a n s w h e n in f a c t t h e y w e r e
p r oh ib it ed direct investments by Old Lincoln;
(f)
Misrepresenting
the
effects
of
a
Tax
Pr ep ar at io n and A l l o c a t i o n A g r e e m e n t
(’’T a x
Plan") a n d u s i n g it to c a u s e O l d Li n c o l n , in
v i o l a t i o n of a p p l i c a b l e law, r e g u l a t i o n s , and
po licies go ve rn in g thrift ho ld in g companies,
to t r a n s f e r a p p r o x i m a t e l y $ 9 4 , 8 0 0 , 0 0 0 f r o m Ol d
L i n c o l n to ACC;
(g)
C o n c e a l i n g t h e e x i s t e n c e of l a r g e i l l e g a l c a s h
p a y m e n t s f r om O l d L i n c o l n to A C C u n d e r th e T a x
Plan;
(h)
Undertaking
sham
economic substance;
(i)
M i s r e p r e s e n t i n g t h e t r u e v a l u e of O l d L i n c o l n ' s
a s s e t s to c r e a t e an a r t i f i c i a l a p p e a r a n c e of
pr o f i t a b i l i t y and stability;
(j)
C a u s i n g O l d L i n c o l n to m a k e f r a u d u l e n t loans;
(k)
E f f e c t i n g t h e f r a u d u l e n t t r a n s f e r of o w n e r s h i p
of s e c u r i t i e s t o ACC;
(l)
C a u s i n g O l d L i n c o l n to p l e d g e $ 1 5 , 0 0 0 , 0 0 0 in
a s s e t s as s e c u r i t y for a l o a n t o t h e A C C
E m p l o y e e S t o c k O p t i o n P l a n to fu nd p u r c h a s e s
of i n s i d e r s t o c k h o l d i n g s ; and
(rw
Using
Old
Lincoln's
assets
tc
pa\
^^e
R acke t e e r i n g Defendants ana ctner insiders
excessive
compensation
and
to
fund
the
28
limits
on
in
risky
an
transactions
direct
effort
devoid
to
of
p e r s o n a l , p o l i t i c a l , an d c h a r i t a b l e c o n v i c t i o n s
of K e a t i n g Jr.
B.
B r e a c h e s of F i d u c i a r y D u t i e s b y O l d L i n c o l n ' s
D i r e c t o r s a n d O f f i c e r s . ________________________ _
57.
D e f e n d a n t s ’ b r e a c h e s of t h e i r f i d u c i a r y d u t i e s w e r e
pervasive.
f r om
Old
T h e i r b r e a c h e s i n v o l v e d d i v e r t i n g e n o r m o u s s u m s of c a s h
Lincoln
imprudent
loans
to
ACC,
and
extending
investments,
loans
to
in s i d e r s ,
manipulating
making
transactions
to
e n h a n c e t h e i n t e r e s t s of A C C an d its i n s i d e r s to t h e d e t r i m e n t of
Old
Li n c o l n ,
wasting
Old
Lincoln's
assets,
and
appropriating
corporate opportunities.
58.
A
recurring
element
in t h e
transactions
in S e c t i o n IV w a s t h e o p e r a t i o n of t h e T a x Plan,
c a u s e d O l d L i n c o l n to e x e c ut e.
permissible
arrangement,
subsidiaries
liabilities,
to
advance
which defendants
T h e T a x P l a n c o r r u p t e d an o t h e r w i s e
i .e .
to
described
requiring
it
cash
to
a
holding
cover
their
company's
a c tu al
tax
to c r e a t e a d e v i c e to s i p h o n c a s h f r o m Ol d L i n c o l n to
A C C on t h e b a s i s of d e f e r r e d t a x l i a b i l i t i e s ,
e v e n t h o u g h no t a x e s
c u r r e n t l y w e r e p a y a b l e by or on b e h a l f of O l d Li nc ol n.
59.
financial
Fa mily,
To
make
benefit
a n d ACC,
of
th e
generate
substance.
for
Tax
Plan
Racketeering
work
for
the
Defendants,
immediate
th e
Keating
it w a s i m p e r a t i v e for O l d L i n c o l n and the L i n c o l n
S u b s i d i a r i e s to e n g a g e
economic
the
Old
in a s e r i e s of s h a m t r a n s a c t i o n s d e v o i d of
Only
Lincoln
in
this
fashion
consolidated
could
"book
the
defendants
in come"
which
p u r p o r t e d l y j u s t i f i e d the d i v e r s i o n of c a s h fr o m Ol d L i n c o l n to A C C
under the Tax Plan.
The defendants g e n e r a l l y empl o y e d sham real
29
estate
transactions
purpose.
and
accounting
gimmickry
to
accomplish
this
It w a s c h a r a c t e r i s t i c of t h e s e t r a n s a c t i o n s t h a t " s t r a w
b o r r o w e r s " w o u l d b e used,
t h a t t h e b o r r o w e r s w o u l d n o t b e at r i s k
on t h e l o a n s e x t e n d e d b y O l d L i n c o l n a n d t h e L i n c o l n S u b s i d i a r i e s ,
a n d t h a t O l d L i n c o l n w o u l d finance,
down payments.
losses
Ultimately,
d i r e c t l y or i n d i r e c t l y ,
their
Old Lincoln sustained Tax Plan related
in e x c e s s of $ 1 2 5 , 0 0 0 , 0 0 0 as a r e s u l t of t r a n s a c t i o n s s u c h
as those.
60.
other
The mi sc o n d u c t
directors
included
their
Partnership.
capital
an d
officers
(both
of t h e R a c k e t e e r i n g
f o rm al
self-d ea li ng wi th the Hotel
For
their
contributions
own
by
benefit,
an d
loans
and
facto)
Pontchartrain
these
from
de
defendants
Old
Defendants
Lincoln
also
Limited
procured
to
Lincoln
S u b s i d i a r i e s w hich p e r m i t t e d t h e p a r t n e r s h i p ' s a c q u i s i t i o n of the
Hotel
Pontchartrain
operation
of
th e
operating
losses.
p a rt ne rs hi p had
approximately
and
the
hotel,
For
continuation
despite
e x a m pl e,
a substantial
a negative
its
at
negative
$20,000,000,
of
the
partnership's
continuing
a
time
when
n e t wo rt h,
and wh en
and
serious
the
limited
believed
its
single
to be
asset,
the h o t e l , was encumbered with secured indebtedness approximately
equal
to
procured
te rm s,
in
excess
a $20,000,000
of
its
appraised
unsecured
Losses
sustained
P o n t c h artrain
Limited
on
the
these
'on f a v o r a b l e
transactions
Partnership
exceed $21,600,000.
loan,
va lue,
defendants
below-market
f r o m one of t h e L i n c o l n S u b s i d i a r i e s w h i c h w a s f u n d e d b y Old
Lincoln.
Hotel
or
30
have
relating
exceeded
to
or
the
will
61.
A c l a s s i c e x a m p l e of t h e f i n a n c i a l i m p r u d e n c e of Old
L i n c o l n ’s d i r e c t o r s a n d o f f i c e r s is t h e f i n a n c i n g of t h e p u r c h a s e
of C r o w d e r W a t e r R a n c h b y C.V.
The
losses
(a)
T h e y s o l d a o n e - t h i r d i n t e r e s t in t h e C r o w d e r
W a t e r R a n c h to C.V. N a l l e y for $ 2 0 , 0 0 0 , 0 0 0 on
S e p t e m b e r 30, 1986.
(b)
On the
s a m e date,
they caused
a Lincoln
S u b s i d i a r y t o r e l e a s e C.V. N a l l e y ’s p e r s o n a l
g u a r a n t e e s on l o a n s t o o n e b o r r o w e r , an d t h e y
f u r t h e r c a u s e d a n o t h e r L i n c o l n S u b s i d i a r y to
p u r c h a s e for $ 3 , 5 0 0 , 0 0 0 all of C.V. N a l l e y ' s
s t o c k in one of t h o s e b o r r o w e r s wh ic h, at t h e
t i m e of the p u r c h a s e , w a s e i t h e r i n s o l v e n t or
n e a r l y in so lv en t.
(c)
T h e y e x t e n d e d t o C.V.
Nalley non-recourse
f i n a n c i n g in th e a m o u n t of $ 1 5 , 0 0 0 , 0 0 0 w h e n he
c l o s e d t h e p u r c h a s e of t h e C r o w d e r W a t e r Ranch.
(d)
When
C.V.
Nalley
failed
to
honor
his
c o m m i t m e n t s u n d e r t h e l o a n a g r e e m e n t , fi rs t
w i t h r e s p e c t to h i s o b l i g a t i o n to m a k e an
a n n u a l p r i n c i p a l a n d i n t e r e s t p a y m e n t in 1987
and t h e n w i t h r e s p e c t to hi s o b l i g a t i o n to m a k e
an a n n u a l p r i n c i p a l a n d i n t e r e s t p a y m e n t in
1988, t h e y c a u s e d O l d L i n c o l n and the L i n c o l n
Subsidiaries
to
agree
to
repurchase
t h is
interest
in
the
Crowder
Water
Ranch
by
forgiving
the
$15,000,000
in
non-recourse
i n d e b t e d n e s s a n d b y p a y i n g h i m $ 7 , 5 0 0 , 0 0 0 in
cash.
realized
approximately
Na ll ey :
on
this
series
of
transactions
are
$14,000,000.
62.
L i n c o l n ’s d i r e c t
To avoid compliance with lawful
investments,
defendants
engaged
l i m i t a t i o n s on O l d
in a v a r i e t y
t r an sa ct io ns to di sguise what otherwise were and were
of
i n t e n d e d to
be i n v e s t m e n t s by Old L i nc ol n.
A n e x a m p l e is t h e C o n t i n e n t a l R a n c h
transaction
Inc.
with
R .A . Homes,
D e fendants
caused
a Lincoln
S u bsidiary to sell the residential portion of Continental Ranch tc
31
R.
A.
Homes,
Inc.,
and
to
finance
th
the
t r a n s a c t i o n d e v o i d of e c o n o m i c s u b s t a n c e .
funds for financing this transaction.
sale
and
financing,
Subsidiaries
they were
to
the
exercise
caused
control
The
a number
sham
Old Lincoln pr ov i d e d the
Lincoln
that
and
project
the
just
Racketeering
Defendants
of t r a n s a c t i o n s w i t h W o l f s w i n k e l
Lincoln
as
though
combine
a number
of
the
serious
acts
and
Group,
i n v o l v i n g a p r o j e c t n e a r T u c s o n k n o w n as R a n c h o V i s t o s o ,
transactions
a
S u b s e q u e n t to t h e p u r p o r t e d
Old
of
in
s o l e o w n e r of or a j o i n t v e n t u r e r on t h a t p r o j e c t .
63.
engineered
they
acquisition
their
Inc.
and these
of m i s c o n d u c t
ad dr es se d by this Complaint:
In sum,
(a)
The
Rancho
Vistoso
loans
were
closed
in
c o n t r a v e n t i o n of a s p e c i f i c
federal
regulation
r e q u i r i n g e a c h real e s t a t e l o a n t o be s u p p o r t e d by
an a d e q u a t e a p p r a i s a l p r i o r to l o an a p p r o v a l or
disbursement.
(b)
O l d L i n c o l n w a s f o r c e d to sell a l e g i t i m a t e p r o f i t
p a r t i c i p a t i o n in t h e R a n c h o V i s t o s o l o a n s for a
p u r p o r t e d $ 1 5 , 0 0 0 , 0 0 0 in a t r a n s a c t i o n _ t h a t w a s
u n l a w f u l l y f i n a n c e d a n d w h i c h o c c u r r e d w i t h o u t the
requisite regula to ry approval.
(c)
A f t e r s e l l i n g t h e p r o f i t p a r t i c i p a t i o n to ACC, A C C
so l d it b a c k to t h e b o r r o w e r , w h o f i n a n c e d t h e r e
a c q u i s i t i o n w i t h p r o c e e d s of i l l u s o r y t r a n s a c t i o n s
with Lincoln Subsidiaries.
(d)
O l d L i n c ol n, m o r e o v e r , w a s c a u s e d b y A C C to r e c o r d
a p r o f i t ©n t h e s a l e of t h e p r o f i t p a r t i c i p a t i o n to
ACC, t h e r e b y f o r c i n g it to a d v a n c e c a s h t o A C C m
t h e a p p r o x i m a t e a m o u n t of' $ 6 , 0 0 0 , 0 0 0 .
the Rancho Vistoso transactions
a m o u n t e d to a v a r i e t y
of
illegal, a n d i m p r u d e n t t r a n s a c t i o n s w h i c h h a v e c a u s e d or w i l l c a u s e
Old Lincoln damages
in e x c e s s of $ 7 6 , 0 0 0 , 0 0 0 .
32
all
64.
manipulated
In a d d i t i o n to real e s t a t e t r a n s a c t i o n s , d e f e n d a n t s
a
number
r e s u l t e d or w i l l
of
result
of t h o s e t r a n s a c t i o n s ,
opportunity
stock
sales
in d a m a g e s
which
have
in e x c e s s of $ 2 2 , 0 0 0 , 0 0 0 .
One
involved the
for th e b e n e f i t
and
purchases
appropriation
of a c o r p o r a t e
of A C C a n d a c o n c u r r e n t d e t r i m e n t to
Old L i n c o l n in the a p p r o x i m a t e a m o u n t of $ 1 1 , 0 0 0 , 0 0 0 .
the
Keating
Fa mily,
more
elaborate
even
prof it ed by
their
series
business
of
selling their stock
Owne'rship Plan.
at risk.
and
This
associates
insider
stock
K e a t i n g Jr.,
engaged
in an
transactions
and
in A C C to t h e A C C E m p l o y e e S t o c k
insider trading placed Old Lincoln's assets
T h e s e t r a n s a c t i o n s w i l l r e s u l t in a lo ss to O l d L i n c o l n
in e x c e s s of $ 1 1 , 0 0 0 , 0 0 0 .
65.
All
told,
the
defendants
caused
Old
Lincoln
to
e n g a g e in n u m e r o u s fraudulent,- illegal, an d i m p r u d e n t t r a n s a c t i o n s .
As
a
result
in s o l v e n t ,
damages
of
and
those
New
transactions,
Lincoln
has
Old
sustained
Lincoln
or
will
was
rendered
sustain
to ta l
in e x c e s s of $ 1 , 1 0 0 , 0 0 0 , 0 0 0 .
C.
D e f e n d a n t s ' M o t i v e s for Il l e g a l ,
F r a u d u l e n t , and I m p r u d e n t T r a n s a c t i o n s .
66.
The
Racketeering
Defendants
set
out
to
acquire
a
s o u r c e of c a s h for the s p e c u l a t i v e b u s i n e s s v e n t u r e s and c a s h n e e d s
of
the
projects
in
ACC
an d
hostile
Enterprise.
investments
takeovers.
This
included
in j u nk b o n d s
Therefore,
th e
speculative
an d
real
in c o m p a n i e s
Racketeering
s o u g h t to a c q u i r e a t h r i f t to s e c u r e a s o u r c e of funds.
estate
involved
Defendants
67.
loans,
and
Tr ad i t i o n a l l y , thrifts
they
Mo re recently,
funds
to
however,
make
subsidiaries,
derive
income
by
use
deposit
collecting
funds
interest
to
and
make
fees.
thrifts also have used depo si ts and other
investments
in
r e al
es tate,
and/or equity securities.
service
corporation
Such non-loan investments
ar e r e f e r r e d to as " d i r e c t i n v e s t m e n t s . "
Federal regulations have
l i m i t e d t h e p e r c e n t a g e of a s s e t s w h i c h a f e d e r a l l y c h a r t e r e d t h r i f t
c o u l d u s e for d i r e c t i n v e s t m e n t s .
however,
thrifts
the
no
such
percentage
in C a l i f o r n i a ,
Racketeering
68.
limit
targeted
acquiring
Defendants1 paramount
applied
to
state
e v e n t h o u g h f-ederally in su re d.
Defendants
After
In l a te 1983 t h r o u g h e a r l y 1985,
motive
Old
was
to
and
acquired
Li nc ol n,
divert
the
Therefore,
Old
the
chartered
Li nc ol n.
Racketeering
resources
of
Old
L i n c o l n to t h e A C C E n t e r p r i s e in f u r t h e r a n c e of t h e i r p l a n s a n d in
disregard
for o t h e r r e g u l a t o r y r e s t r i c t i o n s c o n c e r n i n g s a f e t y and
s o u n d n e s s an d O l d L i n c o l n ' s o b l i g a t i o n s to its d e p o s i t o r s a n d o t h e r
creditors.
In
transactions
ad di t i o n ,
th e
Racketeering
Defendants
used
i n v o l v i n g O l d L i n c o l n in an e f f o r t to m a n i p u l a t e and
t o i n f l a t e a r t i f i c i a l l y t h e p r i c e of A C C ' s s t o c k for t h e u l t i m a t e
b e n e f i t of t h e K e a t i n g F a m i l y a n d o t h e r in si de rs ,
i n c l u d i n g sa le s
of t h e i r s t o c k in A C C for its E m p l o y e e S t o c k O w n e r s h i p Plan.
69.
Enterprise's
T h e R a c k e t e e r i n g D e f e n d a n t s m e a n t t o f i n a n c e t h e AC C
large
speculative
real
with direct
f u n d i n g b y O l d Li nc ol n.
Lincoln
increase
to
th e
ACC
estate
ventures
T h e y a l s o m e a n t to c a u s e Old
Enterprise's
34
and bu siness
cash
f l ow
through
the
objective
of
using
Old
Lincoln's
p r o j e c t s of t h e A C C E n t e r p r i s e ,
many
of
ACC's
subsidiaries
operations
of
such,
to
ACC
deposit
base
to
fu nd
directly
the Ra ck et ee ri ng Defendants caused
be
transferred
Enterprise
to
Old
operations
L i n c ol n.
could
be
As
funded
t h r o u g h c a p i t a l c o n t r i b u t i o n s and l o a n s f r om O l d Li n c o l n .
70.
to
these
imposed
all
The R a ck et ee ri ng Defendants soon met wi t h obstacles
objectives.
duly
specific percentage
federally
ACC's
By
insured
acquisition
Defendants
soon
promulgated
limitations
th r i f t s .
of
control
found
that
In
of
their
regulation,
on d i r e c t
a d d i ti on ,
Old,
ability
the
to m o v e
FHLBB
i n v e s t m e n t s by
under
Li nc ol n,
the
the
terms
of
Racketeering
money
fr om O l d
L i n c o l n to A C C t h r o u g h t h e p a y m e n t of d i v i d e n d s w a s l i m i t e d du e to
regulatory restrictions.
Thereafter,
undertook
the
to
circumvent
investments
and
to
inflate
the R a ck et ee ri ng Defendants
applicable
the
limitations
apparent
on
profitability
direct
of
Ol d
L i n c o l n to s a t i s f y the A C C E n t e r p r i s e ' s c a s h f l o w needs.
71.
K e a t i n g Jr.,
In
the
FHLBB
early
1985,
over
th e
"direct
implemented
w h i c h is c o d i f i e d at 12 C . F . R § 56 3. 9- 8.
th e
strenuous
investment
objection
ru le ,"
A d o p t i o n of t h i s l a wf ul
r e g u l a t i o n w a s i n t e n d e d to li mi t r i s k s to f e d e r a l l y insured,
state
c h a r t e r e d t h r i f t s a r i s i n g f r om i n v e s t m e n t s in s u c h a s s e t s as e q u i t y
s e c u r i t i e s a n d s p e c u l a t i v e real estate.
with
this
Defendants'
Lincoln.
purposes
Accordingly,
Defendants
regulation
were
would
have
for t h e A C C
Old Lincoln's compliance
thwarted
Enterprise's
th e
Racketeering
acquisition
of O l d
after acquiring Old Lincoln the Racketeering
motivated
to
cause Old
35
Lincoln
to e^a-.-
ip,
s^a...
of
transactions
for
the
purpose
of
causing
direct
investments
to
a p p e a r as loans.
72.
investments,
B e c a u s e of t h e i r r e l i a n c e on s p e c u l a t i v e re al e s t
t h e R a c k e t e e r i n g D e f e n d a n t s h a d t o d e v i s e a m e t h o d of
diverting
cash to ACC
on p a y i n g
dividends
A s a r e su lt ,
from Old
forced
Li nc ol n.
them
to
Regulatory
find
another
restrictions
source
of
cash.
t h e R a c k e t e e r i n g D e f e n d a n t s r e l i e d on t h e T a x P l a n to
d i v e r t c a s h to A C C f r o m O l d L i n c o l n e v e n t h o u g h O l d L i n c o l n h a d not
ygt
earned
cash
on
the
transactions
by
which
the
Racketeering
D e f e n d a n t s w e r e c a u s i n g O l d L i n c o l n to b o o k income.
ACC
Enterprise
Lincoln.
dependent
Accordingly,
upon
th e
generating
Racketeering
"book
T h i s m a d e the
in c o m e "
Defendants
at
Old
were
a l so
m o t i v a t e d to c a u s e O l d L i n c o l n t o e n g a g e in s h a m t r a n s a c t i o n s
the
purpose
of
artificially
inflating
v i o l a t i o n of 12 C * F .R . §§ 5 6 3 . 1 8 ( b ) ,
In turn,
its
"book
5 6 3 . 2 3 - 1 (f)
in co me "
for
in
an d 5 6 3 . 2 3 - 3 (c).
t h e " b o o k i n co me " i n f l a t i o n led to p a y m e n t s u n d e r t h e T a x
P l a n w h i c h w e r e i l l e g a l u n d e r 12 U. S. C.
§ 1 7 3 0 a ( d ) (4) an d 12 C.F.R.
§ 584. 3 (a) (4) .
73.
described
in
T h e illegal,
this
f r a u d u l e n t , and i m p r u d e n t t r a n s a c t i o n s
Complaint
were
the
product
of
the
foregoing
motives.
IV.
FACTS UNDERLYING CLAIMS FOR R E L I E F .
A.
The ACC E n t e r p r i s e .
74.
As
is
more
particularly
set
forth
below,
there
existed an enterprise known as the ACC Enterprise,
which engaged,
inter a l i a , in the businesses
estate
of specu l a t i v e real
36
finance
and
of
speculative
real
estate
acquisition,
development,
an d
construction.
75.
P r i o r to 1984, t h e A C C E n t e r p r i s e i n c l u d e d , b u t w a s
n o t l i m i t e d to,
all or p a r t of t h e f o l l o w i n g e n t i t i e s :
American Continental Corporation
M e d e m a H o m e s of Utah, Inc.
U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e
American Continental Mortgage Company
American Continental Resources Corporation
Continental Fire & Casualty Company
T a t u m Place, Inc.
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc.
P a r k D r i v e A p a r t m e n t s , Inc.
A . C. C. R e a l Es ta te , Inc. (formerly, K e a t i n g Homes)
D u n l a p A p a r t m e n t s , Inc.
American Continental Finance Corporation
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II
Continental Home Finance Corporation
American Home Finance Corporation
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
76.
constitutes
defined
by
The
an
ACC
Enterprise
association
18
§ 1 3 - 2 3 0 1 ( D ) (2).
in
U. S. C.
identified
fa ct
and
§ 1961(4)
Indeed,
ACC,
is
and
in
an
paragraph
Me n t e r p r i s e M
Ariz.
Rev.
74,
as
Stat.
t h r o u g h its a u t h o r i z e d agents,
has
a d m i t t e d t h e e x i s t e n c e of the A C C E n t e r p r i s e in p r o c e e d i n g s p e n d i n g
before
the
United
States
District
Court
for
th e
District
of
Arizona :
.
. .
ACC,
Lincoln
Savings
and
Loan
A s s o c i a t i o n (’‘L i n c o l n " ) a n d t h e e l e v e n L i n c o l n
service co mp an y subsidiaries were one business
enterprise
(collectively
the
"ACC
Enterprise").
Supplemental
Continental
Court ;
Memorandum
Corporation
in
To
j am.es
Support
Withdraw
•
of
Motion
Reference
re d e r , m u c u s ;
w
37
of
fr om
American
Bankruptcy
American
Continental
Moreover,
ACC has
C o r p o r a t i o n , CIV
8 9 - 1 1 1 6 - P H X - C L H , at
a d m i t t e d to t h i s C o u r t t h e p r a c t i c a l
p.
and
3.
lega l
e f f e c t s of t h i s a s s o c i a t i o n :
T h e A C C E n t e r p r i s e is o n e b u s i n e s s e n t e r p r i s e ,
i n t e r t w i n e d f i n a n c i a l l y a n d legally.
I d . a t ' 13.
B.
A c q u i s i t i o n a n d M a i n t e n a n c e of C o n t r o l
of O l d L i n c o l n t h r o u g h a S c h e m e a n d
A r t i f i c e To D e f r a u d O l d L i n c o l n
a n d the R e g u l a t o r y A u t h o r i t i e s .
1.
The Re gu l a t o r y structure
Pr ot ec ti ng the Deposit Base
T a r g e t e d b v th e A C C E n t e r p r i s e .
77.
The
Racketeering
Defendants
sought
to
i n s u r e d t h r i f t in o r d e r t o e x p l o i t an e x i s t i n g d e p o s i t b a s e a n d the
potential
for
exploitation.
potential
expansion
As
of
described
that
below,
deposit
that
base
deposit
for
base
further
an d
its
for e x p a n s i o n w e r e m a d e p o s s i b l e by t h e f e d e r a l d e p o s i t
i n s u r a n c e system.
78.
organized,
Old
Lincoln
was
a thrift
which
was
incorporated,
a n d c h a r t e r e d u n d e r t h e laws of t h e S t a t e of C a l i f o r n i a .
A s a t h r i f t c h a r t e r e d by t h o S t a t e of C a l i f o r n i a ,
O l d L i n c o l n was
s u b j e c t to r e g u l a t i o n a n d e x a m i n a t i o n b y t h e CDSL.
79.
t o 12 U . S . C .
Old Lincoln's deposit accounts were insured pursuant
§ 1726.
T h e i n s u r a n c e of d e p o s i t a c c o u n t s m a t e r i a l l y
b e n e f i t e d O l d L i n c o l n in o b t a i n i n g d e p o s i t fu nd s for its i n v e s t m e n t
use.
80.
The
examination
and
supervision
of
individual
f e derally insured t rifts was conducted by the FHLBB ana the F S ^ C ,
38
acquire
in part, t h r o u g h t w e l v e r e g i o n a l o f f i c e s w h i c h h a d d e l e g a t e d p o w e r s
from the
FHLBB
and
the
authority
was
vested
FSLIC.
C.F.R.
501.
B a n k a n d c e r t a i n b a n k e m p l o y e e s k n o w n as S u p e r v i s o r y A g e n t s .
Old
located
in
the
region
of e a c h
Supervisory
Loan
was
President
Part
Home
Lincoln
in th e
12
supervised
D i s t r i c t O f f i c e of t h e S u p e r v i s o r y A g e n t
81.
insurance
series
To
system,
of
application
They
and
corporate
82.
with
the
Home
Ow n e r s '
1934.
system
of t h e
Loan
Act
These Acts
an d
state
FSLIC
of
adopted
matters
origin
1933,
appraisals;
loan
investments,
both
corporations;
certain
each
aspects
insured
its ch a r t e r ,
related
extensive
to
the
of
thrift
because
safety
of
and
i n s u r a n c e system.
fe d e r a l
Federal
an
deposit
and
service
to
of
Eleventh
procedures,
as
and
applied
the
federal
policies,
interests
of
the
subsidiary
federal deposit
The
of
persons;
of t h e
by
("Supervisory A g e n t " ) .
documentation;
They
federal
passage
compatible
and
affiliated
overwhelming
the
such
through
regardless
s o u n d n e s s of t h e
an d
covered
governance,.
institution,
purposes
regulations,
indirectly
with
the
FHLBB
underwriting,
transactions
the
the
operating
requirements.
directly
achieve
Federal
Home
an d
regulations
regulations,
regulation
Loan
the
of
thrifts
Bank Act
National
of
permitted
1932,
Housing
adopted thereunder,
thrifts
began
the
Act
of
along with
an d
their
o w n e r s / m e m b e r s to o p e r a t e in a p r o f i t - o r i e n t e d e n v i r o n m e n t , b u t d i d
not
permit
unrestricted
operations.
t h r i f t and its o w n e r s / m e m b e r s ,
D e n e f its
p r c <iq s u b ^
f e c»e l i
Accordingly,
each
insured
by v i r t u e of t h e i r a c c e p t a n c e of the
g
£p c s i t insurance,
39
ne w £ s s s i
R^St
have
r e c o g n i z e d .t h a t
depositors'
p a r a m o u n t and, t h e r e f o r e ,
interests
an d
protection
were
c o n t r o l l e d an d l i m i t e d t h e size, nature,
a n d t e r m s of t r a n s a c t i o n s .
In short,
e a c h i n s u r e d t h r i f t a n d its
o w ne rs /m em be rs were required to recognize that they operated with
and
placed
at
ultimately,
the
funds
of
the federal deposit
83.
Lincoln
risk
was
thrift's
depositors
and,
i n s u r a n c e fund.
As a c o n d i t i o n of t h e i n s u r a n c e of its d e p o s i t s , O l d
required,
regulations;
the
inter
a l i a , to
comply
with
all
fe d e r a l
t o a d h e r e to s a f e a n d s o u n d m a n a g e m e n t an d f i n a n c i a l
p r a c t i c e s ; t o m a i n t a i n b o o k s a n d r e c o r d s a c c u r a t e l y r e f l e c t i n g all
its
business
examiners
transactions
who
conducted
and
to m a k e
periodic
them
available
examinations
to
to
fe de ra l
monitor
Ol d
Li nc ol n' s and the Lincoln Subsidiaries' compliance with regulations
and
adherence
minimum
net
to
safe
worth
d e p o s i t o r s an d t h e
84.
The
an d
and
sound
other
reserves
i n s u r a n c e fund.
system
of
practices;
for
12 U. S. C.
federal
and
and
to
maintain
the
protection
a
of
§ 1726(b).
state
regulation
which
a p p l i e d to O l d L i n c o l n an d the L i n c o l n S u b s i d i a r i e s w a s n e c e s s a r y
to
serve the
fundamental,
i n s u r a n c e s y st em ,
unique purposes
purposes
regulatory
federal
deposit
including:
(a)
Protecting depositors who entrust their savings
to t h r i f t i n s t i t u t i o n s ;
(b)
Promoting
an d
stability
(c)
These
of t h e
in t h e
financial
sy stem;
Providing
sufficient
l i q u i d i t y to
fund
e c o n o m i c a l s y s t e m of h o m e fi n a n c i n g .
couId
not
be
achieved
without
adherence
requirements.
40
an
to
2
85.
capital
.
T a r g e t i n g of O l d L i n c o l n .
In 1983,
reserves
in
primarily engaged
Old Lincoln was a profitable thrift with
excess
of
regulatory
requirements.
in t h e b u s i n e s s of r e s i d e n t i a l
It
lending
p u r c h a s e or r e f i n a n c i n g of o n e to f o ur u n i t d w e l l i n g s .
was
for th e
Old Lincoln
h a d b e e n o n e of t h e l e a d i n g i n s t i t u t i o n s in, t h e a r e a of a f f i r m a t i v e
lending
in m o r t g a g e
exclusively
oriented
on
retail
branch
California,
deposits
to
deficient
deposits
system,
fu nd
accounted
areas.
its
gathered
primarily
lending
for o n l y
Old
Lincoln
through
servicing
operations.
2.7 p e r c e n t
of
relied, a l m o s t
a
community
Orange
County,
Wholesale
brokered
its
liabilities
prior
to A C C ' s a c q u i s i t i o n .
86.
In 1983 and c o n t i n u i n g t h e r e a f t e r ,
the Ra ck et ee ri ng
D e f e n d a n t s , t h e K e a t i n g Family, c e r t a i n o t h e r d e f e n d a n t s , and t h e i r
associates needed
fu nd s to e x p a n d t h e A C C E n t e r p r i s e ' s o p e r a t i o n s
for t h e i r p e r s o n a l be n e f i t .
87.
Enterprise
insured
T h e R a c k e t e e r i n g D e f e n d a n t s d e t e r m i n e d t h a t th e A C C
s h o u l d a c q u i r e and m a i n t a i n c o n t r o l
thrift
in
order
to
fund
the
of a f e d e r a l l y
operations
of
the
ACC
targeted
Old
Enterprise.
88.
Lincoln
The
Racketeering
Defendants
then
for p u r c h a s e by th e A C C E n t e r p r i s e .
89.
To a c h i e v e
t h e i r g o al
of
exploiting
Old
Lincoln's
e x i s t i n g i n s u r e d d e p o s i t b a s e and its p o t e n t i a l for e x p a n s i o n ,
the
R a c k e t e e r i n g D e f e n d a n t s c o n c e i v e d a s c h e m e and a r t i f i c e to d e f r a u d
41
the
very
regulatory
system which
made
Old
Lincoln
an
attractive
prize.
90.
of t h e A C C
The
Racketeering
Defendants
conducted
E n t e r p r i s e t h r o u g h a p a t t e r n of r a c k e t e e r i n g
activity
t o a c q u i r e O l d L i n c o l n a n d t o m a i n t a i n c o n t r o l of O l d L i n c o l n ,
more
fully
described
be low.
The
Racketeering
the
Defendants
as
also
r e c e i v e d i n c o m e d e r i v e d f r o m a p a t t e r n of r a c k e t e e r i n g a c t i v i t y a n d
i n v e s t e d it in t h e o p e r a t i o n s of t h e A C C E n t e r p r i s e ,
as m o r e f u l l y
d e s c r i b e d below.
3.
91.
Accru i s i t i o n of O l d L i n c o l n .
ACC,
a c o n s t i t u e n t of t h e A C C E n t e r p r i s e ,
was used
as t h e i n s t r u m e n t a l i t y to a c q u i r e O l d Li nc ol n.
92.
A C C ' s a c q u i s i t i o n of O l d L i n c o l n r e q u i r e d t h e r e v i e w
a n d a p p r o v a l of t h e r e g u l a t o r y a u t h o r i t i e s .
93.
approval
of
soliciting
application,
A C C m a d e n u m e r o u s f a c t u a l r e p r e s e n t a t i o n s to i n du ce
ACC's
proposed
regulatory
as
acquisition
ap p r o v a l ,
required
by
ACC
federal
of
Old
Li n c o l n .
submitted
law,
In
a
written
providing
specific
i n f o r m a t i o n d e t a i l i n g t h e i n t e n d e d m a n n e r of o p e r a t i n g O l d Li nc ol n.
ACC,
through
its
representatives,
made
false
representations
r e g a r d i n g t h e i n t e n d e d m a n n e r of o p e r a t i n g O l d L i n c ol n,
b u t n o t l i m i t e d to,
t h e fo ll ow in g:
(a)
ACC would maintain
management.
(b)
ACC would continue Old Lincoln's
lendi ng and o p e r a t i n g focus.
(cj
i n cl ud in g,
ACC
Old
would
m a i n t a i n Old
irvi ni m u m net w o r t h l e v e l s
Lincoln's
existing
residential
L i nco ln 's
required
for tw en ty years.
affa
These
factual
authorities'
representations
were
material
decision to approve ACC's
to
the
acquisition
regulatory
of c o n t r o l
of
O l d L i n c o l n on t h e t e r m s p r o p o s e d b y ACC.
94.
F u r t he r,
the
Racketeering
Defendants
fraudulently
o m i t t e d f r o m t h e i r s t a t e m e n t of i n t e n d e d o p e r a t i o n of O l d L i n c o l n
t h e i r p l a n t o c e a s e t r a d i t i o n a l s ivings a n d l o a n o p e r a t i o n s a n d to
c o n c e n t r a t e e x c l u s i v e l y on h i g h r i s k a c t i v i t i e s u n r e l a t e d t o h o m e
financing.
95.
w e r e false.
T h e f a c t u a l r e p r e s e n t a t i o n s m a d e b y A C C to t h e F H L B B
A C C k n e w the r e p r e s e n t a t i o n s to be false,
but,
at th e
d i r e c t i o n of t h e R a c k e t e e r i n g D e f e n d a n t s , m a d e t h e m to d e c e i v e a n d
to
mislead
the
acquisition.
the
authorities
to
At the time when ACC made
Racketeering
for
regulatory
Defendants
purpose
of
sought
induce
of
the
the representations,
the
to a c q u i r e
effecting
direct
control
approval
of O l d L i n c o l n
investments
in
the
ACC
E n t e r p r i s e and d i v e r t i n g t h e d e p o s i t s a n d a s s e t s of O l d L i n c o l n to
t h e i r p e r s o n a l u s e a n d be n e f i t .
96.
Supervisory
In
Agent
reliance
approved
upon
ACC's
ACC's
representations,
application
for
acquisition
c o n t r o l of O l d L i n c o l n on th e t e r m s p r o p o s e d b y ACC.
A C C a c q u i r e d O l d L i n c o l n on or a b o u t F e b r u a r y 22,
the
of
Thereafter,
1984,
by p a y i n g
$ 5 1 , 0 0 0 , 0 0 0 for F i r s t L i nc ol n, w h i c h o w n e d 100% of t h e s t o c k of O l d
Lincoln.
F i r s t L i n c o l n h a d an d ha s no f u n c t i o n o t h e r t h a n to h o l d
t h e s t o c k of Old Lincoln.
therefore,
ACC d eliberately
With
its a c q u i s i t i o n of F i r s t Lincoln,
acquired an
43
indirect
s u b s i d i a r y , Old
Lincoln,
knowing
that
it
operated
in
the
highly
regulated
e n v i r o n m e n t d e s c r i b e d above.
97.
represented
Lincoln,
Had
their
the
the
Racketeering
intentions
Supervisory
regarding
Agent
would
a c q u i s i t i o n of c o n t r o l a p p l i c a t i o n ,
subject
to
certain
Racketeering
appropriate
Defendants
Defendants
would
the
not
operations
have
of
approved
Old
A C C ’s
or w o u l d h a v e a p p r o v e d it o n l y
operating
not
truthfully
have
restrictions,
acquired
control
and
th e
of
Old
L i n c o l n on t h e s a m e b a s i s as it w a s a c q u i r e d .
4.
98.
its
related
E x p a n s i o n of the A C C E n t e r p r i s e To
I n c l u d e O l d L i n c o l n an d Its S u b s i d i a r i e s .
U p o n its a c q u i s i t i o n and t h e r e a f t e r , O l d L i n c o l n and
entities
became
During the period beginning
part
of
an
expanded
ACC
Enterprise.
in F e b r u a r y of 1984 t h r o u g h A p r i l
13,
1989, t h i s e x p a n d e d A C C E n t e r p r i s e i n c l u d e d t h e f o l l o w i n g e n t i t i e s :
American Continental Corporation
M e d e m a H o m e s of Utah, Inc.
U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e
American Continental Mortgage Company
American Continental Resources Corporation
Continental Fire & Casualty Company
First Lincoln Financial Corporation
T a t u m Place, Inc.
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc.
P a r k D r i v e A p a r t m e n t s , Inc.
A . C. C. R e a l Es tate, Inc.
D u n l a p A p a r t m e n t s , Inc.
American Continental Finance Corporation
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II
Continental Home Finance Corporation
American Home Finance Corporation
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
Lincoln Savings & Loan A s s o ci at io n
Reliable Title Company
Insurance West, Inc.
SSFLC
AMCOR Funding Corporation
44
P h o e n i c i a n C o m m e r c i a l P r o p e r t i e s , Inc.
Provident Mortgage Corporation
AMCOR Investments Corporation
Crescent Lending Corporation
LINFIN Corporation
C a s t l e M e a d o w s , Inc.
The Crescent Hotel Group
CRESFIN Corporation
Oxford Financial Corporation
Y S P H o l d i n g s , Inc.
T a m m a n y H i g h l a n d s , Inc.
A m e r i c a n N o r t h w o o d , Inc.
T h e C r e s c e n t H o t e l G r o u p of M i c h i g a n , Inc.
Phoenician Construction Corporation
E s t r e l l a S t a r R e al E s t a t e C o r p o r a t i o n
The Up la nd s Company
The Uplands Wastew at er Company
A M C O R C o n t i n e n t a l , Inc.
Crescent Hotel Limited Partnership
F i r s t L i n c o l n F i n a n c i a l S e r v i c e s , Inc.
Young, S m i t h & Peacock, Inc.
P.F.C. P h o e n i c i a n F u n d i n g C o r p o r a t i o n , N.V.
Co ntinental Fidelity Life Insurance Company
AMCON Insurance Group
R a n c h o E s t r e l l a R e al E s t a t e C o r p o r a t i o n
C r e s c e n t H o l d i n g s , Inc.
Am er i c a n Founders Life Insurance Company
Crescent Hotels Operating Corporation
The Phoenix Resort Co rp or at io n
The Phoenix Crescent Corporation
Crescent Regional Corporation
C r e s c e n t of W a s h i n g t o n C o r p o r a t i o n
Hotel Pontchartrain Limited Partnership
99.
association
1961(4)
This
expanded
ACC
Enterprise
in fa ct and is an " e n t e r p r i s e "
a n d Ariz.
100. T h e
Rev.
Stat.
affairs
continued
as
an
as d e f i n e d by U. S. C.
§
§ 1 3 - 2 3 0 1 ( D ) (2).
of
this
expanded
ACC
Enterprise
were
c o n d u c t e d b y t h e R a c k e t e e r i n g D e f e n d a n t s a n d o t h e r s to m a n i p u l a t e ,
control
a n d v i c t i m i z e O l d Lincoln,
as set f o r t h below.
5.
M a i n t a i n i n g C o n t r o l of O l d L i n c o l n .
101.
Lincoln,
ACC
As
became
1 7 3 0 a ( a ) (1)(D).
law
to
submit
concerning
a
a
result
thrift
of
its
holding
acquisition
company.
A s a t h r i f t h o l d i n g c o m p an y,
to
the
F S L I C 'and
its o p e r a t i o n s .
the
FHLBB
12 U. S. C.
12
of
control
U.S.C.
§
A C C w a s r e q u i r e d by
requested
information
§ 1 7 3 0 a (b) (2) .
As
such
a
h o l d i n g comp an y, A C C w a s a l s o s u b j e c t to e x a m i n a t i o n b y t h e FSLIC.
12 U . S . C .
ACC was
from
§ 1 7 3 0 a ( b ) (4).
In a d d i t i o n , as a t h r i f t h o l d i n g c o mp an y,
s u b j e c t to F H L B B a n d F S L I C r e g u l a t i o n
engaging
in
certain
transactions
with
L i n c o l n S u b s i d i a r i e s p u r s u a n t t o 12 U . S. C.
P a r t 584.
and
an d w a s p r o h i b i t e d
Old
Lincoln
§1730a(d)
and
the
a n d 12 C.F.R.
Proposed transactions between a thrift holding company
its
thrift
or
any
affiliates
of
the
thrift
either
were
p r o h i b i t e d in t h e i r e n t i r e t y or r e q u i r e d t h a t p r i o r a p p r o v a l of the
appropriate
§§ 563. 41,
S u p e r v i s o r y A g e n t be
563.43,
sought
an d o b t a i n e d .
12 C.F.R.
584.3.
102. As a r e s u l t of A C C ' s a c q u i s i t i o n of c o n t r o l
Lincoln,
the
directors
and
officers
p e r s o n s of Old Li n c o l n .
12 C.F.R.
Lincoln's
and
own
directors
of
ACC
§ 561.28.
of f i c e r s ,
became
w i t h r e s p e c t to O l d L i n c o l n an d its a f f a ir s.
103.
control
Contrary
of Old L i n c ol n,
to
the
became
They,
the R a c k e t e e r i n g
controlling
a l o n g w i t h Ol d
affiliated
12 C.F.R.
representations
of Old
made
Defendants
persons
§ 561.29.
to
acquire
deliberately
r e d i r e c t e d the m a n a g e m e n t and o p e r a t i o n of O l d L i n c ol n, as follows.
(a)
ACC
i n s t a l l e d n e w m a n a g e m e n t at O l d Li nc ol n.
(b)
ACC
caused
Old
Lincoln
tc
redirect
operations from the financing of one to
46
its
four
of
f a m i l y r e s i d e n t i a l p r o p e r t i e s i n to i n v e s t m e n t s
in, an d l o a n s for,
la rg e s p e c u l a t i v e real
estate
projects,
unimproved
re al
estate,
g o v e r n m e n t a n d m o r t g a g e - b a c k e d s e c u r i t i e s , and
l o w g r a d e c o r p o r a t e d e b t (" ju nk bo nds") and
equity securities.
104.
(c)
ACC
caused
Old
Lincoln
to
investment
activity
outside
California.
increase
its
the
State
of
(d)
A C C c a u s e d O l d L i n c o l n to b e g i n s o l i c i t i n g
b r o k e r e d " j um bo " d e p o s i t s ( d e p o s i t s of $ 1 0 0 , 0 0 0
or m o r e ) .
Af te r the R a c k et ee ri ng Defendants acqu ir ed control
of O l d Li n c o l n , t h e y s o u g h t to m a i n t a i n c o n t r o l a n d t o m i n i m i z e the
l e g i t i m a t e e x e r c i s e of r e g u l a t o r y a n d s u p e r v i s o r y a u t h o r i t y .
efforts
to
accomplish
these
purposes
inextricably
The
involved
a
on A u g u s t
8
c o n t i n u i n g p a t t e r n of d e c e i v i n g p u b l i c o f f i c i a l s .
105.
Old
Lincoln
an d a g a i n on N o v e m b e r
to
the
Supervisory
submitted
19,
1984,
Agent
operating
in w h i c h
concerning
plans
it m a d e
representations
m a n a g e m e n t ’s
intentions
for
o p e r a t i n g O l d Li nc ol n.
106.
August
Lincoln
8
and
O l d L i n c o l n f a i l e d to c o n f o r m its o p e r a t i o n s to the
November
instigated
high
19,
risk
a c q u i s i t i o n of j u n k bonds,
107.
these
The
activities
management
1984
on F e b r u a r y
investment
pl ans.
programs,
Instead,
Old
including
the
at g r e a t r i s k to t h e th ri ft .
regulatory
and
operating
authorities
learned
with
Old
certain
convened
a
5,
Old Lincoln's ma na g e m e n t
1985.
meeting
of
of
Lincoln's
agreed
to c o n s i d e r e x t r i c a t i n g the t h r i f t f r om its j u n k b o n d i n v e s t m e n t s .
However,
these
representations were
false and made
o n l y to a v o i d
r e g u l a t o r y c r i t i c i s m and intervention.
108.
unsound,
compel
and
K n o w i n g t h a t t h e i r d e l i b e r a t e l y i m p l e m e n t e d un sa fe ,
fraudulent
lending
and
operating
practices
would
r e g u l a t o r y i n t e r v e n t i o n in O l d L i n c o l n ' s a f f a i r s a n d w r e s t
c o n t r o l of t h e t h r i f t f r o m them, t h e R a c k e t e e r i n g D e f e n d a n t s c a u s e d
the AC C En te r p r i s e to conceal
fr o m t h e r e g u l a t o r y a u t h o r i t i e s t h e
unsafe, unsound, and fraudulent practices which they had caused Old
L i n c o l n t o pu r s u e .
109.
submit
false
The
Racketeering
financial
Defendants
statements,
data to the re gu la to ry authorities.
b e lo w,
these
deferred
re po rt s,
Old
and
L i n c o l n to
other
financial
As set f o r t h m o r e p a r t i c u l a r l y
f i n a n c i a l r e p o r t s w e r e f a l s e in that:
110.
authorities
caused
(a)
They grossly overstated Old Lincoln's
(b)
T h e y c o n c e a l e d t h e p o o r f i n a n c i a l c o n d i t i o n of
O l d Lincoln.
(c)
T h e y c o n c e a l e d f r a u d u l e n t l o a n s to i n s i d e r s and
affiliates.
(d)
T h e y c o n c e a l e d t h e d a n g e r o u s l y l o w and, later,
th e n o n - e x i s t e n t leve l of r e g u l a t o r y ca pi ta l.
Unaware
relied
the
on
exercise
of
their
these
of
false
material
regulatory
nature,
the
income.
regulatory
misrepresentations
powers
to
deprive
and
the
R a c k e t e e r i n g D e f e n d a n t s of c o n t r o l of O l d Li nc ol n.
111.
The
Racketeering
Defendants
also
made
and
o t h e r s to m a k e m i s l e a d i n g s t a t e m e n t s to p u b l i c o f f i c i a l s
48
caused
in o r d e r
to
forestall
regulatory
intervention
in to
the
affairs
of
Old
Li nc ol n.
112.
and
the
L i n c ol n,
In f u r t h e r a n c e of t h e s c h e m e to d e f r a u d O l d L i n c o l n
regulatory
authorities
and
to
maintain
control
on
Defendants,
Letter")
Old
K e a t i n g Jr. a n d h i s a s s o c i a t e s e n l i s t e d J a c k D. A t c h i s o n ,
m a n a g i n g p a r t n e r of t h e P h o e n i x o f f i c e of A r t h u r Y o u n g
("AY"),
of
behalf
to
of
the
transmit
a
ACC
Enterprise
letter
dated
and
March
the
17,
& Company
Racketeering
1987
(the
"AY
t o a p u b l i c of f i c i a l .
113.
T h e AY L e t t e r s u p p o r t e d c l a i m s a d v a n c e d b y t h o s e in
c o n t r o l of O l d L i n c o l n t h a t " F H L B B e x a m i n e r s w e r e u n r e a s o n a b l e i n
t h e i r d e c i s i o n m a k i n g and t h a t at t i m e s t h e i r c o n d u c t b o r d e r e d on
' h a r a s s m e n t 1 ."
AY
suggested
in
its
letter
that
the
regulatory
a u t h o r i t i e s w e r e b i a s e d a g a i n s t O l d L i n c ol n.
114.
T h e AY l e t t e r m a d e m i s r e p r e s e n t a t i o n s c o n c e r n i n g Old
Lincoln's op erations and condition:
After
its
acquisition,
Lincoln
acquired
parcels
of
prime
real
e s t a t e in A r i z o n a a n d o t h e r g r o w t h
states, i n c r e a s e d its c o n s t r u c t i o n
lending,
and
sought
other
nontraditional investments.
Since
aaareaate
Lincoln
has
realized
more
than
after-tax
earninas
of
$141.000.000.
(E m p h a s i s a d d e d ) .
115. T h e
the
validity
L i nc ol n,
of
as well
AY
the
Letter
made
regulatory
misrepresentations
authorities'
criticisms
of
Old
as the purported s u c c e s s e s of Old L i n c o l n u n d e r
the d i rection of the Rackete e r i n g Defendants.
concerning
49
M o r e o v e r , b e c a u s e L i n c o l n d o e s no t
concentrate
on
single
family
r e s i d e n t i a l lending, it d o e s n o t fit
t h e p a t t e r n for m e m b e r i n s t i t u t i o n s
that the present FHLBB leadership
has
espoused
publicly
and
as
reflected
in
recent
regulations.
This
f a ct
has.
based
on
my
observations.
led
to
unusually
a n t a g o n i s t i c p o s i t i o n s an d a c t i o n s
b v t h e F H L B B t o w a r d s L i n c ol n.
This
is d i f f i c u l t t o f u l l y u n d e r s t a n d
because Lincoln's strategies have
t h u s far p r o v e d s u c c e s s f u l an d h a v e
t u r n e d an a s s o c i a t i o n h e a d e d
for
f a i l u r e in to a s t r o n g an d v i a b l e
financial e n t i t y . (Emphasis a d d e d ) .
116.
the
validity
The
of
an
AY
examination
Letter
made
of
Lincoln
Old
misrepresentations
conducted
by
concer
the
FHLBB:
B a s e d on t h e d r a f t r e p o r t s p r e s e n t e d
to Li nc ol n, I b e l i e v e t h e r e s u l t s
w i l l i n d i c a t e L i n c o l n f a i l s to m e e t
t h e m i n i m u m n e t w o r t h r e q u i r e m e n t as
d e t e r m i n e d by th e F H L B B staff.
I
don't . believe
the
fa ct s
and
c i r c u m s t a n c e s will, if o b j e c t i v e l y
viewed, support such a conclusion.
Thus, th e final r e p o r t w i l l in all
likelihood
be
detrimental
and
i n a p p r o p r i a t e l y so.
117.
the
AY
The
Letter
were
representations
intervention
control
in to
the
false.
Jack
forestall
the
affairs
Old
of
D.
representations
Atchison
regulatory
Lincoln
an d
made
containe
these
authorities'
their
wresting
of O l d L i n c o l n f r o m the R a c k e t e e r i n g D e f e n d a n t s .
118.
political
r e gulator
to
above-described
The
influence
exercise
and t h e AY
authorities'
of
the
Racketeering
Letter were designed
issuance
50
of
a
report
of
Defendants
to d e l a y the
C*c
s
condition.
Specifically, the Ra ck et ee ri ng Defendants used baseless
accusations
ongoing
of
regulatory
examination
to
bias
a halt
against
an d
to
Old
Lincoln
attempt
to
to w i n
bring
an
concessions
f r om t h e r e g u l a t o r y a u t h o r i t i e s .
119. A n
discontinued
were
ongoing
and
special
implemented
Racketeering
for
a
Defendants'
examination
examination
new
the
examination
improper
use
examination.
meritless
process
an d
of
Old
conditions
To
address
the
influence,
the
was
procedures
the
examination
The new examination,
political
afforded
Lincoln
and
complaints,
p r o c e s s w a s r e p e a t e d in its e n t i r e t y .
through
of
gained
protracted
Racketeering
the
Defendants
a d d i t i o n a l t i m e in w h i c h to e x a c e r b a t e t h e i r f r a u d s on O l d L i n c o l n
and the re gu la to ry authorities.
6.
120.
O p e r a t i o n of O l d L i n c o l n
A f t e r t h e R a c k e t e e r i n g .D e f e n d a n t s a c q u i r e d c o n t r o l
of O l d Li n c o l n ,
t h e y a n d A C C c a u s e d O l d L i n c o l n to c o n d u c t m a n y of
its
using
operations
investments
the
the
Lincoln
Subsidiaries.
Old
Lincoln's
in and l o a n s to the L i n c o l n S u b s i d i a r i e s w e r e p a r t of
fraudulent,
illegal
an d
imprudent
transactions
in
which
it
e n g a g e d at t h e d i r e c t i o n of t h e R a c k e t e e r i n g D e f e n d a n t s .
121.
what
ACC's
extent
ACC's
Old
management
transaction,
aspects
of
they
a
management
Lincoln
decided
would
criver.
would
dictated
engage
that
Old
determine
t ra n s a c t i o n
in
a
Lincoln
the
would
L i n c o l n and the Lincoln S u b s i d i a r i e s .
51
whether
not
an d
transaction.
would
extent
be
or
to
After
engage
which
allocated
to
in
a
various
among
Old
122. R e a l
frequently had the
Therefore,
were
estate
investments
and
subsequent
sales
f o l l o w i n g as pe ct s:
(a)
O l d L i n c o l n w o u l d finance, t h r o u g h d e p o s i t s
o r i g i n a t e d b y its C a l i f o r n i a b r a n c h ne tw or k,
the acquisition
of p r o p e r t y b y a L i n c o l n
Subsidiary.
(bi
After
h o ld in g the
property,
the
Lincoln
S u b s i d i a r y w o u l d se ll t h e p r o p e r t y to a t h i r d
p a rt y, s u c h as a d e v e l o p e r .
(c)
In c o n n e c t i o n w i t h
the
sale,
the
selling
Lincoln
Subsidiary
or
an
affiliate
would
f i n a n c e a p o r t i o n of t h e p u r c h a s e p r i c e b y
t a k i n g a note.
(d)
A n o t h e r L i n c o l n S u b s i d i a r y w o u l d e n g a g e in a
t r a n s a c t i o n w i t h a b u y e r of t h e p r o p e r t y (such
as a lo an t o t h e b u y e r or p u r c h a s e of c e r t a i n
a s s e t s of t h e b u y e r ) , t h e r e b y d i r e c t l y or
i n d i r e c t l y p r o v i d i n g all or a p o r t i o n of t h e
down payment.
(e)
The selling Lincoln Subsidiary would often
s u b s e q u e n t l y sell a p a r t i c i p a t i o n i n t e r e s t in
t h e n o t e to O l d Li nc ol n.
O l d L i n c o l n a n d t w o or m o r e of th e L i n c o l n S u b s i d i a r i e s
frequently
in v o l v e d ,
whether directly
or
indirectly,
in the
same transaction.
123.
fa s h i o n ,
defraud,
make
and
In
in
order
furtherance
of
to
operate
their
Old
scheme
Lincoln
and
in
artifice
the
to
t h e R a c k e t e e r i n g D e f e n d a n t s a n d A C C c a u s e d O l d L i n c o l n to
capital
investments
in
and
to
extend
loans
to
th e
Lincoln
Subsidiaries.
(a)
Old
L i n c o l n ’s
capital
investments
in
the
Lincoln Subsidiaries
exceeded $285,000,000.
(b)
Old Lincoln's e x tensions of credit to the
L i n c o l n Subsidi a r i e s exceeded $ i , 0 4 0 , 0 0 0 , 0 0 C .
52
foreg
Accordingly,
the
Racketeering
Lincoln to place
Subsidiaries.
fraudulent,
Defendants
at r i s k m o r e t h a n
These
illegal
ACC
$1,325,000,000
transactions
and
and
were
imprudent
an
caused
in t h e
integral
transactions
Old
Lincoln
part
of
th e
directed
by
the
Ra ck et ee ri ng Defendants.
124.
Defendants'
acts
and
omissions
described
herein
d i r e c t l y a n d p r o x i m a t e l y c a u s e d O l d L i n c o l n to s u s t a i n s u b s t a n t i a l
damages
in r e s p e c t to its i n v e s t m e n t s
Subsidiaries,
defraud
Old
determine
all
in
furtherance
Li n c o l n .
the
exact
of
Although
amount
of
the
the
Old
in an d l o a n s to t h e L i n c o l n
scheme
RTC
has
Lincoln's
an d
not
artifice
been
losses
able
directly
to
to
and
p r o x i m a t e l y c a u s e d b y v i r t u e of t h e fo re g o i n g ,
those losses exceed
$180,000,000.
Old
In
addition,
the
operation
of
Lincoln
by the
R a c k e t e e r i n g D e f e n d a n t s an d t h e i r a l l i e s d i r e c t l y a n d p r o x i m a t e l y
caused
the
Old
l o s s e s to
Lincoln
it
in e x c e s s
of
transactions
(a)
$85,000,000 with
described
below,
w i t h r e s p e c t to i l l e g a l t a x s h a r i n g p a y m e n t s ,
with
respect
to
Consequently,
$1,100,000,000
breaches
maintenance
ag re em en t.
scheme
and artifice
to d e f r a u d
in t h i s C o m p l a i n t .
O v e r v i e w of the F r a u d u l e n t T a x P l a n .
In f u r t h e r a n c e of t h e i r s c h e m e to d i v e r t the a s s e t s
Lincoln
Defendants
worth
$745,000,000
The Fraudulent Tax P l a n .
125.
Old
net
as a r e s u l t of t h e
1.
of
a
(c)
$125,000,000
New Lincoln's actual damages will exceed
Old L i nc ol n desc ri be d
C.
of
an d
(b)
r e s p e c t to
to
devised
their
and
use
and
implemented
53
benefit,
a
the
fraudulent
Racketeering
arrangement
between
ACC
Lincoln
to
and 8 Old
ACC
Enterprise
would
of
on
arrangement,
pay
Lincoln
a
Old
ostensibly
Lincoln's
consolidated
share
net
taxes
for
the
of
corporate
c o m m o n l y k n o w n as a t a x
the
fo r
payment
taxes
by
Old
the
ACC
Under
the
for
b a si s.
sharing agreement,
the
consolidated
ACC then
g r ou p.
The
R a c k e t e e r i n g D e f e n d a n t s , h o w e v e r , d e c e i t f u l l y e m p l o y e d an u n l a w f u l
m e t h o d of c a l c u l a t i n g O l d L i n c o l n ' s p a y m e n t s t o A C C w h i c h r e s u l t e d
in O l d
Lincoln's
had
tax
no
making
liability
payments
at
the
to A C C
time.
As
even
a
though
re sult,
t i m e t h e f r a u d u l e n t T a x P l a n w a s in effect,
Old
Lincoln
throughout
the
n o n e of t h e m o n e y p a i d
b y O l d L i n c o l n to A C C w a s e v e r p a i d by A C C in ta xes.
The true but
h i d d e n p u r p o s e of t h e a r r a n g e m e n t w a s to a l l o w A C C t o s i p h o n fund s
from
Old
Lincoln
Defendants,
1987,
ACC
fraudulent
for
the
enrichment
a n d th e K e a t i n g Fa mily.
appropriated
Tax
1988 w h i c h w i l l
Plan;
$94,800,000
ACC
also
of
the
Racketeering
D u r i n g t h e y e a r s 1984 t h r o u g h
from
effected
r e s u l t in l o s s e s
ACC,
Old
Lincoln
a related
under
the
transaction
in e x c e s s of $ 8 , 0 0 0 , 0 0 0 ;
m
a n d Old
L i n c o l n f u r t h e r l o st t h e b e n e f i t of t h e u s e of its o w n fu nd s w h i c h
were
not
result.
owed
for
taxes,
Ultimately,
and
Old
sustained
Lincoln's
additional
damages
damages
resulting
from
as
a
the
fraudu le nt Tax Plan exceeded $125,000,000.
126.
Implementation
of
the
Tax
Plan
depended
c o n c e a l i n g from the regulatory authorities the true and fraudulent
p u r p o s e of t h e T a x P l a n a n d m i s r e p r e s e n t i n g t h e e f f e c t s w h i c h the
Tax
Plan
would
have
on the
condition
54
of O l d
Li n c o l n .
Through
a
scheme
of
deception,
obtained*approval
127.
Old
the
Defendants
ultimately
c o n d i t i o n e d on t w o b a s i c p r o h i b i t i o n s .
First,
Lincoln's
Racketeering
Old
ac tu al ,
Lincoln
could
independent
tax
pay
no m o r e
to
li a b i l i t y . .
ACC
than
Se co nd ,
Old
L i n c o l n c o u l d m a k e no p a y m e n t s to A C C on a c c o u n t of O l d L i n c o l n ' s
i n d e p e n d e n t t a x l i a b i l i t y p r i o r to t h e t i m e w h e n its t a x p a y m e n t s
would
actually
Defendants,
Lincoln
would
be
would
abide
not provide
tax
which
income.
This
lo ss
purportedly
Internal
mo ne y,
The
of
to
ACC
and
the
deferred
that
violating
Defendants
on
The
Racketeering
m i s r e p r e s e n t e d t h a t A C C and O l d
conditions
Racketeering
for taxes.
basis
income,
Service
was
of
None
Old
of
the
Tax
Plan
these prohibitions.
caused
of
Old
rather
Old
L i n c o l n to
Lincoln's
than
on b e h a l f
for
ACC
Lincoln's
funds
that money was
("IRS")
used
Defendants.
its
book
taxable
th e
has
to
ever paid
of
Old
benefit
of
since
paid
become
ACC
to t h e
Li nc ol n.
The
ACC
and
th e
insolvent
an d
itself bankrupt.
129.
engaging
in
income
misapplication
prepayments
Those
these
$94,800,000
in st ea d,
taxable
government.
i m p e r m i s s i b l e m e t h o d of c a l c u l a t i o n r e s u l t e d in the
Racketeering
by
by
included
Revenue
declared
the
for any p a y m e n t s
payments
income,
direct
to
t h r o u g h t h e i r agents,
128.
make
due
sham
of
The
Racketeering
sham
transactions
for O l d
of
Old
Defendants
Li nc ol n,
accounting
Lincoln's
t r a n sactions
were
wh ich,
were
exacerbated
although
used
principles
deferred
tax
designed
to
55
in
to
the
generating
conjunction
trigger
Old
with
no
a
purported
liabilities
cause
fr au d
to
ACC.
Lincoln
to
g e n e r a t e ar ti fi ci al bo ok profits.
turn,
increased
the
amount
of
T h e a r t i f i c i a l b o o k pr o f i t s ,
the
unlawful
Under proper accounting principles,
b e e n r e c o g n i z e d b y O l d Li n c o l n .
of d e f e r r e d tax
then due
liability,
f o r t a xe s.
Old
tax
payments
in
t o ACC.
however, no income should have
B e c a u s e of t h e p r e p a y m e n t t o A C C
L i n c o l n l o s t t h e u s e of f u n d s
not
N o n e of t h e m o n e y p a i d by O l d L i n c o l n to A C C
w o u l d h a v e b e e n o w e d for t a x e s e v e n at a l a t e r date.
2.
130.
the Tax
fo r
O n M a r c h 14,
Plan,
Agreement,
Old
De ceit upon the Re gu la to ry A u t h or it ie s
To O b t a i n A p p r o v a l of F r a u d u l e n t T a x P l a n .
formally
which
Lincoln's
1986, A C C a n d O l d L i n c o l n e n t e r e d into
k n o w n as a T a x P r e p a r a t i o n
called
for
taxes
and
Old
Lincoln
for
ACC
to
r e t u r n a n d to p a y to t h e IRS w h a t e v e r
due
fi l e
a
payments
to ACC
consolidated
tax
income taxes were currently
for the ACC Enterprise.
131.
permitted
companies
manner
due
to make
an d A l l o c a t i o n
T a x s h a r i n g a g r e e m e n t s are i n t e r c o m p a n y a g r e e m e n t s ,
under
the
filing
Internal
Revenue
consolidated
tax
Code,
through which
returns
may
agree
related
upon
the
in w h i c h t h e v a r i o u s c o m p a n i e s c o n t r i b u t e to t h e t o t a l tax
f o r all t h e c o m p a n i e s on a c o n s o l i d a t e d basis.
132.
company
company.
company,
may
A
A t a x s h a r i n g p l a n b e t w e e n a t h r i f t an d its h o l d i n g
involve
tax
however,
payments
sharing
plan
from
the
between
thrift
a
to
thrift
the
and
a
holding
holding
is p e r m i s s i b l e f r o m a r e g u l a t o r y a n d s u p e r v i s o r y
s t a n d p o i n t o n l y if t h e p a y m e n t s ar e s t r u c t u r e d so t h a t t h e t h r i f t
pays
no
more
re
the
holding
company
56
than
it
would
have
paid
independently
to
the
taxing
authorities
and
if
it
makes
those
p a y m e n t s to th e h o l d i n g c o m p a n y no e a r l i e r t h a n it w o u l d h a v e m a d e
i n d e p e n d e n t l y to th e t a x i n g a u t h o r i t i e s .
In a d d i t i o n ,
f e d e r a l la w
expressly
from
any
discount
holding
prohibits
an
or ex tension
insured
specific
a n d 12 C.F.R.
133.
The
thrifts
thrift
making
of c r e d i t to a n y a f f i l i a t e , "
company without
§ 1 7 3 0 a ( d ) (4)
insured
regulatory
"loan,
including
approval.
its
12 U. S.C.
§ 584.3(a)(4).
federal
statute
from ma ki ng
any
an d
loan,
regulation
discount,
prohibiting
or
extension
of
c r e d i t - t o an a f f i l i a t e h a s lo n g a n d •c o n s i s t e n t l y b e e n i n t e r p r e t e d
by t h e F H L B B to p r o h i b i t t a x s h a r i n g p a y m e n t s b y an i n s u r e d t h r i f t
in
excess
of
the
amount
which
would
be
owed
on
a
"stand
a l on e"
b a s i s or in a d v a n c e of t h e t i m e w h e n s u c h p a y m e n t s w o u l d be d u e to
the
taxing
authorities.
This
position
has
been
p u b l i s h e d o p i n i o n s of t h e F H L B B ' s O f f i c e of G e n e r a l
June
1,
1971;
F e b r u a r y 22,
1974;
N o v e m b e r 7,
1975;
expressed
in
Counsel dated
an d A u g u s t 31,
1987 .
134.
On
conversation with
disclosed
with
Old
ACC's
or
the
about
January
1986,
S u p e r v i s o r y Agent,
i n t e n t i o n to e n t e r
Li n c o l n .
16,
The
Supervisory
during
a telephone
K e a t i n g Jr.
and W i s c h e r
in to a t a x
Agent
sharing agreement
instructed
Keating
Jr.
an d W i s c h e r t h a t a t a x s h a r i n g a g r e e m e n t is a t r a n s a c t i o n w i t h an
affiliate
K e a t i n g Jr.
requiring
pursuant
to
12
C.F.R.
§ 584.3.
an d W i s c h e r s t a t e d t h a t t h e y h a d n o t i n t e n d e d to s e e k
s u p e r v i s o r y approval
approval
for the Tax Plan.
57
135.
On
or
about
regulatory authorities'
the Racketeering
application
23,
1986,
in
response
r e q u es t, N i e b l i n g a n d Sa uter,
Defendants
(the
January
via
the
United
the
on b e h a l f of
and the ACC Enterprise,
"Application”)
to
f o r w a r d e d an
States
Postal
S e r v i c e to t h e S u p e r v i s o r y A g e n t s e e k i n g a p p r o v a l of t h e T a x P l a n
b y a n d b e t w e e n A C C a n d O l d Li nc ol n.
136.
dated
January
contained
Agent
The Application,
23,
false
1986,
adverse
financial
137.
Executive
the
intended
of
a four-page
proposed
to
that the prop os ed
letter
arrangement.
mislead
the
It
Supervisory
arrangement would have
no
i m p a c t on O l d Linc ol n.
The
Officer
Corporate
described
statements
into be li ev in g
consisting
Application
of
Counsel.
misrepresentations
Old
The
in
was
Li nc ol n,
signed
and
Niebling,
attested
by
makes
the
Application
describing
by
purported
as
Chief
Sa ut er ,
"benefits"
as
following
of
th e
proposed transaction:
T h e A g r e e m e n t is s t r a i g h t f o r w a r d and to t h e F H L B B
s h o u l d be a n o n - e v e n t .
It m e r e l y c o n t e m p l a t e s
L i n c o l n ' s p a y m e n t to A M C C
[American Continental
C o r p o r a t i o n ] of t h e p o r t i o n of A M C C 's t a x b u r d e n
a t t r i b u t a b l e to Li nc ol n.
I n s t e a d of p a y i n g its
s h a r e of the c o n s o l i d a t e d
group's taxes directly
t o t h e I n t e r n a l R e v e n u e S e rv ic e, as
it c o u l d __in
a b s e n c e of an A g r e e m e n t .
Lincoln will make the
payment
to
AMCC.
which
then
takes
over
r e s p o n s i b i l i t y for m a k i n g s u c h p a y m e n t s to t h e
I.R.S.
T h e A g r e e m e n t h a s a b s o l u t e l y no i m p a c t on
AMCC's
an d
Lincoln's tax burdens
or b e n e f i t s .
(Emphasis a d d e d ) .
138.
misleading.
The
The
above-quoted
paragraph
representations
clearly
states
were
that Old
false
and
Lincoln would
m e r e l y pay the same amount to ACC as it would pay to the IRS on a
58
pa s s t h r o u g h b a s i s .
In fact, t h e R a c k e t e e r i n g D e f e n d a n t s i n t e n d e d
the p a y m e n t s ma d e to A C C un de r the Tax Plan to be m u c h g r e a t e r than
Old
Lincoln
would
have
paid
periods and on an overall,
139.
to
the
IRS
during
comparable
time
p e r m a n e n t ba si s.
The st at em en t that "the Ag r e e m e n t . . .
to the FHLBB
should be a no n- ev en t" was k n o w i n g l y false and d e c e p t i v e given the
re gu la to ry r e s t r i c t i o n s a p pl yi ng to un s e c u r e d loans from an insured
thrift
to
a
holding
Racketeering
company,
Defendants
were
because
that
the
Old
intentions
Lincoln
would
of
the
advance
d e f e r r e d t a x l i a b i l i t i e s t o A C C a n d t h a t A C C w o u l d u s e t h e s e fu nd s
without
any
consideration
p a y a b l e t o t h e IRS,
140.
to
Old
Lincoln
until
the
funds
became
if i n d e e d t h e y e v e r b e c a m e p a y a b l e t o t h e IRS.
The statement that "(t)he Agreement has absolutely
no i m p a c t o n A M C C ' s a n d O l d L i n c o l n ’s t a x b u r d e n s o r b e n e f i t s " w a s
fa ls e s i n c e t h e R a c k e t e e r i n g D e f e n d a n t s r e q u i r e d O l d L i n c o l n t o p a y
more m o n e y
sooner to ACC than
it w o u l d h a v e p a i d t o t h e
IRS
and
b e c a u s e A C C c l e a r l y b e n e f i t t e d f r o m t h i s a d v a n c e of c a s h w h i c h w a s
not d u e t o t h e IRS.
141.
Prior
to
execution
of
the
Tax
Plan,
ACC
and
Old
L i n c o l n w e r e e x p r e s s l y a d m o n i s h e d in a l e t t e r d a t e d M a r c h 7, 1986,
and
in
various
arrangement
telephone
could
not
conversations,
permissibly
call
that
for
Old
any
tax
Lincoln
sharing
to
make
payments to ACC significantly before the time such payments would
be d u e t o t h e t a x i n g a u t h o r i t i e s .
The Supervisory Agent
further
s t a t e d t h a t e v e n a t i m i n g d i f f e r e n t i a l of m o n t h l y p a y m e n t s t o A C C
for q u a r t e r l y t a x l i a b i l i t i e s w a s i m p e r m i s s i b l e .
59
142.
for
approval
responded
Af te r ACC and Old Lincoln submitted the Application
of
by
the
proposed
letter
dated
Tax
March
Plan,
7,
the
1986.
Supervisory
The
letter
Agent
clearly
d e l i n e a t e d the a p p l i c a b l e r e st ri ct io ns on tax s h ar in g a r ra ng em en ts
between
holding
companies
and
insured
thrifts.
The
letter
c r i t i c i z e d t h e s t r u c t u r e of t h e p r o p o s e d a r r a n g e m e n t a n d r e q u e s t e d
that,
within
review
and
thirty
days,
approval,
a revised
that
agreement
complied
with
be
the
submitted,
following
for
f i ve
requirements :
(a)
C a l c u l a t i o n of O l d L i n c o l n ' s t a x l i a b i l i t y on
a
separate
entity
basis,
including
all
applicable tax deductions and credits;
(b)
N o p r e p a y m e n t of e s t i m a t e d t a x e s ;
(c)
R e i m b u r s e m e n t s f r o m A C C f o r a n y t a x loss;
(d)
N o t r a n s f e r of O l d L i n c o l n
tax
liability to ACC ; and
(e)
T h e a l l o c a t i o n of a n y t a x b e n e f i t s t h a t m a y
a r i s e as a r e s u l t o f f i l i n g o n a c o n s o l i d a t e d
b a si s.
Savinas'
deferred
( E m p h a s i s ad de d. )
143.
On
March
14,
1986,
ACC
and
Old
Lincoln
responded
with a letter from Sauter transmitting a revised and executed Tax
Plan.
S a u t e r 's
transmittal
letter
made
the
m i s r e p r e s e n t a t i o n s d e s c r i b i n g t h e r e v i s e d . T a x Plan:
Per our telephone conversations and Sidney
M a r ' s M a r c h 7,
198 6 c o r r e s p o n d e n c e ,
I am
enclosing
a
revised
Tax
Preparation
and
A l l o c a t i o n A g r e e m e n t w h i c h a d d r e s s e s t h e f i ve
p o i n t s r a i s e d in t h e M a r c h 7 le tt er .
The
revised Agreement deletes the provisions cited
as b e i n g o b j e c t i o n a b l e a n d a d d s t h e l a n g u a g e
reguested.
60
following
(E mp h a s i s
ad d e d . )
This
representation
was
intentionally
false,
concealed the tr u e i n te nt io ns of the R a c k e t e e r i n g Defendants,
induced
the
Supervisory
Agent
to
believe
that
there
would
and
be
no
t r a n s f e r o f d e f e r r e d t a x l i a b i l i t y f r o m O l d L i n c o l n t o ACC.
144.
The
representations
Racketeering
made
in
the
Defendants
March
fa ls e a t t h e t i m e t h e y w e r e ma de ,
14,
1986,
knew
that
the
correspondence
were
that the Tax Plan had not been
r e v i s e d t o c o m p l y w i t h t h e r e g u l a t o r y p o l i c i e s a s e x p r e s s e d in t h e
letter
of
March
7,
19 86
from
the
Supervisory
Agent,
that
L i n c o l n w o u l d p a y m o r e t o A C C t h a n it w o u l d p a y t o t h e IRS
were
filing
on
a
separate
entity
basis,
and
that
Old
if it
regulatory
authorities w o u l d rely on t h ei r mi sr ep re se nt ati on s.
145.
Defendants,
In
the
through
March
their
14,
ag e n t s ,
1986,
le t t e r ,
specifically
the
Racketeering
represented
that
they ha d r e v i s e d the Ta x Plan to de le te p r o v i s i o n s w h i c h m i g h t have
permitted payments to ACC
in a d v a n c e o f t h e t i m e t h e y w o u l d h a v e
b e e n d u e t o t h e t a x i n g a u t h o r i t i e s in t h e a b s e n c e o f t h e T a x Plan.
Th is m a t e r i a l r e p r e s e n t a t i o n w a s false.
146.
Based
telephone
and
in
M a r c h 14,
1986,
executed
was
Supervisory
writing
le t t e r ,
the
to
false
through
representations
the
United
States
Old
approved
Lincoln's
in
Board
a
mail
letter
of
in
by
the
from
Directors
th e
dated
The letter recited the FHLBB's understanding, based
up on r e p r e s e n t a t i o n s o f S a u t e r a n d o t h e r s , that,
conveyed
the Tax Plan that Old Lincoln and ACC had
conditionally
Agent
Ap ri l 2, 1986.
upon
61
under the revised
T a x Plan, O l d L i n c o l n w o u l d p a y n o m o r e t h a n it w o u l d h a v e p a i d on
a s e p a r a t e e n t i t y basis.
147.
S u b s e q u e n t t o t h e f r a u d u l e n t l y o b t a i n e d a p p r o v a l of
t h e T a x Plan , t h e R a c k e t e e r i n g D e f e n d a n t s a n d t h e i r a g e n t s u t i l i z e d
the
book,
income
reported
by
Old
Lincoln
in
order
to
generate
u n la wf ul p a y m e n t s from Ol d L i nc ol n to A C C p u r s u a n t to the Ta x Plan
at
a
time
when
Old
d i v i d e n d s t o ACC.
Lincoln
was
T h e T a x Plan,
not
allowed
therefore,
to
pay
proposed
w a s u s e d as a v e h i c l e
t o c i r c u m v e n t o t h e r r e g u l a t o r y r e s t r i c t i o n s on t h e r e c e i p t of c a s h
from Lincoln.
Th e un la wf ul tax p a ym en ts m a de by Old Li nc ol n to ACC
ulti ma te ly totalled $94,800,000.
148.
During
the
years
1984
through
1987,
Old
Lincoln
w o u l d h a v e r e c o g n i z e d n o c u r r e n t t a x a b l e i n c o m e h a d it f i l e d on a
s e pa ra te en t i t y basis.
ACC
of
$94,800,000
Nevertheless,
based
deferred tax liability.
on
book
Old L i n c o l n m a d e p a y m e n t s to
income
consisting
entirely
of
N o p o r t i o n of t h e $ 9 4 , 8 0 0 , 0 0 0 in p a y m e n t s
ma de by Old Lincoln to ACC under the Tax Plan would have been due
t h e IR S h a d O l d L i n c o l n f i l e d o n a s e p a r a t e e n t i t y b a s i s .
149.
ACC
and
the
Racketeering
received and used the $94,800,000
A C C u n d e r t h e T a x Plan.
of
the
ACC
Enterprise
Defendants
in p a y m e n t s
unlawfully
f r o m O l d L i n c o l n to
A C C us ed the m o n e y to p r om ot e the purp os es
for
the
benefit
of
the
Racketeering
Defendants.
150.
The
following
transactions
are
examples
of
the
n u m e r o u s t r a n s a c t i o n s t h a t r e s u l t e d in o r h a d t h e p r i m a r y p u r p o s e
o f a r t i f i c i a l l y i n f l a t i n g b o o k i n c o m e of O l d L i n c o l n a n d t r i g g e r i n g
62
i m p r o p e r p a y m e n t s b y O l d L i n c o l n t o A C C p u r s u a n t t o t h e T a x Plan.
The
effect
of
the
improper
payments
described
below
was
to
dissipate u n l a w f u l l y Ol d L i nc ol n' s as se ts and to en ri ch A C C and the
Racketeering Defendants.
3.
151.
De fe n d a n t s ,
In
late
19 86
conducting
intentionally
the
structured
transactions
th er ef or e,
Hidden Valley Scheme and Artifice
To Defraud - Tax Plan A s p e c t s .
in
order
a
to
through
1988,
affairs
series
of
overstate
the
Racketeering
of
the
the
"Hidden
Old
ACC
Lincoln's
Enterprise,
Valley"
land
income
and,
t o t r i g g e r u n l a w f u l p a y m e n t s t o A C C u n d e r t h e T a x Plan,
t h e r e b y f a l s e l y p o r t r a y i n g O l d L i n c o l n as a p r o f i t a b l e i n s t i t u t i o n .
152.
Corporation
Li n c o l n
is
south
suitable
mid
19 85
("Investments"),
and part
undeveloped
Valley")
Between
of
the ACC
and
a
May
wholly
1988,
owned
Enterprise,
AMCOR
Investments
subsidiary
acquired
8,576
l a n d r e f e r r e d t o as t h e H i d d e n V a l l e y R a n c h
for approximately $26,584,750.
of
for
Investments'
Estrella
residential
acres
Old
of
(" H i d d e n
The Hidden Valley property
project
development
s u b s e q u e n t t o d e v e l o p m e n t of E s t r e l l a .
of
and
in
purportedly
conjunction
Estrella
with
was
or
i t s e l f w a s to be
a r e s i d e n t i a l d e v e l o p m e n t of I n v e s t m e n t s c o n t a i n i n g a p p r o x i m a t e l y
20,000 a c r e s .
153.
1986)
Within a remarkably short time
Investments
Be tw ee n O c t o b e r 31,
began
1986,
pa rcels o f t h i s p r o p e r t y
selling
the
a n d J u n e 30,
same
1988,
( s t a r t i n g in O c t o b e r
undeveloped
property.
I n v e s t m e n t s sold ten
( c o n s i s t i n g of a p p r o x i m a t e l y 6, 6 4 3 of th e
63
8,576
a c r e s t o ta l)
for a total
of a p p r o x i m a t e l y
$110,403,000
and
c l a i m e d a n a g g r e g a t e " p r o f i t " of a p p r o x i m a t e l y $ 8 2 , 0 7 4 , 0 0 0 f r o m t h e
sales.
154.
Lincoln,
The claimed $82,074,000 profit was attr ib ut ed to Old
since Investments was
155.
Old
Lincoln's
its w h o l l y o w n e d s u b s i d i a r y .
recorded
"profit"
of
$82,074,000
a l l o w e d th e R a c k e t e e r i n g D e f e nd an ts to use the Tax Plan to u p s t r e a m
approximately
to
portray
$31,000,000
falsely
that
to AC C
Old
for t h e i r and AC C ' s
Lincoln
had
realized
an
benefit
and
$82,074,000
profit.
156.
In
reality,
Investments'
t r a n s a c t i o n s d e v o i d of e c o n o m i c substance.
sales
Mo re specifically,
sham
S u b s t a n t i a l l y al l f u n d s
for th e p u r c h a s e s w e r e p r o v i d e d by Old Lincoln,
indirectly.
were
e i t h e r d i r e c t l y or
Old Lincoln and Investments funded
l o a n s t o t h e p u r c h a s e r s in a n a m o u n t e q u a l t o 7 5 % o f t h e p u r c h a s e
p r i c e . T h e b a l a n c e of t h e p u r c h a s e p r i c e ,
paid
by
the
"purchasers."
s u b s t a n t i a l l y all
furnishing money
In
tr ut h,
i .e . 25%, w a s o s t e n s i b l y
Old
Lincoln
of t h e d o w n p a y m e n t s b y d i r e c t l y
to
the
purchasers
utilizing
one
or
financed
indirectly
or m o r e
of
the
following techniques:
(a)
Old Lincoln funded loans to th ir d p a r t i e s who
th en tu r n e d over the funds for the do wn p a ym en t
to a purchaser.
(b)
Ol d Li nc ol n g u a r a n t e e d loans ob t a i n e d from
t h ir d pa rt ie s by a p u r c h a s e r to fund the down
p a y m e n t and pa id the loan fees c h ar ge d to the
straw purchaser.
(c)
Old
Lincoln
or
Investments
purchased
or
f i n a n c e d t h e p u r c h a s e of o t h e r p r o p e r t y f r o m
64
the purchaser on or near the
p u r p o r t e d H i d d e n V a l l e y sale.
A business can
Old
Lincoln
date
of
the
(d)
Ol d L i n c o l n fu nd ed a line of c r e d i t to the
p u r c h a s e r on or n e a r the date of the pu rp or te d
H i d d e n V a l l e y sale.
(e)
Old Lincoln or Investments agreed to repurchase
the p r o p e r t y or to e x ch an ge
it f o r o t h e r
property owned by Old Lincpln and the Lincoln
Subsidiaries.
only claim
did,
if
it s
f u ll
accrual profit recognition,
sales
of
real
estate
conform
which
to
the
r e q u i r e m e n t s o f S t a t e m e n t o f F i n a n c i a l A c c o u n t i n g S t a n d a r d s No. 66,
Accounting for Sales of Real E s ta te
("SFAS No.
66")
is su ed by the
F i n a n c i a l A c c o u n t i n g S t a n d a r d s B o a r d in O c t o b e r o f 1982.
66,
the
applicable
s t a n d a r d a t al l p e r t i n e n t t i m e s ,
by t h e R a c k e t e e r i n g D e f e n d a n t s a n d A C C
S F A S No.
was violated
in c a u s i n g O l d L i n c o l n to
report i n co me o n the sh am H i d d e n V a l l e y tr ansactions.
157. E a c h
fraudulent
and
of
damaged
the
Old
Hidden
Valley
Lincoln.
Each
transactions
transaction
phantom profits which were used to effect unlawful
Old L i n c o l n t o AC C.
the s t r a w b u y e r s
"paid"
placed
created
payments
fr o m
B e c a u s e t h e t r a n s a c t i o n s w e r e n o t t r u e sales,
prices
well
in e x c e s s
t h e r e b y i n c r e a s i n g t h e q u a n t u m of fraud.
Defendants
was
Old
Lincoln
at
of m a r k e t
pr ic es ,
Finally, the R a ck et ee ri ng
financial
risk
by
causing
Old
Lincoln an d c e r t a i n L i n c o l n Su b s i d i a r i e s to m a k e loans to the straw
bu ye rs t o
fund the
sham transactions.
These
loans
never will
be
repaid.
158.
E a c h of th e ten H i d d e n V a l l e y t r a n s a c t i o n s
specifically d e s c r i b e d below.
65
is m o r e
(a)
Garcia Purchase.
In e a r l y 1987, Mr. E.C.
G a r c i a , t h e h o l d e r of 20 % o f t h e c o m m o n s t o c k
o f E.C.
Garcia and Company,
Inc.' ( " G a r c i a
C o . ” ), a p p r o a c h e d t h e R a c k e t e e r i n g D e f e n d a n t s
in a n e f f o r t t o o b t a i n f i n a n c i n g f o r Mr.
G a rc ia 's p l a n n e d a c q u i s i t i o n of the re m a i n i n g
80 % of t h e c o m m o n s t o c k o f G a r c i a Co.
A s an
express condition to Old Lincoln's providing
such financing, the R a c k e t e e r i n g Defend an ts
r e q u i r e d G a r c i a Co. t o p u r c h a s e o r a r r a n g e f o r
th e p u r c h a s e of a 1,000 acre H i d d e n V a l l e y
pa r c e l for $14,000,000.
(1)
A s G a r c i a Co. w a s u n w i l l i n g o r u n a b l e to
p u r c h a s e t h e H i d d e n V a l l e y p a r c e l , Mr.
Garcia
arranged
for
Westcontinental
Mortgage
and
Investment
Corporation
("Westcon” ) to p u r c h a s e such parcel and
thereby
satisfy
the
demand
of
the
Racketeering Defendants that the Hidden
Valley
parcel
be
purchased
from
I n v e s t m e n t s , in v i o l a t i o n of 18 U . S . C . §
215.
(2)
O n M a r c h 30, 1987, O l d L i n c o l n l o a n e d Mr.
Garcia $20,200,000. A significant portion
o f t h a t l o a n w a s u s e d b y Mr. G a r c i a to
c o m p l e t e h i s a c q u i s i t i o n o f 10 0% of t h e
G a r c i a Co. s t oc k.
H o w e v e r , G a r c i a Co.
s i m u l t a n e o u s l y l o a n e d $ 3 , 5 0 0 , 0 0 0 of e x c e s s
p r o c e e d s from th at loan to W e s t c o n to
permit Westcon to make the down payment
f o r its a c q u i s i t i o n f r o m I n v e s t m e n t s of
the Hidden Va ll ey parcel.
Also on that
day, I n v e s t m e n t s s o l d t h e H i d d e n V a l l e y
parcel to We st co n for $14,000,000.
The
$3,500,000 cash down payment for such
acquisition was made using the
funds
loaned to Westcon by Garcia
Co.
and
Westcon
executed
a
$10,500,000
non-recourse
promissory
note
for
the
r e m a i n i n g 75% o f t h e p u r c h a s e p r i c e .
(3)
A t t h e t i m e t h a t I n v e s t m e n t s m a d e its
$10,500,000 non-recourse loan to Westcon,
W e s t c o n h a d t o t a l a s s e t s of $ 8 7 , 0 0 0 a n d
a n e t w o r t h of $ 3 1 , 0 0 0 ;
An appraisal
p e r f o r m e d o n M a r c h 27, 1987, v a l u e d t h e
acquired pr op er ty at $8,500,000,
or
a p p r o x i m a t e l y 81% of t h e a m o u n t o f t h e
loan to Westcon.
The
loan required
W e s t c o n to ma k e only an nu al payments. No
66
payments have
on t h a t loan.
(4)
(b)
ever been made
by Westcon
Pr o p e r a c c o u n t i n g t r e a t m e n t of the sale
b y I n v e s t m e n t s to W e s t c o n o f t h e H i d d e n
Valley
parcel, w o u l d
prohibit
present
r e co gn it io n of any gain by Investments.
N o n e t h e l e s s , the R a c k e t e e r i n g D e f e n d a n t s
and other defendants caused Investments
a n d O l d L i n c c l n to r e c o g n i z e g a i n at the
t i m e of t h e p u r p o r t e d sale, c a u s i n g O l d
L i n c o l n t o o v e r s t a t e its 19 87 i n c o m e b y
approximately $11,067,000
and to make
unlawful paym en ts to AC C u n d e r the Tax
Plan.
C o n t i n e n t a l / A d o b e P u r c h a s e . O n J u l y 30, 1987,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 600 a c r e p a r c e l
of H i d d e n V a l l e y to C o n t i n e n t a l / A d o b e Joint
V e n t u r e ( " C o n t i n e n t a l " ) fo r $ 9 , 9 0 0 , 0 0 0 .
The
purchase price was paid to Investments with a
$2,475,000 cash down payment and the proceeds
of a $ 7 , 4 2 5 , 0 0 0 n o n - r e c o u r s e l o a n r e q u i r i n g
annual payments.
(1)
At
the
time
the
loan
was
ma de ,
no
appraisal was do ne for the p r o p e r t y that
w a s s e c u r i t y f o r t h e loan, in v i o l a t i o n
of 12 C. F. R.
§ 56 3 . 1 7 - 1 (c).
W h e n an
a p p r a i s a l w a s o b t a i n e d f o u r m o n t h s later,
t h a t a p p r a i s a l f i x e d t h e m a r k e t v a l u e of
t h e p r o p e r t y p u r c h a s e d b y C o n t i n e n t a l at
a m e r e $ 5 , 4 0 0 , 0 0 0 , a l m o s t o n e - h a l f of t h e
p u r c h a s e p r i c e a n d a p p r o x i m a t e l y 73% of
the a m ou nt of the loan to Continental.
(2)
A t t h e t i m e of C o n t i n e n t a l ' s a c q u i s i t i o n
of t h e H i d d e n V a l l e y p r o p e r t y , it e n t e r e d
into an ag re em en t w i t h In v e s t m e n t s that
g r an te d Co ntinental the right to return
s u c h p r o p e r t y t o I n v e s t m e n t s at a f u t u r e
d a t e in e x c h a n g e fo r o t h e r p r o p e r t y o w n e d
by
Investments.
This
"land-parking"
a r r a n g e m e n t w a s n o t a s a l e of H i d d e n
Valley
property,
but
constituted
an
a n t i c i p a t e d s a l e of p r o p e r t y f r o m a n o t h e r
Investments project.
When Continental
p r e d i c t a b l y e x e r c i s e d its e x c h a n g e r i g h t
in M a r c h 1988 t o r e t u r n t h e H i d d e n V a l l e y
property to Investments, the Racketeering
D e f e n d a n t s a n d o t h e r s h a s t i l y a r r a n g e d for
R.A. H o m e s , Inc. ("R.A. H o m e s " ) t o a s s u m e
67
Co n t i n e n t a l ' s o b l i g a t i o n s to I n ve st me nt s
u n d e r t h e l o a n m a d e b y I n v e s t m e n t s to
f i n a n c e C o n t i n e n t a l ' s a c q u i s i t i o n of t h e
Hidden Valley property.
(c)
(3)
R.
A.
Homes
assumed
Continental's
obligations under the non-recourse note
to
Old
Lincoln
by
entering
into
an
assumption and mo di fi ca ti on agreement.
When
R. A.
Homes
entered
into
this
a r r a n g e m e n t , t h e o u t s t a n d i n g a m o u n t of
s u c h l o a n w a s 137% of t h e a p p r a i s e d v a l u e
of t h e H i d d e n V a l l e y p a r c e l , a n d R. A.
Homes, an il liquid real es ta te investor,
h a d t o t a l l i a b i l i t i e s t h a t w e r e 59 t i m e s
g r e a t e r t h a n its c a p i t a l base.
(4)
Not surprisingly,
now delinquent.
(5)
Proper
accounting
treatment
of ; t h e
purported
sale
by
Investments
to
C o n t i n e n t a l of t h e H i d d e n V a l l e y p a r c e l
w o u l d p r o h i b i t p r e s e n t r e c o g n i t i o n of any
gain
by
Investments
or
Old
Lincoln.
Nonetheless, the Racketeering Defendants
and other defendants caused Old Lincoln
and In vestments to r e c o gn iz e ga in from
such
transactions,
to
overstate
Old
L i nc ol n' s income by $7,776,000, and to
t r a n s f e r funds u n l a w f u l l y to A C C u n d e r the
T a x Plan.
t h e R. A. H o m e s l o a n is
Richmond American Homes P u r c h a s e .
On August
31, 1987, I n v e s t m e n t s p u r p o r t e d l y s o l d a 963
acre parcel
of H i d d e n V a l l e y t o R i c h m o n d
American
Homes,
Inc.
("Richmond")
for
$16,862,062.
T h e p u r c h a s e p r i c e w a s p a i d to
Investments with a $4,215,515 cash down payment
a n d t h e p r o c e e d s of a $ 1 2 , 6 4 6 , 5 4 7 2 0 % - r e c o u r s e
loan.
(1)
At
the
time
the
loan
was
made ,
no
appraisal was done for the p r o p e r t y that
w a s s e c u r i t y fo r t h e loan, in v i o l a t i o n
of 12 C. F. R. § 5 6 3 . 1 7 - 1 (c) (1 ) .
N o l o an
f e es w e r e a s s e s s e d b y O l d L i n c o l n .
The
c a s h d o w n p a y m e n t m a d e to I n v e s t m e n t s by
Richmond
was,
as
described
be lo w,
indirectly provided by Old Lincoln.
68
(d )
(2)
A l s o o n A u g u s t 31,
1987,
Old Lincoln
extended to Hamilton Homes ("Hamilton” )
a
$14,997,000
non-recourse
loan
to
p u r c h a s e f i v e p a r c e l s o r 51 .3 a c r e s of
l a n d in C a l i f o r n i a .
Hamilton purchased
such land from Richmond.
Th e loan from
O l d L i n c o l n t o H a m i l t o n r e p r e s e n t e d 100%
of the p u r c h a s e pric e th at R i c h m o n d and
Hamilton had arranged and was more than
three times greater than the appraised
f a i r m a r k e t v a l u e of s u c h p a r c e l s in t h e i r
then current condition.
No payments were
e v e r m a d e b y H a m i l t o n on t h i s loan, a n d
Ha milton*s obligations u n de r such loan
have since been assumed by a third party
that
negotiated
a
significant
r e s t r u c t u r i n g o f s u c h loan.
(3)
T h e l o a n t o H a m i l t o n w a s m a d e s o l e l y for
the
purpose
of
providing
Richmond
i n d i r e c t l y w i t h t h e c a s h it n e e d e d t o m a k e
the $4,215,515 down payment to Investments
for the p u r c h a s e of the H i d d e n Va l l e y
parcel.
As a result, p r o p e r a c co un ti ng
tr e a t m e n t w o u l d p r o h i b i t Ol d L i nc ol n from
r e c o r d i n g t h e $ 1 3 , 1 9 3 , 0 0 0 p r o f i t t h a t it
r e co rd ed on the salé of H i d d e n Vall ey
property to Richmond.
Further, proper
accounting
treatment
requires
Old
Lincoln's
recognition
of
at
least
$1,500,000
of
loss
that
has
already
resulted
from
the
loan
to
Hamilton.
Nonetheless, the Racketeering Defendants
and other defendants caused Old Lincoln
a n d I n v e s t m e n t s t o r e c o g n i z e g a i n a n d to
p o st po ne re c o g n i t i o n of loss from such
transactions
and
to
overstate
Old
Lincoln's
1987
income
by
more
than
$13,000,000.
Consequently, Old Lincoln
m a d e u n la wf ul p a y m e n t s to A C C u n d e r the
T a x Plan.
M.D.C.
Purchase.
On September
30,
1987,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 630 a c r e p a r c e l
of H i d d e n V a l l e y t o M . D . C . L a n d C o r p o r a t i o n
(" M. D. C. ") ,
an a f f i l i a t e
of R i c h m o n d ,
for
$11,021,565.
This parcel was the identical
p a r c e l t h a t I n v e s t m e n t s s o l d t o U. S. H o m e in
O c t o b e r o f 19 86 a n d t h a t I n v e s t m e n t s r e a c q u i r e d
in N o v e m b e r of 1987.
(S e e s u b p a r a g r a p h (j),
in fr a. )
The purchase
price
was
p a i d to
Investments with a $2,775,391 cash down payment
69
a n d t h e p r o c e e d s of a $ 8 , 2 6 6 , 1 7 4
loan.
Investments
recorded
$ 8 ; 5 8 7 , 0 0 0 o n t h i s sale.
(e )
20%-recourse
a
gain
of
(1)
At
the
time
the
loan
was
made,
no
ap praisal was do ne for the p r o p e r t y that
w a s s e c u r i t y f o r t h e loan, in v i o l a t i o n
o f 12 C. F. R. § 5 6 3 . 1 7 - 1 ( c ) (1).
W h e n an
appraisal was completed subsequently, that
a p p r a i s a l f i x e d t h e m a r k e t v a l u e of t h e
property
purchased
by
M.D.C.
at
a p p r o x i m a t e l y $5,670,000, or a p p r o x i m a t e l y
69% of t h e a m o u n t o f t h e l o a n t o M . D . C .
(2)
Also
on
September
30,
1987,
M . D. C.
af filiates sold to Inve st me nt s parcels
from four different
locations
f o r an
aggregate
price
o f |g a p p r o x i m a t e l y
$16,306,000.
I n v e s t m e n t s p a i d c a s h for
these properties. These transactions were
e n t e r e d i n t o s o l e l y f o r t h e p u r p o s e of
providing
M.D.C.
and
its
parent
c o rp or at io n w i t h the cash ne ed ed to make
the do wn p a y m e n t to I n v e s t m e n t s for the
p u r c h a s e of t h e H i d d e n V a l l e y p a r c e l .
(3)
A l s o o n S e p t e m b e r 30, 1987, L i n c o l n i s s u e d
a $75,00 0, 00 0 line of c r e d i t to M.D.C.
H o l d i n g s , Inc., a n a f f i l i a t e of M . D . C .
(4)
Proper
accounting
treatment
of
these
simultaneous transactions by Investments
w i t h a f f i l i a t e d en ti t i e s of M.D.C. w o u l d
p r o h i b i t p r e s e n t r e c o g n i t i o n .of a n y g a i n
b y I n v e s t m e n t s o n t h e p u r p o r t e d s a l e of
Hidden Valley property.
Nonetheless, the
Racketeering
Defendants
and
other
defendants caused Investments and Old
L i n c o l n t o r e c o g n i z e g a i n at t h e t i m e of
t h e p u r p o r t e d sale, c a u s i n g O l d L i n c o l n
t o o v e r s t a t e its 1987 i n c o m e b y $ 8 , 5 8 7 , 0 0 0
and to ma ke unlawful p a ym en ts to AC C under
t h e T a x Plan.
Hamilton Purchase.
O n D e c e m b e r 29,
1987,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 425 a c r e p a r c e l
of H i d d e n V a l l e y t o H a m i l t o n f o r $ 6 , 8 0 0 , 0 0 0 .
The p u rc ha se pric e was paid to I n ve st me nt s with
a $1,700,000 cash down payment and the proceeds
o f a $ 5 , 1 0 0 , 0 0 0 n o n - r e c o u r s e loan. I n v e s t m e n t s
r e c o r d e d a g a i n of $ 2 , 3 9 7 , 0 0 0 o n t h i s sale.
70
(f)
(1)
At
the
tine
the
loan
was
made,
an
appraisal had been completed indicating
t h a t t h e l o a n w a s 1.3 t i m e s g r e a t e r t h a n
the
value
of
the
property
that
was
s e c u r i t y f o r t h e loan.
No loan fees were
collected.
(2)
To
make
the
cash
down
payment
to
Investments, Hamilton used the proceeds
of a c o n c u r r e n t $ 1 , 7 0 0 , 0 0 0 l o a n f r o m S a u d i
E u r o p e a n B a n k (" Sa ud i B a n k ” ) , a b a n k in
which AMCOR Funding Corporation, another
L i nc ol n Subsidiary, p o s s e s s e d an interest.
O l d L i n c o l n p a i d to S a u d i B a n k all fees
c h a r g e d to H a m i l t o n in c o n n e c t i o n w i t h
s u c h loan.
(3)
In a d d i t i o n , O l d L i n c o l n m a d e an u n s e c u r e d
l o a n to H a m i l t o n o n N o v e m b e r 15, 1987.
(4)
Proper
accounting
treatment
of
the
p u r p o r t e d sale of H i d d e n V a l l e y prop er ty
to
Hamilton
would
prohibit
.present
r e c o g n i t i o n of a n y g a i n b y I n v e s t m e n t s or
Old
Lincoln.
Nonetheless,
th e
Racketeering
Defendants
and
other
defendants caused Investments and Old
L i n c o l n t o r e c o g n i z e g a i n a t t h e t i m e of
t h e p u r p o r t e d sale, c a u s i n g O l d L i n c o l n
t o o v e r s t a t e its i n c o m e b y $ 2 , 3 9 7 , 0 0 0 an d
to m a k e u n la wf ul p a y m e n t s to A C C u n d e r the
T a x Plan.
E m e r a l d H o m e s P u r c h a s e . O n S e p t e m b e r 23, 1987,
O l d L i n c o l n f u n d e d a $ 2 5 , 0 0 0 , 0 0 0 u n s e c u r e d li n e
of
credit
loan
to
Emerald
Homes,
L.P.
("Emerald").
On
September
29,
1987,
I n v e s t m e n t s p u r p o r t e d l y s o l d a p p r o x i m a t e l y 580
a c r e s o f H i d d e n V a l l e y p r o p e r t y t o E m e r a l d for
$9,572,544.
T h e p u r c h a s e p r i c e w a s p a i d to
Investments with a $2,393,136 cash down payment
. a n d t h e p r o c e e d s of a $ 7 , 1 7 9 , 4 0 8 n o n - r e c o u r s e
loan.
(1)
No ap pr ai sa l wa s done for the pr op e r t y
that
was
security
for
the
loan,
in
v i o l a t i o n of
12
C . F. R.
§ 563.171(c) (1) , a n d n o l o a n f e e s w e r e a s s e s s e d .
The previously established $25,000,000
l i n e of c r e d i t f r o m O l d L i n c o l n w a s f u n d e d
a n d a v a i l a b l e f o r E m e r a l d t o d r a w u p o n to
make the $2,393,136 cash down payment.
71
(g)
(2)
A l s o on o r a b o u t S e p t e m b e r 30,
1987,
E m er al d sold to I n ve st me nt s p a rc el s from
four d i f f er en t lo ca ti on s fo r an ag gr eg at e
p u r c h a s e pr i c e of $14,646,500.
(3)
Proper
accounting
treatment
of
these
v i r t u a l l y s i mu lt an eo us t r a n s a c t i o n s by
Investments with Emerald would prohibit
present
recognition
of
any
gain
by
Investments.
Nonetheless,
the
Racketeering
Defendants
and
other
de fe nd an ts caus ed In ve st me nt s and Old
L i n c o l n t o r e c o g n i z e g a i n at t h e t i m e of
t h e p u r p o r t e d sale, c a u s i n g O l d L i n c o l n
t o o v e r s t a t e its 1987 i n c o m e b y $ 7 , 3 4 9 , 0 0 0
and to ma ke unla wf ul p a y m e n t s to A C C un d e r
t h e T a x Plan.
HVPLP
Purchase.
On' J a n u a r y
29,
1988,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 445 a c r e p a r c e l
of H i d d e n V a l l e y to H i d d e n V a l l e y P r o p e r t i e s
L i m i t e d P a r t n e r s h i p ("HVPLP") f o r $ 6 , 0 0 0 , 0 0 0 .
The pu rc h a s e price was pa i d to I n v e s t m e n t s with
a $1,500,000 cash down payment and the proceeds
o f a $ 4 , 5 0 0 , 0 0 0 n o n - r e c o u r s e loan. I n v e s t m e n t s
recorded
a
$4,427,000
gain
from
this
transaction.
(1)
At
the
time
the
loan
was
made ,
no
ap pr ai sa l wa s do ne for the p r o p e r t y that
w a s s e c u r i t y f o r t h e loan, in v i o l a t i o n
o f 12 C. F. R. § 5 6 3 . 1 7 - l ( c ) (1) , a n d n o l o a n
fees we r e assessed.
(2)
A t t h e t i m e t h e l o a n w a s ma de , H V P L P d i d
n o t h a v e $ 1 , 5 0 0 , 0 0 0 in c a s h a v a i l a b l e to
it t o m a k e t h e c a s h d o w n p a y m e n t to
Investments.
HVPLP
was
so
thinly
c a p i t a l i z e d that, o t h e r t h a n t h e p a r c e l
of H i d d e n V a l l e y p r o p e r t y o b t a i n e d f r o m
I n v e s t m e n t s , t h e o n l y a s s e t on its b a l a n c e
s h e e t w a s $1 00 of cash.
The general
p a r t n e r of H V P L P
is a l s o
financially
incapable
of
meeting
the
H V P L P 1s
o b l i g a t i o n s p u r s u a n t t o t h e loan.
(3)
AC C p r ov id ed the funds that en ab le d HVPLP
to
make
the
down
payment
on
the
transaction.
O n J a n u a r y 28, 1988, A C C
p u r c h a s e d p r o p e r t y f r o m t h e S u n Oliv e,
Ltd. P a r t n e r s h i p f o r $ 4 , 2 0 0 , 0 0 0 .
The
p r o p e r t y a p p r a i s e d for $2 ,7 5 3 , 0 0 0 on June
72
25, 1988. T h e s o l e g e n e r a l p a r t n e r of S u n
O l iv e, Ltd. P a r t n e r s h i p w a s P h i l G o r d o n ,
the sole ge ne ra l p a r t n e r of HVPLP.
The
cash down payment made by ACC to Sun Olive
w a s $ 1 , 8 9 7 , 0 0 0 w h i c h w a s u s e d b y H V P L P to
make the down payment to Investments.
(4)
(h)
Proper
accounting
treatment
of
this
transaction
would
prohibit
present
r e c o g n i t i o n of a n y g a i n b y I n v e s t m e n t s on
t h e p u r p o r t e d s a l e t o H V P L P of H i d d e n
Valley
property.
Nonetheless,
the
Racketeering
Defendants
and
other
defendants caused Investments and Old
L i n c o l n t o r e c o g n i z e g a i n a t t h e t i m e of
t h e p u r p o r t e d sale, c a u s i n g O l d L i n c o l n
t o o v e r s t a t e its 1988 i n c o m e b y $ 4 , 4 2 7 , 0 0 0
,and t o m a k e u n l a w f u l p a y m e n t s t o A C C u n d e r
t h e T a x Plan.
National Realty Purchase.
O n J u n e 29, 1988,
Investments
purportedly
sold
two
parcels
t o t a l l i n g 1,500 acres of H i d d e n V a l l e y to
N a t i o n a l R e a l t y L i m i t e d P a r t n e r s (" N R L P " ) for
$24,000,000.
T h e p u r c h a s e p r i c e w a s p a i d to
Investments with a $6,000,000 cash down payment
and the pr oc ee ds of a $18,000,000 no n- re co ur se
loan.
Investments recorded a $17,946,000 gain
o n t h e p u r p o r t e d s a l e of t h e s e t w o p a r c e l s .
(1)
A l s o o n o r a b o u t J u n e 29,
1988,
Old
Lincoln
made
a
series
of
loans
to
S o u t h m a r k C o r p o r a t i o n a n d c e r t a i n of its
affiliates.
N R L P is a n a f f i l i a t e of
Southmark.
These loans were violations
o f 12 C. F. R.
§ 563.9-3
r e g a r d i n g the
limitation on loans to any single borrower
a n d its a f f i l i a t e s .
(2)
B e c a u s e t h e c a s h d o w n p a y m e n t m a d e to
In ve st me nt s wa s in directly p r o v i d e d by Old
L i n c o l n , p r o p e r a c c o u n t i n g t r e a t m e n t of
the p u r p o r t e d sale by I n v e s t m e n t s to NRLP
w o u l d p r o h i b i t p r e s e n t r e c o g n i t i o n o f an y
ga in by In vestments on such transaction.
Nonetheless, the Racketeering Defendants
and other defendants caused Investments
and Old Li nc ol n to re co gn iz e g a i n at the
t i m e of s u c h p u r p o r t e d sale, c a u s i n g O l d
L i n c o l n t o o v e r s t a t e its 19 88 i n c o m e by
$17,946,000 and to make un lawful p a ym en ts
t o A C C u n d e r t h e T a x Plan.
73
(i)
(j)
G a s c o n D e v e l o p m e n t P u r c h a s e , O n J u n e 30, 1988,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 500 a c r e p a r c e l
of H i d d e n V a l l e y t o G a s c o n D e v e l o p m e n t , Inc.
("Ga sc on” ) for $8,000,000.
The purchase price
was pa id to Investments wi th a $2,000,000 cash
d o w n p a y m e n t a n d t h e p r o c e e d s of a $ 6 , 0 0 0 , 0 0 0
n o n - r e c o u r s e loan.
Investments recorded a
$ 6 , 0 0 6 , 0 0 0 g a i n on t h i s p u r p o r t e d sale.
(1)
No loan fees w e r e a s s e s s e d to Gascon, and
Investments provided Gascon with a second
m o r t g a g e loan to p e r m i t G a s c o n to m a k e the
$2,000,000 down payment.
A l th ou gh this
s e c o n d m o r t g a g e l o a n w a s s e c u r e d b y an
i r re vo ca bl e le tt er of cr e d i t issued by
S a u d i Bank, I n v e s t m e n t s e n t e r e d i n t o an
ag r e e m e n t o b l i g a t i n g itself to inde mn if y
S a u d i B a n k w i t h r e s p e c t t o s u c h l e t t e r of
cr e d i t .
(2)
Proper
accounting
treatment
of
this
purported sale would prohibit present
r e c o g n i t i o n of any ga i n b y Investments.
Nonetheless, the Racketeering Defendants
and other defendants caused Investments
a n d O l d L i n c o l n t o r e c o g n i z e g a i n at t h e
t i m e of s u c h p u r p o r t e d sale, c a u s i n g O l d
L i n c o l n t o o v e r s t a t e its 19 88 i n c o m e b y
$6,006,000 and to make unlawful payments
t o A C C u n d e r t h e T a x Plan.
U.S. H o m e P u r c h a s e .
O n O c t o b e r 31, 1986,
I n v e s t m e n t s p u r p o r t e d l y s o l d a 42 5 a c r e p a r c e l
o f H i d d e n V a l l e y t o U.S.
Home Corporation
("U.S. Ho me ") f o r $ 4 , 2 5 0 , 0 0 0 .
The purchase
price was paid to Investments with a $856,000
cash down payment
and the proceeds
of a
$3,400,000 no n- re co ur se loan re q u i r i n g only
annual interest payments.
(1)
T h e s a l e s a g r e e m e n t p e r m i t t e d U.S. H o m e
to tr ad e the H i d d e n V a l l e y pa rc el for a
t r a c t of l a n d in E s t r e l l a P h a s e I.
(2)
Old L i nc ol n on a c o n s o l i d a t e d ba si s with
Investments
recorded
profit
of
approximately
$3,326,000
on
this
transaction.
(3)
O n F e b r u a r y 27, 1987, U.S. H o m e p u r c h a s e d
795
acres
in E s t r e l l a
Phase
II
from
Investments
for
$18,661,000,
paying
74
$ 3 , 7 3 2 , 0 0 0 in c a s h
for $14,929,000.
159.
artifice,
In
certain
and
executing
a note
(4)
Then, o n N o v e m b e r 4, 1987, I n v e s t m e n t s
r e a c q u i r e d t h e 425 a c r e H i d d e n V a l l e y
p a r c e l f r o m U.S. H o m e b y p a y i n g $ 9 4 2 , 0 0 0
in c a s h a n d c a n c e l l i n g t h e $ 3 , 4 0 0 , 0 0 0 n o t e
e x e c u t e d b y U.S. H o m e o n O c t o b e r 31, 198 6.
(5)
T h e e x c h a n g e o p t i o n in f a v o r o f U.S. Home,
I n v e s t m e n t s ' c o n t i n u i n g i n v o l v e m e n t in t h e
p r o j e c t , t h e n o n - r e c o u r s e n a t u r e of t h e
financing, and the other ma tt er s recited
a b o v e m a d e t h e U.S. H o m e p u r c h a s e a s h a m
transaction
under
SFAS
No.
66.
Nonetheless, the Racketeering Defendants
and other defendants caused Old Lincoln
to
overstate
its
19 86
income
by
approximately
$3,326,000
and
to
make
unlawful pa ym en ts to AC C un de r the Tax
Plan.
implementing
defendants,
the
as
Hidden
Valley
directors
and
scheme
officers
Lincoln, a l s o v i o l a t e d t h e i r s t a t u t o r y , c o n t r a c t u a l ,
and
of
Old
and fiduciary
du ti es d e s c r i b e d in p a r a g r a p h 346.
4.
160.
Racketeering
C ro w d e r W a te r R an ch Schem e
and A r t i f i c e - Ta x P la n A s p e c ts .
B e t w e e n S e p t e m b e r of 1986 a n d J a n u a r y o f 1989,
Defendants,
En te r p r i s e ,
caused
Old
conducting
Lincoln
and
the
affairs
Investments
series o f s h a m t r a n s a c t i o n s w i t h C. V. N a l l e y
to
overstate
u n la wf ul
Old
payments
Lincoln's
to
ACC
income
under
and,
the
Tax
p o r t r a y i n g O l d L i n c o l n as a p r o f i t a b l e
161.
Investments
From
April
purchased
or
of
leased
1985
13,542
75
to
of
the
therefore,
Plan,
ACC
engage
( " Na ll ey ")
the
in
a
designed
to
trigger
thereby
falsely
institution.
through
acres
August
of
referred
to
1986,
as
the
Crowder
W a t e r Ranch,
for a p p r o x i m a t e l y
c o s t of $ 8 66 p e r acre.
$11,727,372
at
an average
W i t h i n a r e m a r k a b l y s h o r t p e r i o d o f time,
I n v e s t m e n t s " s o l d " a o n e - t h i r d i n t e r e s t in t h e C r o w d e r W a t e r R a n c h
t o N a l l e y f o r $ 2 0 , 0 0 0 , 0 0 0 o n S e p t e m b e r 30,
1986.
acre
result
purchase
price
was
$4 ,4 31 .
As
a
I n v e s t m e n t s c l a i m e d a p r o f i t of $ 1 5 , 0 7 0 , 0 0 0
162.
Lincoln,
Lincoln.
The average per
of
this
sale,
in 1986.
The cl ai me d $15,070,000 pr o f i t was a t t r i b u t e d to Old
since
Investments
was
a wholly-owned
subsidiary
of
Old
This "profit" allowed the R a c k e t e e r i n g D e f e nd an ts to use
the Ta x Plan to u p s t r e a m
$6,040,000
to
Old
portray
falsely
that
to ACC
Lincoln
had
for t h e i r b e n e f i t and
realized
a
$15,070,000
profit.
163.
the
In r e a l i t y ,
the
s a l e of t h e
Crowder Water Ranch to Nalley was
economic
substance
Defendants'
designed
fraudulent
solely
interest
in
a s h a m t r a n s a c t i o n v o i d of
to
purposes,
one-third
achieve
the
including
Racketeering
overstating
Old
L i n c o l n ' s p r o f i t s a n d d i v e r t i n g f u n d s t o A C C u n d e r t h e T a x Plan.
164.
of w h i c h w a s
executed
1987,
a
Nalley paid $5,000,000
indirectly
non-recourse
Investments
interest
(8-1/3%)
funneled to N a l l e y
Note
repurchased
in
this
agreeing to defer Nalley's
1987)
25,
in c a s h
for
(a s u b s t a n t i a l p a r t
from Old
$15,000,000.
an
property
eight
from
and
On
Lincoln)
and
November
30,
one-third
Nalley
first annual payment
for
Investments
repurchased Nalley's
the property by paying him $7,500,000
76
and
and
by
(due D e c e m b e r 1,
of p r i n c i p a l a n d i n t e r e s t u n t i l D e c e m b e r 1, 1988.
1989,
$10
percent
remaining
On January
interest
forgiving his Note
in
for
$15,000,000
and all
accrued
interest.
The
repurchase
agreements
a v o i d e d r e c o g n i t i o n o f a l o s s o n N a l l e y ' s loan.
165.
The
Crowder
Water
Ranch
transaction
s p e c if ic al ly d e s c r i b e d below:
(a)
D u r i n g the, p e r i o d f r o m A p r i l o f 1 9 8 5 t h r o u g h
August
of
1986,
Investments
acquired
the
C r o w d e r W a t e r Ranch.
T h e b u l k of t h i s a c r e a g e
originally was owned by the Crowder-Weisser
C a t t l e Co.
Investments made
its
initial
p u r c h a s e b y b u y i n g the p r o p e r t y of th a t co nc er n
on
April
23,
1985,
for
approximately
$10,000,000.
One
of
the
Crowder-Weisser
p a r t n e r s , R o b C r o w d e r , a s s i s t e d I n v e s t m e n t s in
purchasing the remaining acreage from sixteen
i n d i v i d u a l s . T h i s acreage*, c o n s i s t i n g of 3,42 3
a c re s, w a s p u r c h a s e d b y h i m a t a n a v e r a g e p r i c e
o f $ 4 01 p e r a c r e t h r o u g h a s e r i e s of s i x t e e n
t r a n s a c t i o n s f r o m J u l y o f 19 85 t h r o u g h J a n u a r y
of 1986.
H e t h e n s o l d t h e s a m e a c r e a g e to
I n v e s t m e n t s at $ 5 00 p e r a c r e in a s e r i e s of
t r a n s a c t i o n s f r o m M a r c h t h r o u g h A u g u s t o f 1986.
(b)
As a result of the fo re go in g transactions,
Investments
assembled
the
total
acreage,
c o n s i s t i n g o f b o t h p r o p e r t y h e l d in f e e a n d
p r o p e r t y h e l d b y le as e.
W h e n it s a c q u i s i t i o n s
w e r e c o m p l e t e d a t t h e e n d o f A u g u s t , 1986, t h e
average cost per acre paid by Investments was
$866.
(c)
O n S e p t e m b e r 30, 1986, I n v e s t m e n t s a g r e e d to
s e l l a o n e - t h i r d i n t e r e s t in t h e C r o w d e r W a t e r
R a nc h to Nalley.
The total pu rc ha se price was
$ 2 0 , 0 0 0 , 0 0 0 , r e s u l t i n g in a n a v e r a g e p r i c e p e r
a c r e o f $4 ,4 31 .
This transaction represents
n e a r l y a t e n f o l d i n c r e a s e in t h e a v e r a g e p r i c e
p e r a c r e o v e r w h a t I n v e s t m e n t s h a d p a i d for
certain acreage just one month earlier.
No
land
development
justified
the
dramatic
i n fl at io n of value, nor was the v a l u e s u pp or te d
by any appraisal.
(d)
O n S e p t e m b e r 30, 1986, O l d L i n c o l n a n d t h e
L i n c o l n S u b s i d i a r i e s e n g a g e d in t h e f o l l o w i n g
additi on al t r an sa ct io ns wi t h Nalley:
(1)
L I N F I N C o r p o r a t i o n (" LI N F I N " ) , a w h o l l y o w n e d s u b s i d i a r y of O l d L i n c o l n , r e l e a s e d
77
is
more
N a l i e y f r o m t h r e e p e r s o n a l g u a r a n t e e s of
i n d e b t e d n e s s of C o n t i n e n t a l S o u t h e r n , Inc.
t o L I N F I N ; at t h a t time, in e x c e s s of
$3 ,400,000 wa s ow ed to LINFIN.
(2)
P h o e n i c i a n F i n a n c i a l C o r p o r a t i o n ("PFC") ,
a n o t h e r w h o l l y - o w n e d s u b s i d i a r y of Old
L i n c o l n , p u r c h a s e d f o r $ 3 , 5 0 0 , 0 0 0 N a l i e y 's
s t o c k in C o n t i n e n t a l S o u t h e r n , Inc'; at
t h a t time, C o n t i n e n t a l S o u t h e r n , Inc. w a s
i n s o l v e n t or, a t best , h a d i n s i g n i f i c a n t
net worth.
(3)
A s a re s u l t , O l d L i n c o l n a n d t h e L i n c o l n
Subsidiaries,
at
the
behest
of
the
Racketeering
Defendants,
bestowed
a
f i n a n c i a l b e n e f i t o f n e a r l y $ 7 , 0 0 0 , 0 0 0 on
N a l i e y f o r v e r y l i t t l e in r e t u r n .
(e)
When
the
purchase
transaction
closed
on
N o v e m b e r 7, 1986, t h e $ 2 0 , 0 0 0 , 0 0 0 c o n s i d e r a t i o n
w a s p a i d in t h e f o r m o f $ 5 , 0 0 0 , 0 0 0 in c a s h and
a non-recourse
note executed
in
favor
of
Investments
in t h e a m o u n t of
$15,000,000.
(Investments subsequently assigned this note
to LINFIN.)
As a resu lt of Investments'
b o o k i n g of p r o f i t in t h e a m o u n t o f $ 1 5 , 1 0 0 , 0 0 0 ,
or ap pr o x i m a t e l y the amou nt of th e note from
the borrower, ACC extracted from Old Lincoln
ta x s h ar in g p a y m e n t for the q u a r t e r ending
D e c e m b e r 31, 1986, of $ 6 , 0 4 0 , 0 0 0 .
(f)
In v i e w of t h e t r a n s a c t i o n s b y a n d a m o n g
N a l i e y , L I NF IN , a n d P F C o n S e p t e m b e r 30, 1986,
a n d of t h e n o n - r e c o u r s e n a t u r e o f N a l i e y ' s
N o v e m b e r 7, 1986, n o t e t o I n v e s t m e n t s , t h e
Crowder Water Ranch tr an sa ct io n was a sham
w h i c h sh ould not ha ve q u a l i f i e d for pr of it
recognition.
(g)
U n d e r the loan documents, N a l i e y was to make
n o p a y m e n t of p r i n c i p a l o r i n t e r e s t u n t i l
D e c e m b e r 1, 1987, a t w h i c h t i m e a p r i n c i p a l and
i n t e r e s t p a y m e n t in t h e a m o u n t of $ 1 , 7 6 2 , 0 0 0
w a s due.
(h)
Naliey
never
made
any
payments
on
th e
$ 1 5 , 0 0 0 , 0 0 0 loan.
Thus , t h e o n l y c a s h e v e r
p a i d t o O l d L i n c o l n w a s t h e i n i t i a l $5,000,00.0
do wn payment, and even this p a y m e n t was
78
s u b s t a n t i a l l y financed, d i r e c t l y or indirectly,
by Old Lincoln's other transactions with Nalley
o n S e p t e m b e r 30, 1986.
(i)
P u r p o r t e d l y , j u s t b e f o r e t h e D e c e m b e r 1, 1987,
i n t e r e s t a n d p r i n c i p a l p a y m e n t w a s due, t h e
p a r t i e s n e g o t i a t e d a n e x t e n s i o n of t h i s p a y m e n t
obligation.
An agreement purportedly was
r e a c h e d o n N o v e m b e r 30, 1987, t o e x t e n d u n t i l
D e c e m b e r 1, 1988, N a l l e y ' s o b l i g a t i o n t o p a y
t h e f i r s t y e a r ' s p r i n c i p a l a n d in t e r e s t .
In
e x c h a n g e f o r t h i s a g r e e m e n t , N a l l e y d e e d e d an
e i g h t a n d o n e - t h i r d p e r c e n t (8-1/3%) i n t e r e s t
in t h e r a n c h t o I n v e s t m e n t s , t h e r e b y r e d u c i n g
h i s t o t a l i n t e r e s t in t h e r a n c h t o t w e n t y - f i v e
percent
(25%).
His
o b l i g a t i o n under the
$ 1 5 , 0 0 0 , 0 0 0 note, h o w e v e r , w a s n o t re d u c e d .
(j)
O n D e c e m b e r 1, 1988, N a l l e y ' s d e f e r r e d first*
a n n u a l p r i n c i p a l a n d i n t e r e s t p a y m e n t w a s due,
as w e l l
as h i s
second
annual
payment
of
p r in ci pa l and interest.
These payments were
n o t m a d e w h e n due.
Nalley was then allegedly
making assertions to the effect that Keating
Jr. h a d m a d e m i s r e p r e s e n t a t i o n s t o him.
On
information and belief, Nalley first demanded
t h a t h i s e n t i r e i n t e r e s t in t h e r a n c h be
repurchased,
but
this
was
rejected.
On
in fo rm at io n and belief, his next effort was to
c o up le a d e m a n d for r e p u r c h a s e of his in terest
with a threat that he would divulge information
e m b a r r a s s i n g t o t h e K e a t i n g Fa m i l y .
(k)
O n J a n u a r y 23, 1989, N a l l e y a n d I n v e s t m e n t s
en te re d into a R e f o r m a t i o n of Am e n d m e n t to Note
p u rs ua nt to w h ic h In ve st me nt s recorded income
as f o ll ow s:
(1)
$ 3 , 1 0 0 , 0 0 0 in i n t e r e s t i n c o m e ( c o n s i s t i n g
o f t h e a g g r e g a t e of t h e f i r s t a n d s e c o n d
years' interest);
(2)
$1,200,000
as
an
"extension
fee"
(apparently
in
recognition
of
the
fo rb ea ra nc e g r a n t e d w i t h respect to the
D e c e m b e r 1,
1987
a n d D e c e m b e r 1,
1988
p a y m e n t s ) ; and
(3)
$ 7 0 0 , 0 0 0 in o t h e r i n c o m e w h i c h w a s b o o k e d
in
connection
with
a
repurchase
t r a n s a c t i o n t w o d a y s later.
79
This
Reformation
of
Amendment
to
Note
apparently
was
intended
to
document
the
fo rb ea ra nc e p r e v i o u s l y e x te nd ed to Nalley.
(1)
166.
certain defendants,
O n J a n u a r y 25, 1989, at a t i m e o f p l u m m e t i n g
r e a l e s t a t e v a l u e s in A r i z o n a , as n o t e d above,
Investments
repurchased
Nalley's
remaining
twenty-five percent
(25%)
interest
in t h e
r a nc h.
T h e t e r m s of t h i s p u r c h a s e r e q u i r e d
I n v e s t m e n t s t o p a y t o N a l l e y $ 7 , 5 0 0 , 0 0 0 in c a s h
a n d t o t a k e b a c k h i s i n t e r e s t in t h e r a n c h in
s a t i s f a c t i o n of t h e o u t s t a n d i n g b a l a n c e o f t h e
$ 1 5 , 0 0 0 , 0 0 0 note, w h i c h w a s s t i l l $ 1 5 , 0 0 0 , 0 0 0 .
As
a
result
of
this
transaction,
Nalley
received substantial personal benefit,
and
Investments suffered a corresponding detriment.
(1)
First,
Nalley
was
relieved
from
any
o b l i g a t i o n o n a n o t e in t h e a m o u n t of
$ 1 5 , 0 0 0 , 0 0 0 a n d r e c e i v e d $ 7 , 5 0 0 , 0 0 0 in
cash ; t h i s e x c e e d e d h i s i n i t i a l c a s h d o w n
payment by $2,500,000.
(2)
Second,
by the
end of J a n u a r y
1989,
Investments ended up ho ld in g exactly the
s a m e p r o p e r t y i n t e r e s t w h i c h it h e l d on
S e p t e m b e r 30, 1986.
While Investments
a g a i n b e c a m e t h e r e c o r d h o l d e r of t h e
ranch, O l d L i n c o l n h a d a d v a n c e d $ 6 , 0 4 0 , 0 0 0
t o A C C u n d e r t h e T a x Plan .
Accordingly,
I n v e s t m e n t s w a s o u t $ 2 , 5 0 0 , 0 0 0 (less t h e
t i m e v a l u e of N a l l e y ' s $ 5 , 0 0 0 , 0 0 0 o v e r
twenty-seven m o n t h s ) , and Old Lincoln was
out $6,040,000.
In a d d i t i o n , O l d L i n c o l n
had
lost
the
benefit
of
Nalley's
g u a r an ti es of other in de bt ed ne ss
and,
t h r o u g h PFC, h a d p a i d N a l l e y $ 3 , 5 0 0 , 0 0 0
f o r s t o c k t h a t h e o w n e d in o n e of t h e
debtors.
ACC, o n t h e o t h e r ha nd , h a d O l d
L i n c o l n ^ $ 6 , 0 4 0 , 0 0 0 a n d w a s in a p o s i t i o n
to clai m th at the ranch w a s w o r t h $7,819
p e r acre, a l t h o u g h t h e a v e r a g e c a s h p r i c e
p e r a c r e w a s $ 8 66 —
a nine hundred
p e r c e n t ''gain'' f r o m A u g u s t of 19 86 t h r o u g h
J a n u a r y of 1989 b a s e d on a s e r i e s o f l a n d
" f l i p s " in a s h a m t r a n s a c t i o n .
In
implementing
the
Crowder
Water
a s d i r e c t o r s a n d o f f i c e r s of O l d L i n c o l n ,
80
Ranch
also
fraud
violated
their
statutory,
contractual,
and
fiduciary
duties
d e s c r i b e d in p a r a g r a p h 346.
5.
167.
loans
the
to
$115,000, 0 0 0 .
Rancho V is to s o
A r tific e - Tax
Beginning
in
loans
Old
1985,
Wolfswinkel
The
Schem e and
P la n A s D e c ts ,
Group,
were
made
Lincoln
("WGI ")
Inc.
ostensibly
made
a
in
to
series
excess
enable
WGI
of
of
to
acquire and d e v e l o p 7,626 acres near Tucson, A r i z o n a ca ll ed Ra nc ho
Vistoso.
One
of
the
various
terms
of
the
loans
entitled
Old
L i n c o l n t o a 50% " n e t p r o f i t s i n t e r e s t " in t h e p r o c e e d s of t h e s a l e
of a n y p a r c e l s w i t h i n R a n c h o V i s t o s o a f t e r t h e f i r s t $ 2 , 0 0 0 , 0 0 0 in
profits.
168.
In
May
of
1987,
the
Racketeering
conducting the a f f a i r s of the ACC Enterprise,
Old L i n c o l n
Vistoso
to
loans
Lincoln's
sell
in
its
a
50%
sham
i n c o m e and,
net
transaction
therefore,
ACC u n d e r t h e T a x Plan,
profits
Defendants,
intentionally caused
interest
designed
to
in
the
Rancho
overstate
to trigger unlawful
payments
Old
to
t h e r e b y f a l s e l y p o r t r a y i n g O l d L i n c o l n as
a profitable institution.
169.
The Racketeering Defendants caused ACC to purchase
Old L i n c o l n ' s 50% n e t p r o f i t s i n t e r e s t in t h e R a n c h o V i s t o s o l o a n s
for
$15,000,000.
Consequently,
attributed to Old Lincoln.
a
profit
of
$15,000,000
was
AC C gave Old Li nc ol n a p r o m i s s o r y note
in t h e a m o u n t o f $ 1 3 , 5 0 0 , 0 0 0 p l u s c a s h in t h e s u m of $ 1 , 5 0 0 , 0 0 0 .
170.
the
O l d L i n c o l n ' s r e c o r d e d p r o f i t of $ 1 5 , 0 0 0 , 0 0 0 a l l o w e d
Racketeering
Defendants
to
81
use
the
Tax
Plan
to
upstream
$ 6 , 0 00 ,0 00 to A C C for t h e i r b e n e f i t and to o v e r s t a t e Ol d Linc ol n' s
1987 p r o f i t b y $ 1 5 , 0 0 0 , 0 0 0 .
171.
The Racketeering Defendants, conducting the affairs
of the A C C Enterprise,
inte nt io na ll y caus ed In ve st me nt s to pr ov id e
A C C w i t h t h e f u n d s necessary* t o p a y o f f its p r o m i s s o r y n o t e t o O l d
Lincoln
and,
hence,
to
satisfy
ACC's
obligation
to
Old
Lincoln
r e s u l t i n g f r o m its p u r c h a s e o f t h e 50% n e t p r o f i t s i n t e r e s t in t h e
Rancho
Vistoso
lo an s.
The
Racketeering
Defendants
I n v e s t m e n t s and an in direct L i nc ol n Subsidiary,
Life
Insurance Company
Vistoso
caused
for
WGI
to
American Founders
( " A F S L " ) , t o purchase' 393
$15,000,000.
purchase
In
from
turn,
ACC
o r i g i n a l l y owne d by Old Lincoln.
the
the
acres
Racketeering
50%
caused
net
of Ra nc ho
Defendants
profits
interest
A C C us e d the p r o c e e d s of th e sale
of t h e 50% n e t p r o f i t s i n t e r e s t t o p a y its $ 1 3 , 5 0 0 , 0 0 n o t e t o O l d
Lincoln.
172.
In
reality,
the
sale
of
Old
Lincoln's
50%
net
p r o f i t s i n t e r e s t in t h e R a n c h o V i s t o s o l o a n s w a s a s h a m t r a n s a c t i o n
devoid
of
Lincoln's
divert
economic
profits
substance
and
to
that was
enable
the
designed
to
Racketeering
\
overstate
Defendants
Old
to
f u n d s t o A C C u n d e r t h e T a x Plan.
173.
T h e R a n c h o V i s t o s o t r a n s a c t i o n is m o r e s p e c i f i c a l l y
d e s c r i b e d below:
(a)
B e t w e e n J a n u a r y of 1 9 85 a n d A u g u s t o f 1986, O l d
L i n c o l n m a d e five loans to WGI t o t a l l i n g ne ar ly
$71,000,000.
B y J u l y 11, 1988, t o t a l l o a n s to
WGI exceeded $115,000,000.
The initial loans
were
made
to
finance
the
acquisition
of
a p p r o x i m a t e l y 7,626 acres of u n i m p r o v e d land
n e a r Tucson, Arizona, w h i c h was to be d e v e l o p e d
into a planned community called Ra nc ho Vistoso.
82
(b)
C o l l a t e r a l f o r t h e l o a n c o n s i s t e d of d e e d s of
t r u s t fo r t h e l a n d a n d a p l e d g e o f s t o c k of a
w a t e r co mp an y w h i c h was p u r c h a s e d to serve the
proposed development.
The loans carried a
f i x e d i n t e r e s t r a t e o f 13% a n d w e r e g u a r a n t e e d
by Conley Wolfswinkel
( " W o l f s w i n k e l " ) , th e
p r i n c i p a l o f WGI, b u t o n l y u p t o 50% o f t h e
amount outstanding.
Furthermore, Old Lincoln
r e t a i n e d a 50% " n e t p r o f i t s i n t e r e s t " in t h e
p r o c e e d s of t h e s a l e o f t h e p r o p e r t y .
(c)
At
the
direction
of
the
Racketeering
Defendants, Old Lincoln entered into the Rancho
Vistoso
loan
without
the
benefit
of
any
adequate underwriting.
T h e f i r s t loan, for
$50,900,000
("Rancho
V i s t ’o s o
I"),
was
considered and "approved" by Old Lincoln's
B o a r d of D i r e c t o r s o n J a n u a r y 21, 1985, a f t e r
the loan had already been disbursed. Moreover,
the loan was ap pr ov ed w i t h o u t an appraisal.
A n appraisal for the property, d a t e d J a nu ar y
31, 1985, w a s o n l y r e c e i v e d b y O l d L i n c o l n on
May
20,
1985.
In
addition,
the
loan
a p p l i c a t i o n w a s d a t e d J a n u a r y 31, t e n d a y s
a f t e r it w a s a p p r o v e d .
Furthermore, the loan
file
contains
no
escrow
instructions,
p r e l i m i n a r y t i t l e re p o r t ,
or w a t e r company
stock
certificates
which
were
supposedly
p l e d g e d as c o l l a t e r a l .
N o c r e d i t r e p o r t or
an al y s i s of WGI or W o l f s w i n k e l p e r s o n a l l y are
in t h e file. A c c o r d i n g l y , in m a k i n g t h e R a n c h o
V i s t o s o I loan Old Lincoln, at the di rection
of the R a c k e t e e r i n g Defendants, c o m p l e t e l y and
deliberately
disregarded
the
specific
requirements
governing
prudent
loan
underwriting.
(d)
The
second
loan,
for $1 1, 37 7, 66 2
(" R a n c h o
V i s t o s o II"), w a s m a d e o n A p r i l 30, 1985, a n d
w a s b a s e d o n a n i n a d e q u a t e l e t t e r a p p r a i s a l for
the
property
which
stated
a
value
of
$11,000,000, thus c r e a t i n g a loan to value
r a t i o of 103%.
(e)
W o l f s w i n k e l 's
financial
statements
showed
in su ff ic ie nt net w o r t h to ma k e his personal
guarantee meaningful.
Furthermore, the terms
of t h e l o a n s r e v e a l t h a t W G I w a s p u t t i n g v e r y
l i t t l e of its o w n c a p i t a l i n t o t h e p r o j e c t .
T h e l o a n s p r o v i d e d f o r a n i n t e r e s t r e s e r v e for
t h e f i r s t h a l f of t h e t e r m of t h e loan, t h u s
el i m i n a t i n g the need for WGI to make interest
83
p a y m e n t s for th at period.
Furthermore, the
l o a n s w e r e s t r u c t u r e d s o t h a t W G I r e c e i v e d full
c r e d i t f o r t h e p r o f i t s of e a r l y sa le s, w h i c h
e f f e c t i v e l y r e s u l t e d in p r o v i d i n g f u n d i n g for
i n te re st p a y m e n t s for the se c o n d h a l f of the
l o a n term.
T h e l o a n s t o WGI, t h e r e f o r e , w e r e
imprudent since WGI did not have to provide
f u n d s t o s e r v i c e them.
(f)
T h e R a n c h o V i s t o s o l o a n s w e r e r e n e g o t i a t e d on
A u g u s t 20, 1986. T h e t o t a l a m o u n t o f t h e l o a n s
wa s i n cr ea se d to $83,700,000: $5 8, 70 0 , 0 0 0 to
p a y o f f t h e p r i o r lo ans, a n d $ 2 5 , 0 0 0 , 0 0 0 to
finance infrastructure
i m p r o v e m e n t s on t h e
property.
The interest rate wa s c h an ge d from
a f i x e d 13% t o p r i m e p l u s 3%, a n d i n t e r e s t
payments, which had been due each month under
t h e o r i g i n a l loan, w e r e c h a n g e d t o q u a r t e r l y
payments.
H o w e v e r , O l d L i n c o l n r e t a i n e d its
50% i n t e r e s t in t h e p r o f i t s of t h e v e n t u r e .
(g)
Again the Racketeering Defendants and other
defendants
deliberately
failed
to
conduct
appropriate underwriting. Old Lincoln obtained
a credit report one mo nt h after the new loan
w a s ma de , t h e r e w a s n o c r e d i t a n a l y s i s or
v e r i f i c a t i o n o f W G I ' s f i n a n c e s in t h e file, t h e
lo an se tt l e m e n t s t a t e m e n t wa s incomplete, and
the underwriting did not include a specific
repayment analysis.
(h)
I n M a y 1987, O l d L i n c o l n s o l d i t s 5 0 % p r o f i t
p a r t i c i p a t i o n in R a n c h o V i s t o s o t o A C C for
$15,000,000.
ACC paid Old Lincoln $1,500,000
in c a s h a n d g a v e O l d L i n c o l n a $ 1 3 , 5 0 0 , 0 0 0 n o t e
for the balance.
This tr an sa ct io n was illegal
in t w o r e s p e c t s .
Accepting a note from ACC
v i o l a t e d 12 U . S . C . § 1 7 3 0 a ( d ) (4) a n d 12 C.F.R.
§ 584.3, w h i c h p r o h i b i t an i n s u r e d i n s t i t u t i o n
from making
loans to
its p a r e n t
company.
F u r t h e r m o r e , t h e s a l e of O l d L i n c o l n ' s " e q u i t y
kicker"
t o ACC, its h o l d i n g c o m p a n y , w a s a
p r o h i b i t e d a f f i l i a t e d p e r s o n t r a n s a c t i o n and
w a s c o n c e a l e d f r o m t h e FH LBB.
(i)
In O c t o b e r 1987, I n v e s t m e n t s , WGI, O l d L i n c o l n ,
a n d A C C e n g a g e d in a s e r i e s of t r a n s a c t i o n s
w h i c h m a d e no e c o n o m i c s e n s e .
T h e y did,
h o w e v e r , r e s u l t in a p a p e r g a i n w h i c h A C C u s e d
to cause Old Lincoln to tr ansfer approximately
$ 6 , 0 0 0 , 0 0 0 t o A C C u n d e r t h e T a x Plan.
84
(1)
I n v e s t m e n t s a n d A F S L p u r c h a s e d 393 a c r e s
of t h e R a n c h o V i s t o s o l a n d f r o m W G I for
an infl at ed p r i c e of $15,000,000, a per
a c r e p r i c e o f $3 8 , 8 6 3 .
(W GI's a v e r a g e
pu rc h a s e pr ic e of the land b e t w e e n J a nu ar y
1 9 85 a n d A u g u s t 19 86 w a s a p p r o x i m a t e l y
$9,000
per
ac re.)
Even
though
the
p u r c h a s e d l a n d w a s p a r t of t h e c o l l a t e r a l
f o r t h e loan, i n s t e a d of s i m p l y r e d u c i n g
the loan balance, In vestments paid WGI
$ 1 5 , 0 0 0 , 0 0 0 in cash.
(2)
WGI
then
purchased
the
50%
profit
p a r t i c i p a t i o n from A C C for $14,000,000.
(3)
A C C t h e n p a i d o f f t h e n o t e it i s s u e d to
Old Lincoln.
Old L i n c o l n tr ea te d the
entire
$15,000,000
s a l e p r i c e of t h e
p r o f i t p a r t i c i p a t i o n as i n c o m e in 1987.
(j)
T h e n e t e f f e c t of t h i s t r a n s a c t i o n w a s t h a t O l d
L i n c o l n , t h r o u g h I n v e s t m e n t s a n d AF SL , o b t a i n e d
393 a c r e s o f l a n d o f q u e s t i o n a b l e v a l u e at an
e x o r b i t a n t p r i c e , w h i c h it h e l d as c o l l a t e r a l
anyway, and A C C d i v e r t e d $6,0 00 ,0 00 from Old
L i n c o l n u n d e r t h e T a x Plan.
(k)
A t a b o u t t h e s a m e time, t h e R a n c h o V i s t o s o
loans were once again restructured. The amount
was increased to $95,919,268, which included
p a y i n g o f f $ 6 3 , 1 1 8 , 2 6 8 of e x i s t i n g d e b t a n d
p a y m e n t o f l o a n f e es a n d c o n t i n g e n t i n t e r e s t
to Ol d Lincoln.
The balance of approximately
$ 3 0 , 0 0 0 , 0 0 0 w a s f o r w o r k i n g c a p i t a l f o r W G I an d
to fund future development.
Currently, the
outstanding
balance
of
that
loan
exceeds
$80,000,000.
174.
In
implementing
the Rancho Vistoso
fraud,
d e f e n d a n t s , as d i r e c t o r s a n d o f f i c e r s of O l d L i n c o l n , a l s o v i o l a t e d
thei r
statutory,
contractual,
and
p a r a g r a p h 346.
85
fiduciary
duties
described
in
certain
6.
175.
conducting
the
C o n tin e n ta l R an ch Schem e
and A r t i f i c e - Ta x P la n A s p e c ts .
O n S e p t e m b e r 30, 19S6, t h e R a c k e t e e r i n g D e f e n d a n t s ,
affairs
of the AC C
Enterprise,
caused
Investments
t o e n g a g e in a s h a m t r a n s a c t i o n t h a t t r i g g e r e d a n u n l a w f u l p a y m e n t
from Old
Lincoln to ACC under the Tax Plan and
falsely portrayed
Ol d L i n c o l n as a p r o f i t a b l e institution.
176.
In 1984,
In vestments pu r c h a s e d a p p r o x i m a t e l y 2,900
a c r e s of l a n d in P i m a C o un ty ,
S e p t e m b e r 30,
R a n c h t o R.
1986,
A.
Arizona
for ne a r l y $21,500,000.
On
I n v e s t m e n t s s o l d 1 , 3 0 0 a c r e s of C o n t i n e n t a l
Homes
for $25,000,000.
As
a result
of t h i s
sale,
I n v e s t m e n t s c l a i m e d a p r o f i t of $ 8 , 1 2 1 , 0 0 0 .
177.
Old Lincoln,
T h e c l a i m e d p r o f i t o f $ 8 , 1 2 1 , 0 0 0 w a s a t t r i b u t e d to
s i n c e I n v e s t m e n t s w a s a w h o l l y - o w n e d s u b s i d i a r y of O l d
Lincoln.
178.
the
Old L i nc ol n' s re co r d e d p r o f i t of $ 8 ,1 21 ,0 00 a l lo we d
Racketeering
Defendants
to
use
the
Tax
Plan
to
upstream
$3 ,2 5 0 , 0 0 0 to A C C for t h e i r b e n e f i t and to p o r t r a y f a ls el y th at Old
L i n c o l n h a d r e a l i z e d a p r o f i t of $ 8 , 1 2 1 , 0 0 0 .
179.
In
reality,
the
"sale
of
the
1,300
acres
of
C o n t i n e n t a l R a n c h t o R. A. H o m e s w a s a s h a m t r a n s a c t i o n d e v o i d of
economic
substance
and
designed,
in
part,
to
overstate
Old
L i n c o l n ' s p r o f i t s to e n ab le the R a c k e t e e r i n g D e f e n d a n t s to di ve rt
f u n d s t o A C C u n d e r t h e T a x Plan.
86
180.
described
The
Continental
in p a r a g r a p h s
Ranch
220 t h r o u g h
transaction
229
(Section
is
more
I V . D . 4)
fully
of t h i s
Co mp la in t.
7 .
181.
The R a c k e te e rin g D e fe n d a n ts 1 A tte m p ts To
C onceal th e Fra u d P ra c tic e d u n d e r th e
T a x P l a n . ______ ______ _________________________________
Th e R a c k e t e e r i n g Defend an ts co nt in ue d to cause Old
Lincoln to m a k e un la w f u l Ta x Plan p a y m e n t s to A C C until the third
quarter
of
19 88
when
unlawful p a y m e n t s
regulatory
the
regulatory
authorities
a n d o r d e r e d t h a t t h e y c e as e.
authorities
advised
ACC
that
the
discovered
the
In a d d i t i o n ,
the
previous
unlawful
p a y m e n t s w o u l d h a v e t o b e r e t u r n e d to O l d L i n c o l n .
182.
Racketeering
Wischer,
Niebling,
Defendants
and ot h e r ag en ts of A C C and the
continued
the
Racketeering
pattern of d e c e i t up o n the re gu la to ry authorities.
with
the
Li n c o l n
illegality
would
of
receive
the
Tax
current
Plan,
taxable
they
Defendants'
When confronted
represented
income
during
that
1988
Old
which
would j u s t i f y al l of t h e u n l a w f u l T a x P l a n p a y m e n t s m a d e f r o m 1984
t h r o u g h 1987.
Th es e r e p r es en ta ti ons we re ma de to conceal
the R a c k e t e e r i n g D e f e n d a n t s '
183.
several
income
During
transactions
to
Old
1988,
in
Lincoln
an
in
further
fraudulent activities.
the
Racketeering
effort
an
to
attempt
Defendants
generate
to
current
justify
the
directed
taxable
unlawful
p a y m e n t s a n d t o c o n c e a l t h e f r a u d e f f e c t e d t h r o u g h t h e T a x Plan.
184.
T o g e n e r a t e c u r r e n t t a x a b l e i n co me , t h e R a c k e t e e r i n g
Defendants ca u s e d A M C O R Fu nd in g Co rp or at io n
S u b s id ia ry ,
to
engage
in
a
transaction
87
("Funding"), a Lincoln
devoid
of
economic
substance.
F u n d i n g t r a d e d its o w n e r s h i p i n t e r e s t s in t w o b u s i n e s s
entities and $8,750,000
in G e n e r a l O r i e n t a l
185.
f o r a n a p p r o x i m a t e 20% o w n e r s h i p
Investments Limited
Prior
to
this
possessed ownership interests
Securities
("GOIL").
"trade,"
both
Funding
in t w o c o m p a n i e s :
LimitedPartnership
interest
("GOSLP")
and
GOIL
General Oriental
and
Grand
Union
Acquisition Corporation ("GUAC").
186.
Prior
to
the
"trade,"
Funding
possessed
the
fo llowing interests:
1 8 . 3 1 4 % i n t e r e s t in G O S L P
25% o f t h e c o m m o n s t o c k of G U A C
3 7 . 5 % of t h e p r e f e r r e d s t o c k of G U A C
187.
P r i o r t o t h e "t r a d e " ,
GOIL possessed the following
interests:
58% i n t e r e s t in G O S L P
25% i n t e r e s t in G U A C
T h e s e w e r e t h e p r i m a r y a s s e t s o f GOIL.
188.
interests
GOIL
O n S e p t e m b e r 2, 1988, F u n d i n g t r a n s f e r r e d a l l of its
in G O S L P a n d G U A C p l u s
transferred
to
Funding
$8,750,000
28,630,000
t o GOIL .
shares
In re tu rn ,
of
GOIL,
giving
F u n d i n g a n e f f e c t i v e 2 0 . 3 % o w n e r s h i p i n t e r e s t in GOIL .
189.
The
Racketeering
Defendants
caused
Funding
to
c a l c u l a t e a "gain" on the t r a n s a c t i o n by u s i n g a v a l u e of $9.50 per
share
for
Funding
the
GOIL
purportedly
stock
that
incurred
Funding
taxable
totalling $116,831,000.
88
received.
income
on
Consequently,
the
transaction
190.
The
GOIL-Funding
"trade"
was
a
sham
transaction
designed s o l e l y to g e n e r a t e c u rr en t t a x a b l e income for Old Lincoln,
through Funding,
the T a x Pl an .
D e f e nd an ts '
a n d t h e r e b y to c o n c e a l t h e f r a u d p r a c t i c e d u n d e r
In a d d i t i o n , t h i s e f f o r t t o c o n c e a l t h e R a c k e t e e r i n g
fraudulent
activities
resulted
in a f u r t h e r w a s t e
of
Old L i n c o l n ' s a s s e t s .
191.
The G O I L - F u n d i n g "trade" ha d no ec on om ic substance.
By t r a d i n g i t s i n t e r e s t s in G O S L P a n d G U A C f o r a n i n t e r e s t in GOIL,
whose p r i m a r y a s s e t s w e r e its i n t e r e s t s in G O S L P a n d GUAC ,
me rely
exchanged
in di re ct
its
ownership
direct
ownership
in t h e v e r y
same
in
GOSLP
entities.
and
Funding
GUAC
Indeed,
for
the
an
only
substantive im pa ct of the "trade" was to d i l u t e F u n d i n g ' s holdings
in G O S L P
and
GUAC
and
to
waste
$8,750,000
of
Funding's
liquid
assets.
192. T h e
table
below
illustrates
that
the
"trade"
ac t u a l l y d i l u t e d F u n d i n g ' s e f f e c t i v e i n t e r e s t in G O S L P a n d GUAC.
Interest
before "Trade"
GOSLP
GUAC Common
GUAC Preferred
In a d d i t i o n ,
Funding
Interest
after "Trade"
18.314%
25.0%
37.5%
paid
$8,750,000
Percentage
Change
15.2628%
1 0 .0%
7 . 5%
to
GOIL
for
-3.0512
-15.0%
-30.0%
these
diluted
ow n e r s h i p i n t e r e s t s .
193.
Funding " t r a d e . "
No
should
have
been
realized
on
The assets transferred and the assets effectively
received c o n s i s t e d
and GU AC .
gain
largely
of t h e s a m e
asset:
interests
in G O S L P
Of th e a p p r o x i m a t e $1 15 ,0 0 0 , 0 0 0 g a i n re c o g n i z e d on the
89
the
GOIL-
supposed
sale
*$95, 000 ,0 00 ,
which
of
is
GOSLP
interests,
attributable
to
approximately
the
15.2628%
five-sixths,
interest
in
Funding held both before and after the exchange.
or
GOSLP
Yet,
the
R a c k e t e e r i n g D e f e n d a n t s s t r u c t u r e d t h e t r a n s a c t i o n t o r e c o g n i z e all
of
this
gain
valuation
up the
for
tax
of G O I L
purposes.
Moreoever,
stock was excessive
" g a i n " to b e r e c o g n i z e d and,
Lincoln's
current
taxable
after the GOIL-Funding
the
$9.50
share
and was utilized to drive
consequently,
in co me .
per
Both
to in crease Old
immediately
before
and
" t r a d e , " t h e s t o c k of G O I L t r a d e d p u b l i c l y
a t p r i c e s b e t w e e n $ 7 . 5 0 p e r s h a r e a n d $ 8 . 2 5 p e r sh are.
194.
As
a
direct
and
i m p l e m e n t a t i o n of t h e T a x Plan,
Lincoln
attempts
to
to
ACC
thereunder,
conceal
their
proximate
result
of
the
the u n la wf ul p a y m e n t s m a d e by Old
and
the
fraud,
Old
Racketeering
Lincoln
was
Defendants'
damaged
in
an
a m o u n t in e x c e s s of $ 1 2 5 , 0 0 0 , 0 0 0 .
D .
F ra u d u le n t Loans fo r th e B e n e fit
o f In s id e rs and A f f i lia t e d P e rs o n s .
195.
Lincoln has
As a re s u l t of the t r a n s a c t i o n s d e s c r i b e d below, New
sustained,
or can be ex pe ct ed to sustain,
damages
in
e x c e s s of $ 2 4 3 , 0 0 0 , 0 0 0 .
1 .
196 . F r o m
Racketeering
Enterprise,
H o t e l P o n tc h a r t r a in Schem e
and A r t if ic e - In s id e r Lo a n s .
December
Defendants,
caused
Old
of
1984
conducting
Lincoln,
through
the
The
June
affairs
Crescent
( " C r e s c e n t " ) , Th e C r e s c e n t Hotel Gr o u p of Michigan,
Hotel
Pontchartrain
Limited
Partnership
90
of
of
1987,
th e
the
ACC
Hotel
Inc.
Group
("C H G / M " ),
("HPLP"),
Lincoln
Commercial Pr op er ti es
Corporation
to
engage
( " L C P " ) , l a t e r k n o w n as P h o e n i c i a n F i n a n c i a l
("PFC") , and Phoenician Commercial Properties
in
a
series
of
abusive
and
fraudulent
transactions
r e g a r d i n g t h e H o t e l P o n t c h a r t r a i n in D e t r o i t , M i c h i g a n .
PFC, a n d P C P a r e d i r e c t L i n c o l n S u b s i d i a r i e s ;
Lincoln Su bs id ia ry ;
197.
The
to
make
indirectly
a s s o ci at es ,
HPLP
is a n a f f i l i a t e d
Racketeering
loans
to
applicable
from m a k i n g
concealed
C H G / M is a n i n d i r e c t
caused
other
Old
Lincoln
defendants,
their
in si de rs and a f f i l i a t e d p e r s o n s for the a c q u i s i t i o n and
operation of the Hotel Pontchartrain.
knew t h a t
Crescent,
p e r s o n of O l d L i n c o l n .
Defendants
themselves,
("POP")
these
from
laws
loans.
the
The Racketeering Defendants
and regulations prohibited
Therefore,
regulatory
Old Lincoln
the Racketeering
authorities
the
Defendants
nature
of
the
insiders
and
transactions pertaining to the Hotel Pontchartrain.
198.
To
conceal
af f i i i s t e d p e r s o n s ,
the
origin
of
loans
to
t h e R a c k e t e e r i n g D e f e n d a n t s c a u s e d c e r t a i n of
the L i n c o l n S u b s i d i a r i e s t o m a k e t h e u n l a w f u l l o an s.
Old Lincoln
p r o v i d e d t h e f u n d s n e c e s s a r y t o e n a b l e t h e L i n c o l n S u b s i d i a r i e s to
make u n l a w f u l l o a n s of a p p r o x i m a t e l y $ 5 8 , 0 0 0 , 0 0 0 t o HP LP .
Of t h e s e
loans,
in
default.
Hence,
Old
excess
Lincoln
of
$20,000,000
has
sustained
is
or
unsecured
can
be
and
in
expected
to
sustain
losses in e x c e s s of $ 2 0 , 0 0 0 , 0 0 0 as a r e s u l t o f t h e a b u s e a n d s e l f
de al in g b y t h e R a c k e t e e r i n g D e f e n d a n t s a n d o t h e r d e f e n d a n t s .
199.
Defendants
To
caused
recipient.
The
conceal
the
the
unlawful
formation
Racketeering
of
HPLP
Defendants,
91
lo ans,
to
the
serve
members
of
Racketeering
as
the
the
loan
Keating
Family,
other defendants,
their associates,
affiliated
persons
benefitted
from loans funded by Old Lincoln.
200.
On
were
December
$19,000,000
the Hotel
fu nds.
facilitate
To
limited
partners
and ot he r insi de rs and
31,
1984,
Pontchartrain.
the
of
and
CHG/M
Old
purchase,
HPLP
the
personally
purchased
Lincoln provided
Racketeering
for
these
Defendants
c a u s e d O l d L i n c o l n t o t r a n s f e r $ 1 9 , 5 0 0 , 0 0 0 t o C r e s c e n t in t h e fo r m
of
a
nominal
Defendants
t o C H G/ M,
capital
caused
In
turn,
the
Racketeering
Crescent to transfer the necessary
again,
201.
contribution.
$19,500,000
as a n o m i n a l J c a p i t a l c o n t r i b u t i o n .
The Ra ck et ee ri ng Defendants, conducting the affairs
of th e A C C Enterprise,
A g r e e m e n t o n M a r c h 30,
c a us ed LCP and CH G/ M to ente r
1985.
into a Loan
L C P l o a n e d $ 3 8 , 0 0 0 , 0 0 0 t o C H G/ M,
the
r e c o r d ow ne r of Hotel Pontchartrain.
202.
provide
the
The Racketeering
funds
transferring
to
LCP
Defendants
necessary
for
$ 3 8 , 0 0 0 , 0 0 0 t o L C P in t h e
caused
the
Old
loan
Lincoln
to
CHG/M
by
to
f o r m of a n o m i n a l
capital
contribution.
203.
HPLP was
assume the $38,000,000
benefits
for
the
formed to buy the Hotel
l o a n m a d e t o t h e CH G/M,
individual
limited
Pontchartrain,
to
and to a c hi ev e tax
partners.
The
individuals
a c q u i r e d t h e i r l i m i t e d p a r t n e r s h i p i n t e r e s t s f o r m i n i m a l c a s h s u ms
and
planned
to
derive
sizeable
tax
benefits
from
the
limited
partnership.
204.
caused
HPLP
to
On
March
purchase
30,
the
1985,
Hotel
92
the
Racketeering
Ponchartrain
from
Defendants,
CHG/M
for
$3 6, 67 7 , 2 0 7 .
$9,500,000
A s a r e s u l t o f t h i s sale,
which
subsequently
was
allowed
attributed
the
to
C H G / M c l a i m e d a p r o f i t of
Old
Racketeering
Lincoln,
Defendants
to
and
this
use
the
Tax
1986,
the
Plan t o u p s t r e a m $ 3 , 8 0 0 , 0 0 0 t o A C C f o r t h e i r b e n e f i t .
205.
De fe n d a n t s ,
Beginning
conducting the
affairs
CHG/M t o m a k e c a s h a d v a n c e s t o HPLP,
in
January
of t h e A C C
of
Enterprise,
Racketeering
caused
a n d it u l t i m a t e l y t r a n s f e r r e d
$ 1 0 , 4 4 6 , 0 5 5 to' HPLP.
20.6. S u b s e q u e n t l y ,
as n o t e d a b o v e .
the name
O n D e c e m b e r 2,
1986,
of L C P w a s
c h a n g e d t o PFC,
the Racketeering Defendants
caused P F C t o e x t e n d a $ 2 0 , 0 0 0 , 0 0 0 u n s e c u r e d l i n e of c r e d i t to H P L P
to b e d r a w n u p o n a n d u s e d f o r v a r i o u s p u r p o s e s :
(a)
Some
loan
proceeds
were
used
to
repay
$ 1 0 , 4 4 6 , 0 5 5 in a d v a n c e s m a d e b y C H G / M to HPLP.
(b)
O t h e r loan p r o c e e d s w e r e u s e d to se rv ic e the
de b t of H P L P s e cu re d b y a first m o r t g a g e on the
Hotel Pontchartrain.
(c)
Some proceeds were used to pay losses incurred
in
continuing
to
operate
the
Hotel
Pontchartrain, thereby m a in ta in in g sizeable tax
b e n e f i t s to the R a c k e t e e r i n g Defendants, the
K e a t i n g Family, and ot he r a f f i l i a t e d persons.
207.
ex tend
The
and, f u n d
which w e r e
a
$20,000,000
unfavorable
to
Racketeering Defendants.
caused
HPLP
PFC
to
without
extend
PFC,
line
but
of
Defendants,
credit' t o
which were
HPLP
also
upon
beneficial
caused
terms
to
the
The Racketeering Defendants deliberately
and
underwriting
ab i l i t y t o r e p a y t h e
Racketeering
loan.
fund the
the
loan
$20,000,000
or
assessing
The Racketeering
93
line
of
the
credit
to
borrower's
Defendants
did this
PFC
to
in o r d e r t o h e l p t h e m c o n t i n u e t h e u n p r o f i t a b l e o p e r a t i o n s of t h e
Hotel
Pontchartrain,
to stave off the imminent financial co llapse
of HP LP ,
an d t h e r e b y to co nt i n u e to g e n e r a t e s i z e a b l e ta x b e ne fi ts
for
Racketeering
the
Defendants,
the
Keating
Family,
and
other
insiders.
208.
$42,000,000
O n J a n u a r y 16,
1986,
HPLP obtained loans totalling
from San Jacinto Mortgage Company
Credit Lyonnais.
("San J a c i n t o " )
A $38,000,000 loan from San Jacinto was secured
by a first m o r t g a g e on the Hotel Pontchartrain,
the
interest
conceal
of
the
and
LCP.
unlawful
This
refinancing
affiliated
regulatory
authorities.
As
deception,
Southmark Corporation
was
person
compensation
t h e r e b y t a k i n g out
part
of
a
scheme
transactions
for
assisting
from
in
to
the
this
( " S o u t h m a r k " ) , the p a r e n t of San
Jacinto, r e c e i v e d m a j o r co n c e s s i o n s from Old Lincoln, a s i gn if ic an t
c r e d i t o r of Southmark.
in
the
plan
received
to
fees
deceive
A s f u r t h e r c o m p e n s a t i o n f o r its c o m p l i c i t y
the
rightfully
regulatory
belonging
authorities,
to
LCP
and
San
Jacinto
CHG/M
in
the
a p p r o x i m a t e a m o u n t of $ 1 , 6 0 0 , 0 0 0 .
209.
The
Hotel
Pontchartrain
transaction
is
more
s p e c i f i c a l l y d e s c r i b e d b e lo w:
i
(a)
In D e c e m b e r o f 1984, t h e H o t e l P o n t c h a r t r a i n
was
purchased
by
CH G/ M,
a
wholly-owned
subsidiary
of PCP,
itself
a wholly
owned
s u b s i d i a r y of O l d L i n c o l n .
The purchase price
was approximately $19,500,000.
(b)
In M a r c h 1985, K e a t i n g Jr. , t h e K e a t i n g Fa mi ly ,
a n d v a r i o u s A C C E n t e r p r i s e i n s i d e r s f o r m e d th e
H P L P f o r ^ t h e p u r p o s e of a c q u i r i n g t h e H o t e l
P o n t c h a r t r a i n f r o m C H G/ M.
The general partner
of H P L P is C H G/ M.
H P L P was an a f f i l i a t e d
94
ft)
M l
rson w i t h
r e s p e c t to O l d L i n c o l n b y r e a s o n
e a c h of t h e f o l l o w i n g s e p a r a t e m a t t e r s :
(1)
T h e g e n e r a l p a r t n e r in H P L P w a s CHG/M,
w h i c h , as n o t e d ab ove, w a s a w h o l l y - o w n e d
s u b s i d i a r y o f PCP, i t s e l f a w h o l l y - o w n e i
s u b s i d i a r y of O l d L i n c o l n , a n d CHG/M' p
officers and directors included p e r s o m
w h o t h e n w e r e o f f i c e r s o f O l d Lincoln,
s u c h as R a y C. F i d e l a n d M. V i r g i n i a
Novak; these circumstances made HPLP a 1
a f f i l i a t e d p e r s o n w i t h i n t h e m e a n i n g of
12 C. F. R. § 5 6 1 . 2 9 ( d ) (2).
(2)
L i m i t e d p a r t n e r s in H P L P i n c l u d e d K e a t i n g
Jr.,
K e a t i n g III,
Hall,
Hubbard,
and
W u r z e l b a c h e r ; these me n w e r e all members
of t h e s a m e i m m e d i a t e f a mi ly , w i t h i n t h e
m e a n i n g of 12 C. F. R. § 5 6 1 . 3 0 t h e s e m e n
w e r e a f f i l i a t e d p e r s o n s of O l d L i nc ol n,
w i t h i n t h e m e a n i n g o f 12 C . F . R . §§ 561.28,
5 6 1. 29 (a ) a n d 5 6 1 . 2 9 ( c ) , b e c a u s e K e a t i n g
Jr. w a s a c o n t r o l l i n g p e r s o n o f A C C which,
in t u r n c o n t r o l l e d O l d L i n c o l n , b e c a u s e
K e a t i n g III a n d H u b b a r d w e r e d i r e c t o r s of
O l d L i n c o l n (as w e l l as d i r e c t o r s of ACC) ,
and because Hall and Wurzelbacher were
d i r e c t o r s o f ACC; c o l l e c t i v e l y , t h e s e m e n
held
19.305 percent
o f HP LP ,
thereby
m a k i n g H P L P a n a f f i l i a t e d p e r s o n of O l d
L i n c o l n w i t h i n t h e m e a n i n g o f 12 C.F.R.
§ 5 6 1 . 2 9 ( d ) (3).
(3)
L i m i t e d p a r t n e r s in HPLP, in a d d i t i o n to
K e a t i n g Jr., K e a t i n g III, Ha ll , H u b b a r d ,
and Wurzelbacher, also in cl u d e d Wischer,
K i e l t y , L i gg et ,
Niebling,
Sheldon
K.
Weiner
("Weiner")
a n d R o n a l d M. St o l l
("S t ol l" );
each
of
these
additional
p e r s o n s w e r e a f f i l i a t e d p e r s o n s of O l d
L i n c o l n , w i t h i n t h e m e a n i n g o f 12 C.F.R.
§§ 56 1.28,
561.29(a),
and
561.29(c),
because
Wischer
and
Niebling
were
d i re ct or s of Old Li nc ol n
(as w e l l as
directors
of
A C C ) , Niebling
was
Old
Li ncoln's chief ex ec ut iv e officer, Ligget
w a s a d i r e c t o r of O l d L i n c o l n (as w e l l as
c h i e f f i n a n c i a l o f f i c a r of A C C ) , K i e l t y
v/as
a
director
of
ACC,
Weiner
was
e x e c u t i v e v i c e p r e s i d e n t of O l d L i n c o l n
(as w e l l as a d i r e c t o r of ACC) , a n d S t o l l
w a s a v i c e p r e s i d e n t of O l d L i n c o l n ;
95
c o l l e c t i v e l y , t h e s e p e r s o n s , i n c l u d i n g th e
Keating Family members who
also were
a f f i l i a t e d p e r s o n s , h e l d 2 9 . 7 p e r c e n t of
HPLP, t h e r e b y m a k i n g
HPLP an affiliated
p e r s o n of O l d L i n c o l n w i t h i n the' m e a n i n g
o f 12 C.F.R. § 5 6 1 . 2 9 ( d ) ( 3 ) .
Accordingly, by re as on of each of the fo regoing
separate matters,
tr a n s a c t i o n s b e t w e e n Old
Lincoln and the Lincoln Subsidiaries
on one
hand, a n d HPLP, o n t h e o t h e r hand, were s u b j e c t
to
t h e ' affiliated
person
trc.nsaction
r e q u i r e m e n t s s e t f o r t h a t 12 C . F. R. *?§ 5 6 3 . 4 1
and 563.43 and to the c o n f l i c t of interest
s t a n d a r d s s e t f o r t h in 12 C . F . R . § 571.7.
(c)
L i m i t e d p a r t n e r s in H P L P d e r i v e d t a x b e n e f i t s
t y p i c a l of t a x a d v a n t a g e d r e a l e s t a t e l i m i t e d
partnerships
formed
prior
to
the
1986
a m e n d m e n t s to t h e I n t e r n a l R e v e n u e Co de ; in
t h i s case, f o r t h e y e a r s 19 85 t h r o u g h 1987, t h e
Keating Family obtained the right to claim
t o t a l t a x l o s s e s of a p p r o x i m a t e l y $ 5 , 4 7 5 , 0 0 0 ,
and ot h e r a f f i l i a t e d p e r s o n s of Ol d Li nc ol n
o b ta in ed the right to cl ai m total tax losses
of a p p r o x i m a t e l y $ 3 , 9 3 5 , 0 0 0 f o r a n a g g r e g a t e
t o t a l of $ 9 , 4 1 0 , 0 0 0 ; of t h i s a g g r e g a t e to ta l,
Keating
Jr.
acquired
tax
losses
of
ap pr o x i m a t e l y $2,200,000 for thos e thre e years;
given the unreasonably high salaries which
d e f e n d a n t s p a i d t o t h e m s e l v e s (in K e a t i n g J r . ' s
c a s e in e x c e s s of $ 5 , 1 0 0 , 0 0 0 in c a s h f o r t h o s e
three
years),
these
tax
benefits
were
tremendously beneficial to defendants.
(d)
O l d L i n c o l n p r o v i d e d $ 3 0 , 0 0 0 , 0 0 0 in f i n a n c i n g
for
HPLP's
a c q u i s i t i o n of
the
Hotel
P o n t c h a r t r a i n on a n o n - r e c o u r s e b a s i s t h r o u g h
o n e o f its a f f i l i a t e s , L C P (now k n o w n as P C P ) ;
this
same affiliate provided
a loan with
r e c o u r s e a g a i n s t H P L P (but n o t t h e l i m i t e d
partners)
in t h e
amount
of
$8,000,000
to
renovate the Hotel Pontchartrain;
the no n
r e c o u r s e l o a n w a s s e c u r e d b y a f i r s t d e e d of
trust, and the re co u r s e loan was s e cu re d by a
s e c o n d d e e d o f t r us t.
(e)
Total
capital
of
HPLP
was
$10,101,000,
a l l o c a t e d as f o l l o w s :
CH G/ M,
the general
partner, c o nt ri bu te d $101,000, and the limited
partners contributed $10,000,000; each limited
partner, however, was only r e qu ir ed to invest
96
(f)
(g)
$ 1 0 , 0 0 0 in c a s h f o r e a c h p a r t n e r s h i p u n i t a n d
t o e x e c u t e a p r o m i s s o r y n o t e in t h e a m o u n t of
$ 1 9 0 , 0 0 0 fo r t h e b a l a n c e of t h e p u r c h a s e p r i c e
of each unit; moreover,
if t h e p a r t n e r s h i p
o p e r a t e d at a d e f i c i t , t h e l i m i t e d p a r t n e r s
we r e n e i t h e r r e qu ir ed nor ob l i g a t e d to make
additional capital contributions.
HPLP
obtained
a
questionable
appraisal
indicating
that
the
value
of
the
Hotel
Pontchartrain, after the planned renovations,
would be $37,000,000.
Old Lincoln extended
c r e d i t t o H P L P in a n a m o u n t in e x c e s s of t h e
a p p r a i s e d v a l u e ( $ 3 8 , 0 0 0 , 0 0 0 in t o t a l l o a n s
c o m p a r e d t o a n i n f l a t e d a p p r a i s e d v a l u e of
$ 3 7 , 0 0 0 , 0 0 0 ) a n d w a s r e q u i r e d t o p l a c e CHG/M,
o n e o f t h e L i n c o l n S u b s i d i a r i e s , a t r i s k as a
general partner.
In c o n t r a s t , t h e l i m i t e d
partners acquired the tax benefits described
a b o v e a n d o w n e r s h i p of t h e P o n t c h a r t r a i n for
a
total
cash
investment
of
$10,000
per
p a r t n e r s h i p unit.
F u l l y a w a r e o f t h e i r o b l i g a t i o n s u n d e r 12
C . F. R. §§ 563. 41 , 56 3. 43 , a n d 5 7 1 . 7 t o o b t a i n
a p p r o v a l f o r a n y l o a n b y O l d L i n c o l n or P C P to
HP LP , t h e o f f i c e r s a n d d i r e c t o r s of ACC, O l d
Lincoln,
PCP,
and
CHG/M
embarked
on
the
fo llowing scheme to evade r e gu la ti on s and
conceal the Hotel Pontchartrain transactions
f r o m t h e FS LIC.
(1)
Old Lincoln made a capital contribution
o f $ 3 8 , 0 0 0 , 0 0 0 t o PCP, o n e o f its w h o l l y owned subsidiaries.
(2)
PCP then made the two loans
above
to
CH G/ M,
for
total
$ 3 8 , 0 0 0 , 0 0 0 t o CH G/ M.
(3)
Shortly thereafter, CHG/M sold the Hotel
P o n t c h a r t r a i n t o H P L P in c o n s i d e r a t i o n
for: (a) H P L P ' s a s s u m i n g a l l o f C H G / M ' s
obligations
under
these
two
loans
(including the o b l i g a t i o n to pay a total
o f $ 6 0 0 , 0 0 0 in l o a n o r i g i n a t i o n f e e s ) , an d
(b) a n a d d i t i o n a l $ 4 9 0 , 0 0 0 in cash.
This
transaction
permitted
CHG/M
to
book
ap pr ox im at el y $9.5 m i l l i o n
in income,
a l t h o u g h it h a d h e l d t h e P o n t c h a r t r a i n
f o r o n l y a s h o r t p e r i o d o f time.
97
described
loans
of
CHG, a n o t h e r w h o l l y - o w n e d s u b s i d i a r y o
Old Lincoln, ag r e e d to p r o v i d e m a n a g e m e n
s e rv ic es to H P L P for m a n a g i n g the Hotel
P o n t c h a r t r a i n at rates b a s e d on the gross
receipts earned by the h o t e l .
ft Hi
(4)
(h)
T h e r e s u l t o f t h e s e t r a n s a c t i o n s w a s t h a t HPLP,
o n e - t h i r d owned by a f f i l i a t e d p e r s o n s of Old
L i nc ol n and itself an a f f i l i a t e of Old Lincoln,
was: (1) t h e r e c i p i e n t o f $38 m i l l i o n w o r t h of
loans
from
POP,
one
of
the
Lincoln
Subsidiaries,
and
(2)
the
beneficiary
of
services to be p r o v i d e d by Crescent, a n ot he r
of the Li nc ol n Subsidiaries.
(i)
Aware that these transactions, which constitute
f l a g r a n t v i o l a t i o n s of f e d e r a l l a w a n d i n v o l v e
o b v i o u s c o n f l i c t s of i n t e r e s t , w o u l d c r e a t e
significant problems
for Old
Lincoln upon
r e g u l a t o r y re vi ew , t h e o f f i c e r s a n d d i r e c t o r s
of O l d L i n c o l n , ACC, CH G/ M, C r e s c e n t , a n d P C P
a r r a n g e d f o r H P L P t o o b t a i n a $35 m i l l i o n l o an
f r o m S a n J a c i n t o a n d a n $8 m i l l i o n l o a n f r o m
Credit Lyonnais.
T h e p r o c e e d s of t h e s e t w o
loans we r e used to p a y off the two loans from
PCP that were or ig in al ly obta in ed by CHG/ M and
t h e n a s s u m e d b y HPLP.
In o r d e r to i n d u c e S a n
J a c i n t o t o m a k e its $35 m i l l i o n loan, h o w e v e r ,
PCP had to agree to assi gn to San J a c i n t o the
right to r e ce iv e on e- h a l f of the $6 00,000 loan
o r i g i n a t i o n fee d u e t o P C P f r o m H P L P a n d P C P
h a d to agree to forfeit the o t h e r ha l f of such
fee.
In addition,
C r e s c e n t a g r e e d t o an
e s t i m a t e d $ 1 , 0 0 0 , 0 0 0 r e d u c t i o n in t h e s e r v i c e
f e e s d u e t o it f r o m HPLP .
The of fi c e r s and
d i r e c t o r s of O l d L i n c o l n , ACC, C H G/ M, C r e s c e n t ,
and PCP kn ew that such co n c e s s i o n s by the
L i n c o l n s u b s i d i a r i e s in f a v o r of a n a f f i l i a t e d
p e r s o n of O l d L i n c o l n r e q u i r e d t h e a p p r o v a l of
the F H L B B .
K n o w i n g l y f a i l i n g t o a p p l y for
ap proval for such c o n c e s s i o n s c o n s t i t u t e s a
fraudulent
concealment
of
a
prohibited
t r a n s a c t i o n f r o m t h e F S L I C a n d t h e F H L B B in
d i r e c t v i o l a t i o n of r e g u l a t i o n s d e s i g n e d to
protect Old Lincoln and the FSLIC insurance
fund.
Defendants'
conduct
resulted
in
$ 1 , 6 0 0 , 0 0 0 in d a m a g e s t o O l d L i n c o l n .
(j)
Despite the significant financial concessions
m a d e b y t h e L i n c o l n S u b s i d i a r i e s t o H P L P in
or d e r to ob ta in the San J a c i n t o f i na nc in g and
a p p r o x i m a t e l y $ 1 0 , 5 0 0 , 0 0 0 a d v a n c e d b y C H G / M to
98
meet
certain
ongoing
expenses
of
th e
p a r t n e r s h i p , b y D e c e m b e r o f 1 9 86 t h e n e t w o r t h
of H P L P h a d be c o m e negative,
and
it w a s
d e s p e r a t e for ca sh to m e e t the o p e r a t i n g and
r e m o d e l i n g e x pe ns es of the Hotel. A t th at time
HPLP's negative net worth was approximately
$ 2 0 ,0 0 0 ,0 0 0 .
(k)
O n D e c e m b e r 2, 1986,
PFC,
another Lincoln
Subsidiary, provided HPLP with a $20,000,000
u n s e c u r e d r e v o l v i n g l i n e of c r e d i t loan.
The
amount
of
this
loan,
when
added
to
San
J a c i n t o ’s
first
mortgage
loan,
was
s i g n i f i c a n t l y in e x c e s s of t h e v a l u e of t h e
Hotel
Pontchartrain,
HPLP's
only
tangible
a s se t.
A n a p p r a i s a l d a t e d o n e y e a r ea r l i e r ,
t h e l a t e s t a p p r a i s a l a v a i l a b l e t o O l d L i n c ol n,
i n d i c a t e d a v a l u e of a p p r o x i m a t e l y $ 4 4 , 4 0 0 , 0 0 0
for, t h e H o t e l P o n t c h a r t r a i n .
If o n e a s s u m e s
-the u n l i k e l y p r o p o s i t i o n t h a t t h i s w a s
a
reliable appraisal wh en rendered and remained
indicative
of
value
one
year
later,
the
appraised value ba re ly exceeded the prior
outstanding indebtedness, let alone justified
an
unsecured
loan
of
$20,000,000
to
an
insolvent borrower.
This unsecured
loan,
m o r e o v e r , h a d e x t r e m e l y f a v o r a b l e te rm s, as no
inte re st or pr i n c i p a l wa s due for five years
an d as the i n te re st r a t e wa s ten percent.
T h e s e t e rm s, e v e n a s s u m i n g r e p a y m e n t in full
o f t h i s loan, r e s u l t e d in a y i e l d t h a t w a s
below
Old
Lincoln's
cost
of
funds.
A c c o r d i n g l y , O l d L i n c o l n , t h r o u g h PCP, n o t o n l y
e x t e n d e d a g r o s s l y i m p r u d e n t loan,
it a l s o
subsidized the transaction.
(l)
T h e o f f i c e r s a n d d i r e c t o r s of O l d L i n c o l n , ACC,
PFC,
and CHG/M knew that the
$20,000,000
unsecured loan required regulatory a p p r o v a l .
T h e i r k n o w i n g f a i l u r e t o o b t a i n a p p r o v a l for
such
a
loan
constitutes
a fraudulent
c o n c e a l m e n t o f a p r o h i b i t e d t r a n s a c t i o n in
d i r e c t v i o l a t i o n o f r e g u l a t i o n s d e s i g n e d to
protect Old Lincoln and the federal deposit
i n s u r a n c e fund.
(m)
On
September
11,
1988,
the
$20,000,000
u n s e c u r e d loan to H P L P by PFC was cl as s i f i e d
as s u b s t a n d a r d b y O l d L i n c o l n ' s m a n a g e m e n t .
C o n s e q u e n t l y , t h e f r a u d d e s c r i b e d a b o v e c a n be'
e x p e c t e d t o r e s u l t in a t l e a s t $ 2 0 , 0 0 0 , 0 0 0 in
further damages.
99
210.
artifice,
Lincoln,
In i m p l e m e n t i n g t h e H o t e l P o n t c h a r t r a i n s c h e m e a n d
certain
defendants,
as
directors
also vi o l a t e d their statutory,
and
officers
contractual,
of
Old
and fiduciary
d u t i e s d e s c r i b e d in p a r a g r a p h 346.
2 .
211.
paragraphs
Ranchi V is to s o
S tra y B o rro w e r
Plaintiff
Schem e and A r t i f i c e and In s id e r Loan A s p e c ts .
incorporates
167 t h r o u g h 174 i n c l u s i v e ,
212.
herein,
by
reference,
of this Complaint.
T h e R a c k e t e e r i n g D e f e n d a n t s c a u s e d t h e s a l e of O l d
L i n c o l n ' s 50% n e t p r o f i t s i n t e r e s t in t h e R a n c h o Vistoso. l o a n s to
cause
Plan .
of
Ol d L i nc ol n to ma k e unlawful pa ym en ts
to AC C u n d e r the Tax
This unlawful Tax Plan payment, however, was only one aspect
the
fraud
and
self-dealing
engaged
in w i t h
respect
to
Rancho
Vistoso.
213.
Enterprise
The
to
purchase
personal benefit.
Lincoln,
to
fund
Vistoso
and
Defendants
develop
the
ACC
wanted
Rancho
their
They intended to exercise their control
of O l d
Enterprise's
purchase
and
Vistoso
ACC
to caus e Old Lincoln
development
of
Rancho
for t h e i r pe rs o n a l benefit.
restricted
to
by
The
Racketeering
applicable
loan
funds
laws
Defendants
and
directly
knew
regulations
to
in o r d e r t o d e v e l o p R a n c h o V i s t o s o .
applicable
laws
and
regulations
limiting
100
that
from
constituents
Enterprise
the
for
a c o n s t i t u e n t of the A C C Enterprise,
214.
Lincoln
Racketeering
they
were
causing
Old
of
ACC
the
To c i r c u m v e n t the
such direct
investments
by O l d
Lincoln,
the Racketeering
Defendants
utilized undisclosed
agents to o b t a i n loans from Old L i n c o l n to enable the AC C
Enterprise
to
purchase
and
develop
Rancho
Vistoso
for
their
personal benefit.
215.
Defendants
and
WGI
was
the undisclosed
fraudulently
ACC E n t e r p r i s e ’s p u r c h a s e
fact,
WGI
and c o n c ea le d
and development
acted, as a " s t r a w b o r r o w e r "
Defendants,
unlawful
obtained
through
loans
to
the
agent of the
ACC
purchase
and
develop
loans
for t h e
of R a n c h o V i s t o s o .
to enable
Enterprise,
Racketeering
to
the Racketeering
obtain
Rancho
In
and
Vistoso
conceal
for
their
personal benefit.
216.
The p u r c h a s e and d e v e l o p m e n t of R a n c h o V i st os o was
a c t u a l l y a s p e c u l a t i v e r e a l e s t a t e d e v e l o p m e n t p r o j e c t of t h e A C C
Enterprise,
engaged
in
at t h e
direction
benefit of the Ra ck et ee ri ng Defendants.
sustain s u bs ta nt ia l
paragraphs
Plaintiff
The
for
the
personal
N e w L i n c o l n c a n e x p e c t to
C ro w d e r W a te r R anch Schem e
and A r t if ic e - D iv e rs io n
o f Funds to C . V . N a lle v .
incorporates
160 t h r o u g h 166,
218.
and
l o s s e s o n t h e R a n c h o V i s t o s o loans.
3•
217.
of
inclusive,
Racketeering
undivided one-third
interest
herein
by
reference
of t h i s C o m p l a i n t .
Defendants
caused
the
sale
of
an
in t h e C r o w d e r W a t e r R a n c h to N a l l e y
to c a u s e O l d L i n c o l n t o m a k e u n l a w f u l p a y m e n t s t o A C C u n d e r t h e T a x
Plan.
However,
Old
Lincoln
also
incurred
damage
as
a
result
of
this t r a n s a c t i o n b e y o n d t h e a m o u n t of t h e u n l a w f u l p a y m e n t m a d e to
ACC u n d e r t h e T a x Plan.
101
219.
participation
To
compensate
in
this
Nalley
fraudulent
caused
$7,500,000.
T h e y also caus ed Old Lincoln,
release Nalley
from
pay him $3,500,000.
releases
of
Lincoln,
his
complicity
transaction,
Defendants
to
Old
for
through
liabilities
the
and
Racketeering
Investments,
to
pay
him
t h r o u g h L I N F I N a n d PFC,
on p e r s o n a l
guarantees
a n d to
The p a y m e n t s of $11, 00 0, 00 0 to N a l l e y and the
liabilities
constituted
fraudulent
wastes
of
Old
L i n c o l n ’s a s s e t s a n d d a m a g e d O l d L i n c o l n .
4.
220.
In
in P i m a C o u n t y ,
Defendants
Continental Ranch/R.A. Homes
Scheme and Artifice - Straw
Borrower and Insider Loan A s p e c t s .
1984
Investments purchased
Arizona,
intended
for
2,900
fo r n e a r l y $ 2 1 , 5 0 0 , 0 0 0 .
Continental
Ranch
to
acres
of
land
The Racketeering
be
a
development
p r o j e c t of the A C C En te r p r i s e funded w i th direct inve st me nt s
from
Old Lincoln.
221.
direct
B y S e p t e m b e r o f 198 6, O l d L i n c o l n w a s s u b j e c t t o t h e
investment
rule
and
under
pressure
from
the
regulatory
a u t h o r i t i e s t o d i v e r s i f y its p o r t f o l i o t o c o m p l y w i t h l i m i t a t i o n s
on a t h r i f t ' s d i r e c t investments.
a
cash
shortage
these problems,
and
required
an
In a d d i t i o n ,
infusion
of
ACC suffered
funds.
To
from
rectify
t h e R a c k e t e e r i n g D e f e n d a n t s c a u s e d I n v e s t m e n t s to
e n g a g e in a s h a m t r a n s a c t i o n w i t h R.A. H o m e s r e g a r d i n g C o n t i n e n t a l
Ranch.
222.
Thus ,
on S e p t e m b e r 30,
1986,
Investments
" s o l d " to
R.A. H o m e s 1 , 3 0 0 a c r e s of C o n t i n e n t a l R a n c h fo r $ 2 5 , 0 0 0 , 0 0 0 .
R.A.
H o m e s m a d e a d o w n p a y m e n t of $ 5 , 0 0 0 , 0 0 0 a n d g a v e I n v e s t m e n t s a n o n -
102
recourse no t e for $20,000,000.
O l d L i n c o l n p r o v i d e d $ 3 , 5 0 0 , 0 0 0 of
the d o w n p a y m e n t * b y e x t e n d i n g a n d f u n d i n g a l i n e of c r e d i t t o R.A.
Homes.
223.
T h e R a c k e t e e r i n g D e f e n d a n t s u s e d t h e " s a l e " t o R.A.
Homes t o c o n c e a l O l d L i n c o l n ' s d i r e c t i n v e s t m e n t in t h e C o n t i n e n t a l
Ranch d e v e l o p m e n t p r o j e c t .
B y w a y of t h e s a l e t o R.A.
Homes,
the
Racketeering Defendants sought to show the regulatory authorities
that
Old
Lincoln
Continental
Ranch
had
lessened
development
its
in
direct
investment
compliance
with
in
the
regulations
governing d i r e c t investments by thrifts.
224.
In
fact,
the
Racketeering
n o t w i t h s t a n d i n g t h e " s a l e " t o R.A. H o m e s ,
as pe ct s
of
the
Continental
development
Ranch
and,
regulatory
authorities,
investment
in
the
of
the
contrary
had
not
Continental
to
c o n t i n u e d t o c o n d u c t all
entire
its
lessened
Ranch
Defendants,
2,900
acres
of
the
representations
to
the
Old
Lincoln's
development
project.
direct
R.A.
Homes a c t e d t o c o n c e a l t h e e x t e n t of I n v e s t m e n t s ' i n v o l v e m e n t a n d
p a r t i c i p a t i o n in t h e C o n t i n e n t a l R a n c h d e v e l o p m e n t p r o j e c t .
225.
A s d e s c r i b e d in p a r a g r a p h s
175 t h r o u g h 180 of t h i s
Co mplaint, t h e R a c k e t e e r i n g D e f e n d a n t s a l s o u s e d t h e " s a l e " t o R.A.
Homes t o e f f e c t a n i n f u s i o n o f c a s h t o A C C f r o m O l d L i n c o l n u n d e r
the T a x Plan.
226.
The
Continental
Ranch
transactions
are
more
fully
e x p l a i n e d as f o l l o w s :
(a)
Old Lincoln, t h ro ug h Investments, p u r c ha se d
approximately
2,900
acres
in P i m a
Co u n t y ,
A r i z o n a , in 1984 f o r a p p r o x i m a t e l y $ 2 1 , 0 0 0 , 4 6 4 .
T h i s t r a c t o f p r o p e r t y h a s b e c o m e k n o w n as t h e
103
C o n t i n e n t a l R a n c h p r o j e c t w h i c h is t o e n c o m p a s s
a master-planned community with approximately
1 , 6 0 0 a c r e s of r e s i d e n t i a l d e v e l o p m e n t w e s t of
the
Santa
Cruz
River
and
550
acres
of
industrial de v e l o p m e n t to the east of this
river, w i t h t h e b a l a n c e o f t h e a c r e a g e i n v o l v e d
to be us e d for st re et s and o t h e r w i s e co n s i d e r e d
u n s a l a b l e ; t h e p r o j e c t is a p p r o x i m a t e l y s e v e n
m i l e s n o r t h w e s t of T u c s o n .
(b)
O n o r a b o u t S e p t e m b e r 30, 198 6, R. A. H o m e s
purchased
from Investments
1,300
acres
of
C o nt in en ta l R a n c h for $25,000,000.
The sales
p r i c e w a s p a i d p a r t i a l l y in c a s h a n d p a r t i a l l y
with
a note.
Cash paid
at
closing
wa s
$5,000,000, and a non-recourse note bearing
i n t e r e s t a t an a n n u a l r a t e of 10% in t h e a m o u n t
o f . $ 2 0 , 0 0 0 , 0 0 0 w a s e x e c u t e d at c l o s i n g .
(c)
P r i o r t o t h e s a l e of t h e 1 , 3 0 0 a c r e s t o R.A.
Homes, I n ve st me nt s ha d c o m p l e t e d su bs ta nt ia l
elements
of
the
infrastructure
for
the
r e s i d e n t i a l p o r t i o n of t h e p r o j e c t .
(d)
At the
closing
of t h e
sale,
Old
Lincoln
r e c o r d e d b o o k p r o f i t of $8,121,000.
This
profit recognition pe rm it te d ACC to compel Old
Lincoln
to
advance
to
it
approximately
$ 3 , 2 5 0 , 0 0 0 u n d e r t h e T a x Plan. C o n t r a r y t o t h e
position
taken
by
Old
Lincoln
at
ACC's
d i r e c t i o n , f u ll a c c r u a l p r o f i t r e c o g n i t i o n w a s
i n a p p r o p r i a t e w i t h r e sp ec t to the sale of the
1 , 3 0 0 a c r e s t o R.A. H o m e s :
(1)
In t h e f i r s t p l a c e , O l d L i n c o l n p r o v i d e d
a p o r t i o n of t h e f u n d i n g of t h e c a s h p a i d
a t c l o s i n g t h r o u g h a S e p t e m b e r 23, 1986,
$ 3 , 0 0 0 , 0 0 0 u n s e c u r e d r e v o l v i n g l i n e of
cr e d i t for the borrower.
(2)
C o l l e c t i o n of a d d i t i o n a l a m o u n t s f r o m t h i s
b o r r o w e r w a s h i g h l y u n c e r t a i n , b e c a u s e of
t h e n o n - r e c o u r s e n a t u r e of t h e n o t e and
b e c a u s e of t h e s u b s t a n t i a l
continuing
i n v o l v e m e n t of I n v e s t m e n t s in t h e p r o j e c t ;
in fact,
without
the benefit
of
any
e x e c u t e d c o n t r a c t b e t w e e n R.A. H o m e s and
Investments,
Investments
continued
to
manage
the
portion
of
the
project
purchased
by
R.A.
Homes,
negotiated
c o n t r a c t s f o r s a l e s of i n d i v i d u a l p a r c e l s ,
including
sales
of
land
holdings
to
104
m e r c h a n t b u i l d e r s and other investors, and
supervised
completion
of
the
infrastructure installation.
A c c o r d i n g l y , u n d e r S F A S No. 66, f u ll a c c r u a l
p r o f i t re c o g n i t i o n for this t r a n s a c t i o n was
c o m p l e t e l y improper.
227.
artifice,
(e)
A s a c o n s e q u e n c e of t h e f o r e g o i n g t r a n s a c t i o n ,
O l d L i n c o l n h a s lost, o r c a n e x p e c t t o lose,
a p p r o x i m a t e l y $ 2 0 , 0 0 0 , 0 0 0 in a d d i t i o n to t h e
approximately $3,250,000 taken by ACC through
t h e T a x Plan.
(f)
In
manufacturing
this
sham
transaction,
however, Old Lincoln did not give up control
of t h e p r o j e c t , f o r it c o n t i n u e d t o m a n a g e a n d
d e v e l o p t h e p r o j e c t as if t h e r e h a d b e e n no
s a l e t o R.A. Ho me s.
In
certain
implementing
defendants,
the
as
Continental
directors
Lincoln, a l s o v i o l a t e d t h e i r s t a t u t o r y ,
Ranch
and
scheme
officers
contractual,
and
of
Old
and fiduciary
du ti es d e s c r i b e d in p a r a g r a p h 346.
228.
Ranch
addition
transactions,
transactions
$30,000,000
in
In
which
interests
with
to
R.A.
unsecured
ACC
$30,000,000
Old
forced
the
to
the
Hidden
Lincoln
Homes.
Old
benefit
Lincoln
of
engaged
One
subordinated
ACC's
Valley
of
loan,
to
them
in
in
and
various
financial
other
particular,
demonstrates
prejudice
Continental
its
a
the manner
financial
interests.
This
loan and r e l a t e d c i r c u m s t a n c e s are d e s c r i b e d below.
(a)
O n o r a b o u t A p r i l 8, 1987, A C C a n d R.A. H o m e s
entered
into
a
Line
of
Credit
Agreement
p u r s u a n t to w h i c h A C C ag re ed to d i s b u r s e the
a g g r e g a t e p r i n c i p a l a m o u n t of $ 2 , 0 0 0 , 0 0 0 to
R.A. H o me s.
Di sb ur se me nt s made unde r the Line
of
Credit
Agreement
were
repayable
in
a c c o r d a n c e w i t h t h e t e r m s of t h a t a g r e e m e n t a n d
of t h e N o t e d a t e d t h e s a m e date.
105
(b)
The or iginal m a t u r i t y date of the No t e e x ec ut ed
p u r s u a n t t o t h e L i n e of C r e d i t A g r e e m e n t w a s
M a y 1, 1988.
A s of M a y 1, 1988, h o w e v e r , A C C
a n d R.A. H o m e s a g r e e d p u r s u a n t t o A m e n d m e n t No.
1 t o t h e N o t e t o e x t e n d t h e m a t u r i t y d a t e of
t h e N o t e f r o m M a y 1, 1988 u n t i l M a y 1, 1989.
(c)
A f t e r A C C a n d R.A. H o m e s e x e c u t e d t h e a b o v e
r e f e r e n c e d A g r e e m e n t a n d Note , t h e R a c k e t e e r i n g
Defend an ts caused Old Li nc ol n to e n te r into a
L o a n A g r e e m e n t d a t e d as o f J u n e 30, 1987, w i t h
R.A. H o m e s .
T h e t e r m s of t h e O l d L i n c o l n L o a n
A g r e e m e n t r e q u i r e d O l d L i n c o l n t o l o a n o n an
unsecured
and
fully
subordinated
basis
$ 3 0 , 0 0 0 , 0 0 0 t o R.A. Ho me s.
(d)
R e p a y m e n t o f t h e $ 3 0 , 0 0 0 , 0 0 0 t o R.A. H o m e s w a s
fully
subordinated
to
that
b o r r o w e r ’s
o b l i g a t i o n to r e p a y t h e $2,'000,000 l o a n f r o m
ACC:
(e)
(1)
In t h e f i r s t i n s t a n c e , t h i s is e v i d e n c e d
b y t h e d e f i n i t i o n s o f " I n d e b t e d n e s s ” and
of " S e n i o r I n d e b t e d n e s s " s e t f o r t h in
S e c t i o n s 1.17 a n d 1.41, r e s p e c t i v e l y , of
the Old Li nc ol n Loan Ag re em en t; th es e and
related p r o v is io ns m a d e the A C C loan
s e n i o r in r i g h t o f p a y m e n t t o t h e O l d
Lincoln loan to the same borrower.
(2)
I n fact, t h e p r i o r i n d e b t e d n e s s t o A C C w a s
r e c o g n i z e d in § 8.9 o f t h e O l d L i n c o l n
L o a n A g r e e m e n t d e a l i n g w i t h d e f a u l t s on
other indebtedness.
(3)
Moreover, the Old Lincoln Loan Agreement
o b l i g a t e s O l d L i n c o l n t o h o l d as t r u s t e e
a n d to p a y o v e r a n y f u n d s r e c e i v e d b y it
f r o m R.A.
Homes
that
are payable
to
a n o t h e r l e n d e r w h o s e r i g h t o f p a y m e n t is
s e n i o r t o t h a t of O l d L i n c o l n .
T h e f o r e g o i n g t r a n s a c t i o n s d e m o n s t r a t e A C C ’s
d i v e r s i o n of a s s e t s a n d o p p o r t u n i t i e s of O l d
L i n c o l n t o t h e p e r s o n a l b e n e f i t o f A C C a n d its
insiders, in cl ud in g the R a c k e t e e r i n g De fe n d a n t s
and
the
Keating
Fa m i l y .
In
s h or t,
ACC
p r ej ud ic ed the ab il it y of Old L i nc ol n to expect
f u ll r e p a y m e n t o f its $ 3 0 , 0 0 0 , 0 0 0 s u b o r d i n a t e d
l o a n b y e x p l i c i t l y s u b o r d i n a t i n g its r i g h t to
r e p a y m e n t t o t h e r i g h t of A C C t o r e p a y m e n t of
its l o a n o n a p r i o r i t y b a s i s .
A s a re su lt ,
106
d e f e n d a n t s , as o f f i c e r s a n d d i r e c t o r s , b r e a c h e d
t h e i r d u t i e s of c a r e a n d o f l o y a l t y t o O l d
L i n c o l n and us e d the d o m i n a n c e of A C C ' s control
o v e r O l d L i n c o l n t o p r e j u d i c e t h e i n t e r e s t s of
O l d L i n c o l n a n d its d e p o s i t o r s .
229.
I n i m p l e m e n t i n g t h e R.A. H o m e s s c h e m e a n d a r t i f i c e ,
c e rt ai n d e f e n d a n t s ,
violated
their
as d i r e c t o r s a n d o f f i c e r s o f O l d L i n c o l n ,
statutory,
contractual,
and
fiduciary
also
duties
d e s c r i b e d in p a r a g r a p h 346.
E .
230.
Li ncoln h a s
M a n ip u la tio n o f S to c k T ra n s a c tio n s as
a Schem e and A r t i f i c e To D e fra u d O ld
L i n c o l n a n d T o B e n e f i t I n s i d e r s . __________
A s a r e s u l t of t h e t r a n s a c t i o n s d e s c r i b e d be lo w, N e w
sustained,
or can be expe ct ed to sustain,
damages
in
excess o f $ 2 2 , 0 0 0 , 0 0 0 .
1 .
231.
a
scheme
to
Su bs idiary,
D iv e rs io n to ACC
fro m th e S a le o f
o f P ro fits
M e m orex S t o c k .
The Racketeering Defendants devised and implemented
injure
Funding;
Old
Lincoln's
investment
in
a
Lincoln
this included d i v e r t i n g pr of it s d e r i v e d from
the a p p r e c i a t i o n o f s t o c k o w n e d b y F u n d i n g t o ACC.
232.
its s t o c k
T h e R a c k e t e e r i n g D e f e n d a n t s c a u s e d F u n d i n g t o s e ll
in M e m o r e x
International,
party a t a n a r t i f i c i a l l y l o w p r i c e .
N.V.
(" Me mo re x" )
to
a third
Subsequently, the Racketeering
Defendants ca u s e d F u nd in g to relinquish,
f o r no c o n s i d e r a t i o n ,
option t o r e p u r c h a s e t h e M e m o r e x s t o c k t o e n a b l e ACC,
an
instead,
to
buy t h e M e m o r e x s t o c k f r o m t h e t h i r d p a r t y a t a n a r t i f i c i a l l y l o w
price.
ACC
later
sold
the
stock
at
a
substantial
profit
received t h e p r o f i t s t h a t r i g h t f u l l y b e l o n g e d t o F u n d i n g .
107
and
As a
result
of t h e
Defendants,
scheme
to
with
recognition
FHLBB
of
its
approval
obligation
before
an a f f i l i a t e d p e r s o n ,
of
a sale by
Old
Corporation
Fu nd in g to A C C
("Edgcomb"),
under
engaging
Lincoln
o n b e h a l f o f F u n d i n g a n A p r i l 29,
for approval
Edgcomb
In
obtain
transactions
the FHLBB,
implemented by the Racketeering
Ol d Li n c o l n was damaged.
233.
§ 584.3
devised and
1987,
of the
Playtex
12
C.F.R.
in
certain
f o r w a r d e d to
an application
common
stock
Holdings,
of
Inc.
( " Pl ay te x" ), and Memorex.
234.
To s u pp or t the p u r p o r t e d fairness of th e s e p r o p o s e d
transactions,
Old
obtained
Drexel
from
Lincoln's
application
Burnham
Lambert,
enclosed
two
Incorporated
letters
("Drexel").
Th e first of D r ex el 's letters p r o v i d e d the m a r k e t v a l u e p e r share
e a c h o f P l a y t e x a n d E d g c o m b c o m m o n st oc k.
estimated
the
aggregate
market
value
The second Drexel letter
of
the
79,275
shares
of
M e m o r e x co mm on s t oc k h e ld by Fu nd in g to be $2,800,000.
235.
29,
1987,
Directors
On May
1,
application,
of
Old
Lincoln
1987,
the
responding to Old Lincoln's April
FHLBB
its
forwarded
approval
of
to
the
the
Board
of
sale
by
proposed
F u n d i n g t o A C C o f t h e P l a y t e x a n d t h e E d g c o m b c o m m o n st oc k.
23 6. R e g u l a t o r y
of
the
common
stock
approval
of M e m o r e x w a s
of t h e s a l e b y
withheld
Funding to ACC
pending
the
FHLBB's
r e c e i p t o f d o c u m e n t a t i o n f r o m D r e x e l s u p p o r t i n g its e s t i m a t e of t h e
m a r k e t v a l u e o f M e m o r e x c o m m o n st oc k.
237.
obtain approval
In
continuing
recognition
of
its
f o r a n y s a l e b y F u n d i n g t o A C C of M e m o r e x
108
obligation
common
to
stock,
on May
ap pr ov al .
stock
19,
1987,
Old Lincoln
renewed
its r e qu es t
for s u c h
This r e qu es t re fe rr ed to an a n al ys is of M e m o r e x common
value
that
was
to
be
prepared
by
Drexel
and
forwarded
by
Drexel t o F H LB B.
238.
never
sent
to
The
the
Drexel
analysis
FH LB B.
of
Memorex
In a t e l e p h o n e
common
stock
was
with
the
communication
FHLBB, a r e p r e s e n t a t i v e o f O l d L i n c o l n t o l d t h e F H L B B t h a t it c o u l d
not p r o v i d e
earlier
the
valuation
agreement,
information
because
the
at
that
information
time,
was
despite
its
"confidential."
FHLBB a p p r o v a l of a s a l e b y F u n d i n g t o A C C of M e m o r e x c o m m o n s t o c k
or
any
interest
therein
Funding,
o r ACC.
Lincoln,
239.
Old
was
Lincoln,
never
pursued
Funding,
thereafter
and ACC were
by
Old
f u l l y a w a r e of
the o b l i g a t i o n t o .obtain F H L B B a p p r o v a l f o r a n y s a l e b y F u n d i n g t o
ACC
of
Memorex
common
st ock.
Nonetheless,
because
of
their
i n a b i l i t y t o i n d u c e D r e x e l t o s u b s t a n t i a t e its e s t i m a t e d v a l u e of
M e m o r e x c o m m o n s t o c k f o r t h e FHLBB,
t h e o f f i c e r s a n d d i r e c t o r s of
Old
in
Lincoln,
§ 5 8 4. 2( a) ,
Funding,
embarked
their o b l i g a t i o n ,
and
on t h e
under
ACC,
following
12 C . F. R.
violation
fraudulent
§ 584.3(a),
to
of
12
scheme
C.F.R.
to evade
obtain approval
of a t r a n s a c t i o n w i t h a n a f f i l i a t e .
240.
Ke at in g Jr.
Following
and Wischer,
negotiations
o n J u n e 30,
between
1987,
Garcia
Co.
Funding entered
and
in to a
Stock P u r c h a s e A g r e e m e n t w i t h G a r c i a Co. p u r s u a n t t o w h i c h F u n d i n g
sold t o
Garcia
aggregate
Co.
purchase
79,275
price
shares
of
of M e m o r e x
$1,000,000.
109
common
Section
stock
6 of
the
for
an
Stock
P u r c h a s e A g r e e m e n t g r a n t e d F u n d i n g t h e o p t i o n t o r e p u r c h a s e a l l of
the
79,275
shares
of
b e f o r e D e c e m b e r 30,
241.
Memorex
common
stock
for
$4,25*0,000
on
or
1988.
There
is n o
evidence, t h a t
p r ic e wa s fair to Funding.
the
$1,000,000
purchase
In fact, s u c h p r i c e w a s $ 1 , 8 0 0 , 0 0 0 l e ss
than the market value which Old Lincoln
represented
in its A p r i l
application.
242.
On
October
b e t w e e n K e a t i n g Jr.
21,
1987,
and Garcia
Co.
after
further
and wh il e
negotiations
Funding's
o p t i o n to
p u r c h a s e f r o m G a r c i a Co. al l 7 9 , 2 7 5 s h a r e s o f M e m o r e x c o m m o n s t o c k
f r o m G a r c i a Co. w a s s t i l l e x e r c i s a b l e , K e a t i n g Jr. a r r a n g e d f o r A C C
to p u r c h a s e the st oc k for $2,000,000.
243.
A f t e r t h e s a l e t o A C C o n O c t o b e r 26,
1987,
Keating
Jr. a r r a n g e d f o r F u n d i n g t o e x e c u t e a d o c u m e n t i n d i c a t i n g F u n d i n g ' s
c o n s e n t t o G a r c i a C o . ' s s a l e t o A C C of t h e M e m o r e x s t o c k t h a t w a s
subject
does
to
Funding's
option
described
a b ov e.
not recite any consideration passing
exchange
sought
for consent.
nor
Funding's
obtained
valuable
Necessary
to
from AC C to
regulatory approval
permitting
right
Funding's
Funding
repurchase
to
the
consent
Funding
was
relinquish
Memorex
in
neither
to
stock
ACC
from
G a r c i a Co.
244.
received
on
As
June
a
30,
result
1987,
of
these
only
$1,000,000
v a l u e d a t $ 2 , 8 0 0 , 0 0 0 in A p r i l of 1987.
f o r s u c h s t o c k o n O c t o b e r 21,
such
stock by the
1987.
end of April,
transactions,
stock
which
had
was
ACC paid a mere $2,000,000
A C C s u b s e q u e n t l y s o l d all of
1988,
110
for
Funding
fo r $ 1 3 , 3 0 0 , 0 0 0 ,
capturing
for
itself
approximately
$11,300,000
in
profits
that
rightfully
belonged to L i nc ol n or to Funding.
245.
The
scheme
undertaken
by
the
Racketeering
Defendants, the o f f i c e r s and d i r e c t o r s of Old Lincoln, Funding, and
ACC
to
transfer
Memorex
concealing the transfer
approval
for
purchase
Memorex
fraudulent
the
transfer
common
v i o l a t i o n o f 12 C . F . R .
to
ACC,
from the FHLBB and
circumvention
246.
stock
by
Funding
stock
of
from
the
to
including
f a i l i n g to s e e k F H L B B
ACC
Garcia
FHLBB
knowingly
of
Co.,
approval
its
right
to
constitutes
process
and
a
a
§ 584.2(a).
A s a r e s u l t of s u c h f r a u d u l e n t s c he me ,
Old Lincoln
s u f f e r e d d a m a g e s e q u a l t o t h e d i f f e r e n c e b e t w e e n t h e p r i c e at w h i c h
ACC b o u g h t t h e M e m o r e x
stock from Garcia
Co.,
$2,000,000,
least t h e a g g r e g a t e p r i c e a t w h i c h s u c h s h a r e s w e r e
sold b y AC C,
subsequently
$13,300,000.
2•
247.
A b u s e o f th e AC C E m p lo y e e S to c k
O w n e rs h ip P la n f o r th e B e n e f it o f
th e K e a tin g F a m ily and O th e r In s id e r s .
O n o r a b o u t J a n u a r y 1, 1984, t h e B o a r d of D i r e c t o r s
of A C C c r e a t e d t h e A C C E m p l o y e e S t o c k O w n e r s h i p
the
execution
of
an
Employee
e f f e c t i v e a s o f t h a t date.
Stock
Ownership
Plan
Trust
plan"
included
S e c u r i t y A c t of 1974,
("ESOP")
Agreement
in
29 U . S . C .
the
Employee
§ 10 01 et.
sea.
w e l f a r e or
Retirement
Income
The ESOP replaced
an e a r l i e r E m p l o y e e S t o c k I n c e n t i v e P l a n e s t a b l i s h e d in 1978.
by
T h i s a g r e e m e n t e s t a b l i s h e d an e m p l o y e e
stock o w n e r s h i p p l a n w i t h i n t h e d e f i n i t i o n of "h e a l t h ,
retirement
a n d at
111
The
A C C E S O P also was d e t e r m i n e d to be a tax ex em pt q u a l i f i e d pl a n by
•the IRS o n o r a b o u t S e p t e m b e r 23,
248.
1985.
Th e initial m e m b e r s of the E S O P Plan A d m i n i s t r a t i v e
C o m m i t t e e w e r e K e a t i n g Jr. a n d W i s c h e r ,
b u t in 1 9 85 c o m p o s i t i o n of
t h e E S O P P l a n A d m i n i s t r a t i v e C o m m i t t e e w a s c h a n g e d t o M a r g a r e t W.
W o n g , R i c h a r d M. B e r t s c h ,
a n d J a m e s T. M i l l i c a n ,
Administrative
is r e s p o n s i b l e
plan
Jr.
assets,
Committee
but
II.
The ES O P Plan
for d e c i s i o n s
concerning
frequently acted under the direction
of K e at in g
and th e A C C Bo a r d of Directors.
249.
Plan
The ESOP Plan Trustee,
Administrative
"operative
Committee
documents"
for
to
the
w h i c h was a u t h o r i z e d by the
enter
ESOP,
into
was
and
and
execute
remains
the
all
First
N a t i o n a l B a n k of Minneapolis.
250.
B o t h A C C a n d its E S O P h a v e u t i l i z e d v a r i o u s p r o g r a m s
t o r e p u r c h a s e o v e r $ 7 2 , 0 0 0 , 0 0 0 of A C C ' s c o m m o n a n d p r e f e r r e d s t o c k
from
the
persons
Old
Keating
Family,
other
affiliated
c l o s e l y a s s o c i a t e d w i t h ACC.
Lincoln's
various
assets
affiliated
purchases
the
This
a m o u n t of
of
the
program
Keating
involved
$23,000,213.
by borrowing a total
of
the
ESOP
letter
of
pledge
of at
credit
collateralize
indebtedness
from
was
Bankers
least
$15,000,000
the
indebtedness.
facilitated
Trust
112
stock
financed
including
by
the
of
issuance
New
York
owned by Old
Under this
and
a
At least $15,000,000
Company
of a s s e t s
ESOP
and
used
Family
The ESOP
$23,000,000,
l o a n of $ 3 , 0 0 0 , 0 0 0 f r o m V a l l e y N a t i o n a l Bank.
of
Drexel,
One of th o s e p r o g r a m s
benefit
persons.
in t h e t o t a l
these purchases
for
persons,
program,
and
of
a
th e
L i n c o l n to
the Keating
Family
sold
ACC
stock
to
the
ESOP
for
total
consideration
of
$ 6 , 1 2 0 , 7 3 6 in 1985, a n d o t h e r d e f e n d a n t s s o l d A C C s t o c k to t h e E S O P
for t o t a l
consideration
of
$1,462,500.
Th us ,
certain defendants
d i r e c t l y r e c e i v e d $ 7 , 9 9 9 , 3 9 6 f r o m t h e ESOP , w h i c h w a s o n l y a b l e t o
afford
these
pledged
to
purchases
through
collateralize
purchases.
The
the
affiliated
assets
of
Old
indebtedness
persons
who
Lincoln
necessary
benefitted
that
to
were
fund
directly
the
from
this p r o g r a m a n d t h e p a y m e n t s r e c e i v e d b y them- f r o m A p r i l t h r o u g h
N o v e m b e r o f 1 9 85 we re :
Affiliated Person
Shares Sold
Total Price
200,000
150,000
88,548
250,000
121,000
25,000
100,000
80,000
$ 1,650,000
1,162,500
689,896
1,950,000
873,250
206,250
825,000
637.500
7
,
9
99,396
$
K e a t i n g Jr.
Mary E l a i n e K e a t i n g
Maureen K e a t i n g
Hall
Hubbard
Wurzelbacher
Niebling
Ki el ty
As p a r t
sold
of th is program,
51,107
purchase
shares
was
part
indirectly to the
transactions
Lincoln's
of
of
ACC
stock
another
to
scheme
Homes,
the
below.
Inc.
ESOP
for
$4 55,7 2 0;
Jr.
$1,500,000
Approximately
r e m a i n at r i s k w i t h
("Continental")
for
Keating
e x t e n t of a p p r o x i m a t e l y
described
assets
Continental
to
benefit
through the
$11,000,000
respect to the
this
in
financing
New
of
the f o r e g o i n g t r a n s a c t i o n s .
251.
Arizona,
from
Keating
Medema
subsidiary of ACC;
Homes
of
Jr.
Ut ah ,
purchased
Inc.
land
in
("Medema"), a
Maricopa
direct
t h i s l a n d s u b s e q u e n t l y b e c a m e t h e r e s i d e n c e of
113
C o un ty ,
Keating
Jr.
and
his
financed b y ‘a note
wife
Mary
Elaine.
This
land
purchase
executed between him and Medema
in t h e
was
amount
of a p p r o x i m a t e l y $ 1 , 5 0 0 , 0 0 0 .
252.
purchased
by
Continental
Continental,
Donald
a n o t h e r d i r e c t s u b s i d i a r y o f ACC,
Loback,
subsequently
Robert
acquired
al l
was
Wade,
and
Kathy
Wade.
interest
in
Keating
Jr.'s
indebtedness to Medema.
253.
$50,000
In
interest
or
about
free
to
February
Loback;
of
the
254.
transferred
from
said
loan
were
shares
of
ACC
1985,
st ock,
K e a t i n g Jr.
valued
at
privately
$327,979,
to
O n o r a b o u t N o v e m b e r 28,
K e a t i n g Jr. d i r e c t e d t h e E S O P t o p u r c h a s e t h e s a m e A C C s t o c k
Continental
K e a t i n g Jr.
for
$337,772.
Said
purchase
was
directed
O n o r a b o u t M a r c h 27,
1986,
K e a t i n g Jr.
t r a n s f e r r e d 121,171 shares of A C C s t o c k to Continental.
valued
$1,469,198
by
for his own e c on om ic benefit.
255.
was
loaned
1986.
reduce his indebtedness to Continental.
1985,
of
Jr.
Th e loan wa s to b e c o m e due
O n o r a b o u t O c t o b e r 7,
39,162
Keating
proceeds
u s e d b y L o b a c k t o p u r c h a s e A C C st oc k.
o n o r a b o u t J u l y 1,
1984,
by
him
of h i s
at
$12,125
per
share
and
was
indebtedness to Continental.
used
privately
This stock
to
offset
On or about July
3, 1986, K e a t i n g Jr. d i r e c t e d t h e A C C t r e a s u r y t o p u r c h a s e t h e s a m e
1 2 1 , 1 7 1 s h a r e s o f A C C s t o c k f r o m C o n t i n e n t a l a t $ 1 2 . 4 3 p e r share,
f o r a t o t a l a m o u n t of $ 1 , 5 0 6 , 1 5 6 .
114
256.
On
or
about
December
shares o f A C C s t o c k t o t h e E S O P
10,
1935,
Loback
f o r $ 9 4, 3 06.
sold
9,550
Said ESOP purchase
was d i r e c t e d b y K e a t i n g Jr.
257. A C C n o w is i n s o l v e n t ,
to w o r t h l e s s .
Thus ,
next t o w o r t h l e s s ,
the ESOP's
a n d it is,
a n d its c o m m o n s t o c k is n e x t
i n v e s t m e n t in A C C ' s s e c u r i t i e s
o r w i l l be co me ,
is
unab le to repay the
i n d e b t e d n e s s a s s u m e d b y it t o f i n a n c e t h e f o r e g o i n g t r a n s a c t i o n s .
As a r e s u l t , t h e p l e d g e o f O l d L i n c o l n ' s a s s e t s w i l l b e f o r e c l o s e d ,
and N e w L i n c o l n w i l l s u f f e r a c o m p l e t e loss.
258.
Robert W a d e ,
F r o m 19 85 t h r o u g h 1986, K e a t i n g Jr., D o n a l d Lo back,
K a t h y Wa de ,
and Continental
to p a r t i c i p a t e in t h e a b o v e t r a n s f e r s ,
stock.
S a i d s t o c k sa le s,
purchases,
participated
purchases,
and agreed
a n d s a l e s of A C C
a n d t r a n s f e r s p l a c e d at r i s k
and w a s t e d O l d L i n c o l n ' s a s s e t s a n d p e r s o n a l l y b e n e f i t t e d K e a t i n g
Jr.,
the Keating
and N i e b l i n g .
pursuant
family's,
to
Family,
and other defendants,
especially Kielty
S a i d s t o c k t r a n s a c t i o n s w e r e d i r e c t e d b y K e a t i n g Jr.
a
plan
and
in
a
manner
and other defendants'
that
was
for
personal benefit.
his
own,
his
A s a r e s u l t of
those s a l e s in v i o l a t i o n of f i d u c i a r y r e s p o n s i b i l i t i e s , N e w L i n c o l n
can
be
expected
to
sustain
monetary
damages
in
excess
of
$ 11 , 0 0 0 , 0 0 0 .
3.
259.
trustee,
K e a t i n g Jr. q u a l i f i e s a s a n a d m i n i s t r a t o r ,
custodian,
under 18 U . S . C .
V i o l a t i o n o f 18 O . S . C .
§ 1954
in F u rth e r a n c e o f th e Schem e
a n d A r t i f i c e T o D e f r a u d . _______
counsel,
ag ent,
§ 19 5 4 ( 1 ) .
i.5
or
employee
of
the
of f i c e r ,
ACC
ESOP
260.
K e a t i n g Jr. qualifies, as a n o f f i c e r , c o u n s e l , ag ent,
or e m p l o y e e of an e m p l o y e r or an e m p l o y e r any of w h o s e
a r e c o v e r e d b y t h e E S O P u n d e r 18 U . S . C .
261.
artifice
to
participated
In
furtherance
defraud
Old
in t h e a f f a i r s
criminal activity.
of
the
Lincoln,
employees
§ 1 9 54 (2 ).
above-described
Keating,
Jr.
scheme
conducted
of the A C C E n t e r p r i s e by e n g a g i n g
and
and
in
A s d e s c r i b e d ab ov e, K e a t i n g , Jr. r e c e i v e d m o n e y
or v a l u e b e c a u s e of his actions, decisions, or ot h e r dutis r e l a t i n g
t o m a t t e r s c o n c e r n i n g t h e A C C E S O P a n d v i o l a t e d 18 U . S . C .
§ 1954.
F .
C o n d u c tin g th e B u s in e s s and A f f a i r s
o f th e AC C E n t e r p r is e T o S ip h o n
and D iv e r t th e P r o f it s and A s s e ts
o f O ld L in c o ln to B e n e fit th e
Keating Family and o th e r In s id e r s .
262.
K e a t i n g Jr. u s e d O l d L i n c o l n ' s r e s o u r c e s t o p r o m o t e
his own personal,
convictions.
financial, political,
ideological,
and religious
K e at in g Jr.'s di version of depositors' m o n e y from Old
L i nc ol n to A C C for his personal purposes grossly abused and wa st ed
Old
Lincoln's
assets.
p u r p o s e s o f K e a t i n g Jr.
Examples
of
this
waste
for
the
personal
include the following:
(a)
Paying himself and his immediate
excessive cash compensation;
(by
Using Old Lincoln's assets to leverage ACC's ESOP
so t h a t it c o u l d p u r c h a s e s t o c k o f A C C t o t h e
b e n e f i t of K e a t i n g Jr. a n d h i s i m m e d i a t e f a m i l y ; a n d
(c)
P r o v i d i n g a s o u r c e of f u n d s f o r c o n t r i b u t i o n s t h a t
served
Keating
Jr.'s
personal
and
financial
i n t e r e s t s a n d g o al s, t h e r e b y u s i n g d e p o s i t o r ' s m o n e y
t o p r o m o t e t h e i n t e r e s t s of K e a t i n g Jr. b e y o n d t h e
levels w h i c h his own pers on al re so ur ce s permitted.
116
family
members
Using O l d L i n c o l n ' s r e s o u r c e s t o f u n d A C C ' s p a y m e n t s of t h i s n a t u r e
to p r o m o t e K e a t i n g J r . ' s p e r s o n a l
agenda
constituted
a b r e a c h of
fiduciary d u t i e s owed to Old Lincoln.
263.
constituted
resulting
T h e a c t s o f w h i c h t h e R T C c o m p l a i n s in p a r a g r a p h 262
an
in
abuse
breaches
Li n c o l n
and
paid
Keating
to
amount;
and
in
Jr.
and
of
Keating
a detriment
therefore,
264.
of
waste
to
the
corporate
Jr.'s
its
assets,
fiduciary
depositors.
Keating
Family
duties
The
was
of t h e
foregoing,
Old
to
Old
compensation
unreasonable
t h e s e p a y m e n t s v i o l a t e d 12 C. F. R.
By reason
thereby
in
§ 563.17(b).
Lincoln
sustained
da ma ge s in a n a m o u n t in e x c e s s of $ 5 , 0 0 0 , 0 0 0 .
artifice
6.
U s e o f t h e U.s. H a i l s a n d W i r e s
in Fu rth e ra n c e o f th e
Schem e and A r t i f i c e To D e fr a u d .
265.
In
to
furtherance
defraud
Old
of
the
Lincoln,
above-described
the
Racketeering
scheme
and
Defendants
c o n d u c t e d a n d p a r t i c i p a t e d in t h e b u s i n e s s a n d a f f a i r s o f t h e A C C
E n t e r p r i s e b y d i r e c t l y o r i n d i r e c t l y c a u s i n g t h e A C C E n t e r p r i s e to
engage
in
the
following
conduct
to
deceive
the
regulatory
authorities:
(a)
O n o r a b o u t D e c e m b e r 6, 1983, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d D e c e m b e r 6,
1983,
regarding
Amendment
No.
1
to
the
A p p l i c a t i o n of A C C f o r a p p r o v a l to a c q u i r e O l d
Lincoln, to be m a i l e d to the Su p e r v i s o r y Agen t
vi a the U n i t e d States Postal Service.
(b)
O n o r a b o u t D e c e m b e r 7, 1983, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d D e c e m b e r 7,
1983, r e g a r d i n g A C C ' s P r e l i m i n a r y P r o s p e c t u s
w i t h r e s p e c t t o E x c h a n g e a b l e P r e f e r r e d St oc k,
to be mailed to the Supervisory Agent via the
United States Postal Service.
117
(c)
O n o r a b o u t J a n u a r y 4, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d J a n u a r y 4,
1984, r e g a r d i n g A C C ' s H-(g) A p p l i c a t i o n , t o be
mailed to the Supervisory Agent and FHLBB via
the Un it ed States Postal Service.
(d)
O n o r a b o u t J a n u a r y 4, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a- l e t t e r d a t e d J a n u a r y 4,
1984, r e g a r d i n g a r e v i s i o n t o A p p l i c a t i o n b y
A C C to ac qu ir e Old Lincoln, to be m a i l e d to the
Supervisory Agent via the United States Postal
Service.
(e) . O n o r a b o u t J a n u a r y 4, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d J a n u a r y 4,
1984, r e g a r d i n g a m e n d m e n t s t o A C C ' s p r o p o s e d
a c q u i s i t i o n of Old Lincoln, to be m a i l e d to the
Supervisory Agent via the Un it ed States Postal
Service.
(f)
O n o r a b o u t J a n u a r y 16, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d J a n u a r y 16,
1984, r e g a r d i n g u n d e r t a k i n g s o f A C C a n d its
non-insured
subsidiaries
with
respect
to
se cu r i t i e s activities, to be m a i l e d to the
Supervisory Agent and the FHLBB via the United
States Postal Service.
(g)
O n o r a b o u t J a n u a r y 26, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d J a n u a r y 26,
19 83 (sic) r e g a r d i n g a m e n d m e n t s t o t h e J a n u a r y
4, 19 84 A m e n d m e n t H-(g) a p p l i c a t i o n , t o be
mailed to the Supervisory Agent and the FHLBB
via the Un it ed States Postal Service.
(h)
O n o r a b o u t F e b r u a r y 3, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 3,
1984,
r e g a r d i n g A C C ' s f i l i n g of N o t i c e of
Fi li ng of A p p l i c a t i o n
for H o l d i n g Co mp an y
A c q u i s i t i o n a n d t h e P u b l i s h e r ' s A f f i d a v i t of
Publication, to be m a i l e d to the S u pe rv is or y
A g e n t via the U n i t e d States Postal Service.
(i)
O n o r a b o u t F e b r u a r y 7, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 7,
1984, r e g a r d i n g a m e n d m e n t s t o t h e H - ( e ) l of A C C
f o r a p p r o v a l o f a c q u i s i t i o n o f O l d L i n c o l n , to
be m a i l e d to the S u p e r v i s o r y A g e n t via the
Un it ed States Postal Service.
(j)
O n o r a b o u t F e b r u a r y 17, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 17,
118
1984,
regarding
revised
stipulations
of
C o n t i n e n t a l A m e r i c a n S e c u r i t i e s , Inc., t o b e
m a i l e d to the S u p e r v i s o r y Ag en t v i a th e U n i t e d
States Postal Service.
(k)
O n o r a b o u t F e b r u a r y 22, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 22,
1984, r e g a r d i n g s t i p u l a t i o n s in c o n n e c t i o n w i t h
ACC's
acquisition
of
Old
Lincoln,
to
be
transmitted electronically to the Supervisory
Agent
via
a
telecopy
machine
utilizing
inte rs ta te t e l e p h o n e wires.
(l)
O n o r a b o u t F e b r u a r y 28, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 28,
1984, r e g a r d i n g d o c u m e n t a t i o n o f t h e a g r e e m e n t
between
the
Supervisory
Agent
and
ACC
p e r t a i n i n g t o A C C ' s a c q u i s i t i o n o f O l d L i n c ol n,
t o b e m a i l e d t o t h e S u p e r v i s o r y A g e n t v i a th e
U n i t e d States Postal Service.
(m)
O n o r a b o u t F e b r u a r y 28, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d F e b r u a r y 28,
1984, a c k n o w l e d g i n g w o r k c o m p l e t e d o n A C C ' s
a c q u i s i t i o n of O l d L i n c o l n , t o b e m a i l e d to t h e
Su pervisory Agent via the Un it ed States Postal
Service.
(n)
O n o r a b o u t M a r c h 14, 1984, t h e R a c k e t e e r i n g
Defendants caused an application by Old Lincoln
to be m a i l e d to th e S u p e r v i s o r y A g e n t and the
FH LB B vi a the U n i t e d Stat es Postal Service.
(o)
O n o r a b o u t M a r c h 22, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d M a r c h 22,
1984, r e s p o n d i n g t o I t e m 2(a) of a l e t t e r d a t e d
F e b r u a r y 21, 1984 f r o m t h e F H L B B t o ACC, t o be
ma i l e d to the Supervisory Agent via the United
States Postal Service.
(p)
O n o r a b o u t M a y 31, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d M a y 31, 1984,
r e g a r d i n g p r o j e c t e d i n c o m e s t a t e m e n t s fo r 1985
for A C C and A C C Co n t i n e n t a l M o r t g a g e Company,
to be m a i l e d to the S u p e r v i s o r y A g e n t vi a the
U n it ed States Postal Service.
(q) ' O n o r a b o u t J u n e 27, 1984, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d a l e t t e r d a t e d J u n e 27, 1984,
s u mm ar iz in g the in cu rr en ce of a d d i ti on al debt
b y A C C f o r t h e a c q u i s i t i o n o f O l d L i n c o l n , to
119
be mail ed to the Supervisory
Un it ed States Postal Service.
Agent
via
the
(r)
O n o r a b o u t M a y 5, 1987, t h e R a c k e t e e r i n g
Defendants caused Old Lincoln's revised Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
February
28,
1987,
to
be
transmitted
e l e c t r o n i c a l l y to the S u p e r v i s o r y A g e n t using
inters ta te te l e p h o n e wires.
(s)
O n o r a b o u t A p r i l 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of M a r c h
31,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in terstate te le ph on e wires.
(t)
O n o r a b o u t M a y 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f ' C o n d i t i o n as
of Ap ri l
30,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in terstate te l e p h o n e wires.
(u)
O n o r a b o u t J u n e 19, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
May
31,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
inters ta te te l e p h o n e wires.
(v)
O n o r a b o u t J u l y 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
June
30,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in terstate t e l e ph on e wires.
(w)
O n o r a b o u t A u g u s t 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
July
31,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in te rs ta te t e l e p h o n e wires.
(x)
On
or
about
September
22, 1987,
the
R a c k e t e e r i n g D e f e n d a n t s c a u s e d O l d L i n c o l n 's
Thrift
Financial
Report
Statement
of
Condition
as
of
August
31,
1987,
to
be
transmitted electronically to the Supervisory
A g e n t u s i n g in terstate t e l e p h o n e wires.
120
(y)
O n o r a b o u t O c t o b e r 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
L i n c o l n ’s
Thrift
Financial. R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of S e p t e m b e r
30,
1987,
to b e t r a n s m i t t e d
electronically to the Supervisory Agent using
i n t e rs ta te t e l e p h o n e wires.
(z)
O n o r a b o u t N o v e m b e r 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
L i n c o l n ’s
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t O f C o n d i t i o n as
of
October
31,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in te r s t a t e t e l e p h o n e wires.
(aa)
O n o r a b o u t D e c e m b e r 20, 1987, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
November
30,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
in te r s t a t e t e l e p h o n e wires.
(bb)
O n o r a b o u t J a n u a r y 20, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
L i n c o l n ’s
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
December
31,
1987,
to
be
transmitted
electronically to the Supervisory Agent using
inters ta te te le p h o n e wires.
(cc)
O n o r a b o u t M a r c h 29, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of F i n a n c i a l
C o n d i t i o n as o f D e c e m b e r 31,
1987,
t o be
transmitted electronically to the Supervisory
A g e n t u s i n g i n t e r s t a t e t e l e p h o n e lines.
(dd)
O n o r a b o u t F e b r u a r y 19, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of
January
31, 1988,
to
be
transmitted
electronically to the Supervisory Agent using
inters ta te t e l e p h o n e wires.
(ee)
O n o r a b o u t M a r c h 21, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of
February
27, 1988,
to
be
transmitted
electronically to the Supervisory Agent using
inters ta te t e l e p h o n e wires.
(ff)
O n o r a b o u t A p r i l 19, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
121
of M a r c h
31,
1988,
to
be
transmitted
el e c t r o n i c a l l y to the S u p e r v i s o r y A g e n t using
in te r s t a t e t e l e p h o n e wires.
(gg)
O n o r a b o u t M a y 20, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of A p r i l
30,
1988,
to
be
transmitted
electronically to the Supervisory Agent using
i n te rs ta te t e l e p h o n e vires.
(hh)
O n o r a b o u t J u n e 21, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of
May
31,
1988,
to
be
transmitted
el e c t r o n i c a l l y to the S u p e r v i s o r y A g e n t using
inters ta te t e l e ph on e wires.
(ii)
O n o r a b o u t J u l y 20, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of
June
30,
1988,
to
be
transmitted
electronically to the Su pervisory Ag en t using
i n te rs ta te t e l e p h o n e wires.
(jj)
O n o r a b o u t A u g u s t 19, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of
July
31,
19 88
to
be
transmitted
electronically to the Supervisory Agent using
in te rs ta te t e l e p h o n e wires.
(kk)
On
or
about
September
20,
1988,
the
Racketeering Defendants caused Old Lincoln's
Thrift
Financial
Report
Statement
of
Condition
as
of
August
31,
19 88
to
be
t r a n s m i t t e d e l e c t r o n i c a l l y to the Supe rv is or y
A g e n t us in g interstate te l e p h o n e wires.
(11)
O n o r a b o u t O c t o b e r 20, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of S e p t e m b e r
30,
1988,
t o be
transmitted
electronically to the Supervisory Agent using
i n t e r s t a t e t e l e p h o n e w i re s.
(mm)
O n o r a b o u t N o v e m b e r 21, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - , S t a t e m e n t o f C o n d i t i o n as
of
October
31,
1988,
to
be
transmitted
e l e c t r o n i c a l l y to the S u p e r v i s o r y A g e n t using
in te r s t a t e t e l e p h o n e wires.
122
(nn)
O n o r a b o u t D e c e m b e r 19, 1988, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of No ve mb er
30,
1988,
to be
transmitted
electronically to the Supervisory Agent using
i n t e r s t a t e t e l e p h o n e w i re s.
(oo)
O n o r a b o u t J a n u a r y 20, 1989, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t of C o n d i t i o n as
of D e c e m b e r
31,
1988,
to be
transmitted
e l e c t r o n i c a l l y to the S u pe rv is or y A g e n t using
i n te rs ta te t e l e p h o n e wires.
(pp)
O n o r a b o u t F e b r u a r y 21, 1989, t h e R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of J a n u a r y
31,
1989,
to be
transmitted
" e l e c t r o n i c a l l y to the S u p e r v i s o r y A g e n t using
in te r s t a t e t e l e p h o n e wires.
(qq)
O n o r a b o u t M a r c h 21, 1989,. t h e . R a c k e t e e r i n g
Defendants
caused
Old
Lincoln's
Thrift
F i n a n c i a l R e p o r t - S t a t e m e n t o f C o n d i t i o n as
of February
28,
1989,
to be
transmitted
electronically to the Supervisory Agent using
i n t e rs ta te t e l e p h o n e wires.
266.
scheme
to
In f u r t h e r a n c e o f t h e a b o v e - d e s c r i b e d a r t i f i c e a n d
defraud,
participated
the
Racketeering
in t h e a f f a i r s
Defendants
conducted
and
o f t h e A C C E n t e r p r i s e b y d i r e c t l y or
indirectly causing the AC C Enterprise to engage
in t h e
following
co nd uc t w i t h r e s p e c t t o t h e H i d d e n V a l l e y t r a n s a c t i o n s :
(a)
On
or
about
September
23,
1988,
th e
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 6 9 3 , 5 9 3 . 6 0 to
b e t r a n s f e r r e d f r o m A c c o u n t # 0 3 2 - 2 5 6 0 1 at Ol d
L i n c o l n , in P h o e n i x , A r i z o n a t o I n v e s t m e n t s '
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Irvine,
C a l i f o r n i a , u s i n g i n t e r s t a t e t e l e p h o n e wi re s.
(b)
On
or
about
September
23,
1988,
th e
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 1 0 8 , 0 0 0 . 0 0 to
b e t r a n s f e r r e d f r o m A c c o u n t # 0 3 2 - 2 5 6 0 1 at O l d
L i n c o l n , in P h o e n i x , A r i z o n a t o I n v e s t m e n t s '
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Ir v i n e ,
California, u s i n g in te rs ta te te le ph on e wires.
123
267.
artifice
to
On
or
about
September
23,
1988,
the
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 2 8 8 , 4 6 3 . 4 2 to
b e t r a n s f e r r e d f r o m A c c o u n t # 0 3 2 - 2 5 6 0 1 at O l d
Lincoln,
Phoenix,
Arizona
to
Investments’
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Ir vi ne ,
California, u s i n g in te r s t a t e t e l e p h o n e wires.
(d)
On
or
about
September
23,
1988,
the
R a c k e t e e i i n g D e f e n d a n t s c a u s e d $ 4 5 1 , 2 0 6 . 4 0 to
be t r a n s f e r r e d from A c c o u n t # 0 3 2 -2 56 01 at Old
Lincoln,
Phoenix,
Arizona
to
Investments'
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Ir vi ne ,
California, u s i n g inters ta te te l e p h o n e wires.
(e)
On
or
about
S e p t e m b e r 23,
1988,
the
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 3 4 0 , 0 0 0 . 0 0 to
be t r a n s f e r r e d from A c c o u n t #032-25601 at Old
Lincoln,
Phoenix,
Arizona
to
Investments'
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Ir vi ne ,
California, u s i n g in te r s t a t e t e l e p h o n e wires.
(f)
On
or
about
S e p t e m b e r 23,
1988,
the
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 4 5 0 , 0 0 0 . 0 0 to
be t r a n s f e r r e d from A c c o u n t # 0 32 -2 56 01 at Old
Lincoln,
Phoenix,
Arizona
to
Investments'
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 a t O l d L i n c o l n , Ir vi ne ,
California, u s i n g in te r s t a t e t e l e p h o n e wires.
(g)
On or
about
S e p t e m b e r 23,
1988,
the
Racketeering Defendants caused $5,382,507.00
t o b e t r a n s f e r r e d f r o m A c c o u n t # 0 3 2 - 2 5 6 0 1 at
Ol d Lincoln, Phoenix, A r i z o n a to Investments'
A c c o u n t # 0 3 1 0 0 0 0 0 0 1 at O l d L i n c o l n , Ir vi ne ,
California, us i n g i n t e rs ta te t e l e p h o n e wires.
In
furtherance
defraud,
participated
indirectly
(c)
in t h e
causing
the
of
the
above-described
Racketeering
affairs
Defendants
scheme
and
conducted
and
of t h e A C C E n t e r p r i s e b y d i r e c t l y
the ACC Enterprise
to engage
in t h e
or
following
c o nd uc t w i t h r e sp ec t to the Cr ow de r W a t e r Ra nc h transactions:
(a)
O n o r a b o u t J a n u a r y 25, 1989, t h e R a c k e t e e r i n g
Defendants
caused
$4,330,630.87
to
be
transferred
from
Investments'
Account
# 0 3 1 0 0 0 0 0 0 1 a t L i n c o l n , I r v i n e , C a l i f o r n i a , to
A c c o u n t # 8 8 4 0 1 1 8 8 8 2 a t T r u s t C o m p a n y Bank,
Atlanta, Georgia, using interstate telephone
wires.
124
(b)
268.
artifice
to
participated
In
O n o r a b o u t J a n u a r y 25, 1989, t h e R a c k e t e e r i n g
Defendants
caused
$3,169,369.13
to
be
transferred
from
Investments'
Account
# 0 3 1 0 0 0 0 0 0 1 a t L i n c o l n , Ir vi ne , C a l i f o r n i a to
Lincoln
Savings,
Phoenix,
Arizona,
using
in te r s t a t e t e l e p h o n e wires.
furtherance
defraud,
in t h e
indirectly causing
the
of
the
above-described
Racketeering
affairs
Defendants
scheme
and
conducted
and
of the ACC E n t e r p r i s e b y di re c t l y
the ACC Enterprise
to engage
in t h e
or
following
conduct w i th respect to the Rancho Vistoso transactions:
(a)
O n o r a b o u t D e c e m b e r 13, 1985, t h e R a c k e t e e r i n g
Defendants
caused
$2,543,517.00
to
be
t r a n s f e r r e d f r o m O l d L i n c o l n t o A c c o u n t #0 22 2 4 8 5 0 9 a t A r i z o n a Bank, T u c s o n , A r i z o n a , u s i n g
in te r s t a t e t e l e p h o n e wires.
(b)
O n o r a b o u t D e c e m b e r 31, 1985, t h e R a c k e t e e r i n g
Defendants
caused
$1,948,000.19
to
be
t r a n s f e r r e d f r o m O l d L i n c o l n to A c c o u n t # 6 01 7 1 0 - 1 1 6 3 a t U n i t e d B a n k o f A r i z o n a , Tu c s o n ,
Arizona, u s i n g in te rs ta te t e l e p h o n e wires.
(c)
O n o r a b o u t J a n u a r y 8, 1986, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $45,948.85 to be t r an sf er re d
f r o m O l d L i n c o l n t o A c c o u n t # 0 2 2 - 7 0 8 8 4 3 - 4 5 at
A r i z o n a Bank, T u c s o n , A r i z o n a , u s i n g i n t e r s t a t e
t e l e p h o n e wires.
(d)
O n o r a b o u t M a r c h 3, 1986, t h e R a c k e t e e r i n g
Defendants caused $718,815.66 to be transferred
f r o m O l d L i n c o l n t o A c c o u n t # 7 0 1 - 7 1 0 - 1 1 6 3 at
U n i t e d Ba nk of Arizona, Tucson, Arizona, us in g
i n te rs ta te t e l e p h o n e wires.
(e)
O n o r a b o u t O c t o b e r 7, 1986, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $1 3 7 , 5 1 8 . 0 0 to be t r a n s f e r r e d
f r o m O l d L i n c o l n t o A c c o u n t # 6 4 8 5 7 0 1 1 8 6 at
U n i t e d Bank, P h o e n i x , A r i z o n a , u s i n g i n t e r s t a t e
te le ph on e wires.
(f)
O n o r a b o u t O c t o b e r 31, 1986, t h e R a c k e t e e r i n g
Defendants
caused
$8,055,433.60
to
be
t r a n s f e r r e d f r o m O l d L i n c o l n to A c c o u n t # 2 4 6 1 2 5 0 0 a t F i r s t I n t e r s t a t e B a n k of A r i z o n a ,
125
Phoenix,
wires.
Arizona,
using
interstate
telephone
(g)
O n o r a b o u t M a r c h 2, 1987, t h e R a c k e t e e r i n g
Defendants caused $165,727.14 to be transferred
f r o m O l d L i n c o l n t o A c c o u n t # 7 0 1 - 7 1 0 - 1 1 6 3 at
V a l l e y N a t i o n a l Bank, P h o e n i x , A r i z o n a , u s i n g
i n t e rs ta te t e l e p h o n e wires.
(h)
O n o r a b o u t O c t o b e r 30, 198 7, t h e R i c k e t e e r i n g
Defendants
caused
$3,324,405.26
to
be
transferred
from
Old
Lincoln
zo
Account
#6479401072
at
Western
Savings
&
Loan
A s s o c i a t i o n , Me sa , A r i z o n a , u s i n g i n t e r s t a t e
t e l e p h o n e w i re s.
(i)
O n o r a b o u t O c t o b e r 30, 1987, t h e R a c k e t e e r i n g
Defendants caused $109,652.35 to be transferred
f r o m O l d -Lincoln t o A c c o u n t # 2 0 7 8 - 1 4 5 5 2 at
F i r s t I n t e r s t a t e Bank, T u c s o n , A r i z o n a , u s i n g
i n te rs ta te t e l e p h o n e wires.
(j)
O n o r a b o u t N o v e m b e r 3, 1987, t h e R a c k e t e e r i n g
De fendants caused $641,503.88 to be tr a n s f e r r e d
f r o m O l d L i n c o l n t o A c c o u n t # 6 4 7 9 4 0 1 0 7 2 at
Western Savings
& Loan Association,
Mesa,
Arizona, using in te r s t a t e t e l e p h o n e wires.
(k)
O n o r a b o u t N o v e m b e r 3, 1987, t h e R a c k e t e e r i n g
Defendants caused $2,280.00 to be transferred
f r o m O l d L i n c o l n t o A c c o u n t # 2 0 7 8 - 1 4 5 5 2 at
F i r s t I n t e r s t a t e Bank, T u c s o n , A r i z o n a , u s i n g
in terstate te le ph on e wires.
(l)
O n o r a b o u t M a r c h 25, 1988, t h e R a c k e t e e r i n g
Defendants
caused
$1,208,944.76
to
be
tr a n s f e r r e d from Old Li nc ol n to A c c o u n t #20345 8 6 6 at V a l l e y N a t i o n a l Bank, T u c s o n , A r i z o n a ,
usin g interstate t e l e ph on e wires.
(m)
O n o r a b o u t A p r i l 7, 1988, t h e R a c k e t e e r i n g
De fendants caused $1 54,893.00 to be tr a n s f e r r e d
f r o m O l d L i n c o l n t o A c c o u n t # 6 1 6 5 1 0 1 2 4 5 at
U n i t e d B a n k of A r i z o n a , T u c s o n , A r i z o n a , u s i n g
in te rs ta te te l e p h o n e wires.
(n)
O n o r a b o u t J u n e 17, 1988, t h e R a c k e t e e r i n g
De fendants caused $475,203.00 to be t r an sf er re d
f r o m O l d L i n c o l n t o A c c o u n t # 2 0 0 2 - 1 1 0 8 at
V a l l e y N a t i o n a l B a n k of T u c s o n , A r i z o n a , u s i n g
in te rs ta te t e l e p h o n e wires.
126
(o)
On
or
about
S e p t e m b e r . 30,
1983,
the
R a c k e t e e r i n g D e f e n d a n t s c a u s e d $ 1 8 , 9 1 6 . 4 4 to
be transferred from Old Lincoln to Account
# 2 0 7 8 - 1 4 5 5 2 at F i r s t I n t e r s t a t e Bank, T u c s o n ,
Arizona, us in g in terstate t e l e ph on e wires.
(p)
O n o r a b o u t O c t o b e r 3, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $4,225.80 to be t r a n s f e r r e d
f r o m O l d L i n c o l n t o A c c o u n t #2 07 8- 14 55 2' at
F i r s t I n t e r s t a t e Bank, T u c s o n , A r i z o n a , u s i n g
i n t e rs ta te t e l e p h o n e wires.
(q)
O n o r a b o u t O c t o b e r 4, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $357,313.96 to be t r an sf er re d
from Ol d L i nc ol n to A c c o u n t #2 07 00 61 50 at First
Interstate
Bank,
Tucson,
Arizona,
using
i n t e r s t a t e t e l e p h o n e w i re s.
(r)
O n o r a b o u t O c t o b e r ' 4, 1988, t h e R a c k e t e e r i n g
De fe n d a n t s ca u s e d $324,104.14 to be tr a n s f e r r e d
from
Old
Lincoln
to
Account
#1357001328,
A r i z o n a C o m m e r c e Bank, T u c s o n , A r i z o n a , u s i n g
interstate t e l e ph on e wires.
(s)
O n o r a b o u t D e c e m b e r 16, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $634,730.69 to be t r an sf er re d
from LINFIN Corporation Account #031-0000015
to Old Lincoln, u s i n g in te rs ta te telephone
wires.
(t)
O n o r a b o u t D e c e m b e r 29, 1988, t h e R a c k e t e e r i n g
Defendants caused $154,893.00 to be transferred
f r o m O l d L i n c o l n t o A c c o u n t # 6 4 8 5 - 7 0 1 1 8 6 at
Citibank, Tucson, Arizona, u s i n g interstate
t e l e p h o n e wires.
(u)
O n o r a b o u t M a r c h 20, 1989, t h e R a c k e t e e r i n g
Defendants
caused
$9,887,850.81
to
be
transferred
from
Old
Lincoln
to
Account
# 3 8 1 5 1 0 3 1 a t C i t i b a n k , T u c s o n , A r i z o n a , for
further
credit
to
Account
#7873-01001
at
Citibank, Delaware, N e w c a s t l e , Delaware, using
i n t e rs ta te t e l e p h o n e wires.
(v)
O n o r a b o u t M a r c h 21, 1989, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 6 , 1 3 0 . 5 0 t o be t r a n s f e r r e d
f r o m O l d L i n c o l n t o A c c o u n t # 0 1 2 7 7 6 3 5 9 at t h e
A r i z o n a Bank, T u c s o n , A r i z o n a , u s i n g i n t e r s t a t e
t e l e p h o n e wires.
(w)
O n o r a b o u t M a r c h 31, 1989, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 1 5 4 , 8 9 3 . 0 0 to be t r a n s f e r r e d
127
from Old Lincoln
Citibank, Tucson,
t e l e p h o n e wires.
269.
artifice
to
participated
In
furtherance
defraud,
the
the
above-described
Racketeering
in t h e a f f a i r s
indirectly causing
of
t o A c c o u n t # 6 4 8 5 7 0 1 1 8 6 at
Arizona, using interstate
Defendants
scheme
and
conducted
and
of the A C C E n t e r p r i s e b y ' d i r e c t l y
the A C C En te r p r i s e to enga ge
in t h e
or
following
c o n d u c t w i t h r e sp ec t to the Hotel Po n t c h a r t r a i n transactions:
(a)
O n o r a b o u t J a n u a r y 23, 1987, t h e R a c k e t e e r i n g
De f e n d a n t s ca u s e d $3 35 ,0 00 .0 0 to be p a i d from
PFC to Hotel Po n t c h a r t r a i n by u s in g interstate
telephone wires
to
cause
said
s u m t o be
t r a n s f e r r e d ’ f r o m A c c o u n t No.
5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(b)
O n o r a b o u t F e b r u a r y 3, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s ca us ed $ 3 80 ,0 23 .2 1 to be pa i d from
PFC to Hotel Pontchartrain by using interstate
telephone wires to
cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No. 5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 34 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(c)
O n o r a b o u t F e b r u a r y 5, 1987, t h e R a c k e t e e r i n g
De f e n d a n t s ca u s e d $1 50 ,0 00 .0 0 to be p a i d from
PFC to Hotel Po n t c h a r t r a i n by u s i n g interstate
telephone wires
to cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(d)
O n o r a b o u t M a r c h 2, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 5 0 0 , 0 0 0 . 0 0 t o b e p a i d f r om
PFC to Hotel P o nt ch ar tr ai n by us in g interstate
telephone wires
to
cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(e)
O n o r a b o u t M a r c h 9, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 2 0 0 , 0 0 0 . 0 0 t o b e p a i d f r om
128
P F C t o H o t e l P o n t c h a r t r a i n b y using' i n t e r s t a t e
telephone wires
to cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k of
D e t r o i t , D e t r oi t, M i c h i g a n .
(f)
O n o r abc u t J u n e 4, 1987, t h e R a c k e t e e r i n g
D e f e nd an ts caused $400,000.00 to be pa id from
PFC to Hotel P o nt ch ar tr ai n by u s i n g interstate
telephone wires
to c a u s e
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 2 - 0 8 7 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(g)
O n o r a b o u t J u n e 29, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 1 2 , 9 5 0 , 4 2 6 . 9 0 t o b e .p a i d
• from
PFC
to
Crescent
Lending
Corporation
("CLC") b y u s i n g i n t e r s t a t e t e l e p h o n e w i r e s to
cause said sum to be transferred from Account
No. 5 0 - 0 5 2 - 0 8 7 a t B a n k e r s T r u s t C o m p a n y , N e w
York, N e w Y o r k t o A c c o u n t No. 5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w York.
(h)
O n o r a b o u t J u n e 30, 1987, t h e R a c k e t e e r i n g
Defend an ts caused $402,889.12 to be paid from
PFC to CLC by using interstate telephone wires
to cause said sum to be tr ansferred from
Account
No.
50-052-087
at
Bankers
Trust
C o m p a n y , N e w York, N e w Y o r k t o A c c o u n t No. 500 5 5 - 7 9 8 a t B a n k e r s T r u s t C o m p a n y , N e w York, N e w
York.
(i)
O n o r a b o u t J u l y 2, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s ca u s e d $4 80,000 to be pa id from CLC
to Hotel Pontchartrain by using interstate
telephone
wires to
cause
said
sum to be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York', N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(j)
O n o r a b o u t A u g u s t 4, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 4 9 0 , 0 0 0 . 0 0 to be p a i d f r o m
CLC to Hotel Pontchartrain by using interstate
telephone
wires to
cause
said
s u m t o be
t r a n s f e r r e d f r o m V a l l e y N a t i o n a l Bank, P h o e n i x ,
A r i z o n a t o A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l
Ba n k of Detroit, Detroit, Michigan.
O n o r a b o u t S e p t e m b e r 1, 1987, t h e R a c k e t e e r i n g
De f e n d a n t s ca u s e d $4 0 0 , 0 0 0 . 0 0 to be pa id from
(k)
129
CLC to Hotel P o n t c h a r t r a i n by u s i n g interstate
telephone
wires to
cause said sum
t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(l)
Or o r a b o u t O c t o b e r 1, 1987,. t h e R a c k e t e e r i n g
Defend an ts caus ed $4 50,000.00 to be pa id from
CIjC t o H o t e l P o n t c h a r t r a i n b y u s i n g i n t e r s t a t e
telephone
w i re s to
cause said sum
t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
Account. No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(m)
O n o r a b o u t N o v e m b e r 4, 1987, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $450,000.00 to be pa id from
CLC to Hotel Pontchartrain by using interstate
telephone
wires to
cause said sum
to be
transferred
f r o m A c c o u n t No.
0158-2321
at
Valley National
Bank,
Phoenix,
A r i z o n a to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(n)
O n o r a b o u t N o v e m b e r 12, 1987, t h e R a c k e t e e r i n g
Defendants caused $150,000.00 to be paid from
CLC to Hotel Pontchartrain by using interstate
telephone
wires to
cause said sum
t o be
t r a n s f e r r e d f r o m A c c o u n t No. 5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(o)
O n o r a b o u t D e c e m b e r 3, 1987, t h e R a c k e t e e r i n g
De fe nd an ts ca us ed $4 00,000.00 to be p a id from
CLC to Hotel Pontchartrain by using interstate
telephone wires
to ca us e
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(p)
O n o r a b o u t D e c e m b e r 16, 1987, t h e R a c k e t e e r i n g
D e f e n d a n t s c a us ed $ 1 50 ,0 00 .0 0 to be pa i d from
CLC to Hotel Pontchartrain by using interstate
telephone wires
to cause
said
sum to
be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
130
(q)
k
O n o r a b o u t J a n u a r y 7, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 6 0 0 , 0 0 0 to b e p a i d f r o m C L C
to Hotel Pontchartrain by using interstate
telephone wires
to
cause
said
sum
to b e
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k t o
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(r)
O n o r a b o u t J a n u a r y 15, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s ca u s e d $490,000.00 to be pa id from
CLC to Hotel Po nt ch ar tr ai n by us in g interstate
telephone
w i re s to cause
said sum
t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(s)
O n o r a b o u t J a n u a r y 29, 1988, t h e 'Rac ke te er in g
De fe n d a n t s ca u s e d $110,0 00 .0 0 to be pa id from
CLC to Hotel P o n t c h a r t r a i n by u s i n g interstate
telephone
wire s to cause
said sum
to b e
transferred
f r o m A c c o u n t No.
0158-9566
at
Valley National
Bank,
Phoenix, Ar iz on a
to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(t)
O n o r a b o u t F e b r u a r y 1, 1988, t h e R a c k e t e e r i n g
Defend an ts caused $450,000.00 to be paid from
• CLC to Hotel Pontchartrain by using interstate
telephone
wire s to cause
said sum
to be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(u)
O n o r a b o u t M a r c h 3, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caused $500,000.00 to be paid from
CLC to Hotel Pontchartrain by using interstate
telephone wires
to cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(v)
O n o r a b o u t A p r i l 4, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 2 0 0 , 0 0 0 . 0 0 t o be p a i d f r o m
CLC to Hotel Pontchartrain by using interstate
telephone wires
to
cause
said
sum to
be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
131
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l
Detroit, Detroit, Michigan.
B a n k of
(w)
O n o r a b o u t A p r i l 25, 1988, t h e R a c k e t e e r i n g
De f e n d a n t s c a us ed $ 5 0, 00 0. 00 to be p a i d from
CLC to Hotel P o n t c h a r t r a i n by u s i n g interstate
telephone wires
to
cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(x)
O n o r a b o u t M a y 4, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s ca u s e d $ 2 60 ,0 00 .0 0 to be p a i d from
CLC to Hotel Po n t c h a r t r a i n by usin g interstate
telephone wires
to cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(y)
O n o r a b o u t J u n e 1, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 2 4 0 , 0 0 0 . 0 0 t o b e p a i d f r om
CLC to Hotel Pontchartrain by using interstate
telephone wires
to
cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(z)
O n o r a b o u t J u n e 13, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s ca us ed $245,000 to be p a i d from CLC
to Hotel Pontchartrain by using interstate
telephone wires to
cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(aa)
O n o r a b o u t J u n e 29, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 3 6 5 , 0 0 0 . 0 0 t o b e p a i d fr om
CLC to Hotel P o nt ch ar tr ai n by u s in g interstate
telephone wires
to cause
said
s u m t o be
t r a n s f e r r e d f r o m A c c o u n t No.
5 0 - 0 5 5 - 7 9 8 at
B a n k e r s T r u s t C o m p a n y , N e w York, N e w Y o r k to
A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l B a n k of
Detroit, Detroit, Michigan.
(bb)
O n o r a b o u t J u l y 29, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 2 6 0 , 0 0 0 . 0 0 t o b e p a i d f r om
CLC to Hotel P o n t c h a r t r a i n by u s i n g interstate
telephone wires
to
cause
said
s u m t o be
132
t r a n s f e r r e d f r o m A c c o u n t No. 0 3 1 9 0 0 0 1 1 9 0 0 at
O l d L i n c o l n , in P h o e n i x , A r i z o n a t o A c c o u n t No.
104-1434 at th e N a ti on al Ba n k of Detroit,
Detroit, Michigan.
(cc)
O n o r a b o u t A u g u s t 31, 1988, t h e R a c k e t e e r i n g
Defendants caused $260,000.00 to be paid from
CLC to Hotel Pontchartrain by using interstate
telephone wires
to cause
said
sum to be
t r a n s f e r r e d f r o m A c c o u n t No. 0 3 1 9 0 0 0 1 1 9 0 0 at
O l d L i n c o l n , in Ph o e n i x , A r i z o n a t o A c c o u n t No.
1 0 4 - 1 4 3 4 at t h e N a t i o n a l B a n k o f D e t r o i t ,
Detroit, Michigan.
(dd)
On or
about
September
21,
1988,
the
R a c k e t e e r i n g De fe nd an ts ca us ed $9 0,000.00 to
be p a i d from CLC to Hotel P o n t c h a r t r a i n by
using interstate telephone wires to cause said
sum to
be
transferred
from Account
No.
03 19 00 01 19 00 at
Old
Lincoln,
in
Phoenix,
A r i z o n a t o A c c o u n t No. 1 0 4 - 1 4 3 4 a t t h e N a t i o n a l
B a n k of D e t r o i t , D e t r o i t , M i c h i g a n .
(ee)
On or
about
September
30,
1988,
the
R a c k e t e e r i n g De fe n d a n t s c a us ed $2 60 ,0 00 .0 0 to
be paid from CLC to Hotel Pontchartrain by
u s i n g in terstate te l e p h o n e wire s to cause said
sum to
be
transferred
from Account
No.
03 19 00011900 at
Old
Lincoln,
in
Phoenix,
A r i z o n a t o A c c o u n t No. 1 0 4 - 1 4 3 4 at t h e N a t i o n a l
B a n k of D e t r o i t , D e t r o i t , M i c h i g a n .
270.
artifice
to
participated
In
defraud,the
furtherance
Racketeering
in t h e a f f a i r s
of
the
above-described
Defendants
conducted
of the AC C E n t e r p r i s e by d i r e c t l y
indirectly c a us in g the AC C E n t e rp ri se to
engage
in t h e
scheme
and
or
following
co nd uc t r e s p e c t i n g t h e A C C ESOP:
(a)
O n o r a b o u t J a n u a r y 21, 1988, t h e R a c k e t e e r i n g
D e f e n d a n t s c a u s e d $ 7 5 , 6 6 2 . 5 0 to b e t r a n s f e r r e d
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s in g interstate t e l e ph on e
lines.'
133
and
(b)
O n or a b o u t F e b r u a r y 24, 19S8, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $65,988.89 to be tr a n s f e r r e d
from
Old
Lincoln
to
First Minrieapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g i n t e r s t a t e t e le ph on e
lines.
(c)
. O n o r a b o u t M a r c h 21, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $53,961.11 to be t r an sf er re d
from
Old
Lincoln
to
First Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
fo r
further credit
to ACC
A c c o u n t #20429-0, u s i n g in te r s t a t e t e l e p h o n e
lines.
(d)
O n o r a b o u t A p r i l 21, 1988, t h e R a c k e t e e r i n g
De fe nd an ts caused $61,669.44 to be t r an sf er re d
from
Old
Lincoln
to
First Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further credit
to
ACC
A c c o u n t #20429-0, us i n g i n t e r s t a t e t e le ph on e
lines.
(e)
O n o r a b o u t M a y 23, 1988, t h e R a c k e t e e r i n g
Defendants caused $64,877.78 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further credit
to
ACC
A c c o u n t #20429-0, u s i n g in te r s t a t e t e l e p h o n e
lines.
(f)
O n o r a b o u t J u n e 21, 1988, t h e R a c k e t e e r i n g
Defendants caused $61,322.22 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
M i n n e a p o l i s , Minnesota,, T r u s t T e l l e r A c c o u n t
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g in te r s t a t e t e le ph on e
lines.
(g)
O n o r a b o u t J u l y 21, 1988, t h e R a c k e t e e r i n g
Defendants caused $65,933.33 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g i n te rs ta te tele ph on e
lines.
(h)
O n o r a b o u t A u g u s t 22, 1988, t h e R a c k e t e e r i n g
De fe nd an ts ca us ed $7 3,100.00 to be t r a n sf er re d
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
134
#402-8054-353,
for
further
credit
to. ACC
A c c o u n t #20429-0, u s in g interstate t e l e ph on e
lines.
(i)
On
or
about
September
21,
1988,
the
R a c k e t e e r i n g De fe n d a n t s ca us ed $ 7 3, 22 5. 00 to
be transferred
from Old Lincoln
to
First
Minneapolis,
Minneapolis,
Minnesota,
Trust
Teller
Account
#402-8054-353,
for
further
credit
to
ACC
Account
#20429-0,
using
i n t e r s t a t e t e l e p h o n e lines.
(j)
O n o r a b o u t O c t o b e r 21, 1988, t h e R a c k e t e e r i n g
Defendants caused $71,662.50 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g i n te rs ta te telephone
lines.
(k)
O n o r a b o u t N o v e m b e r 8, 1988, t h e R a c k e t e e r i n g
Defendants
caused
$1,250,000.00
to
be
transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis,
Minnesota,
Trust
Teller
Account
#402-8054-353,
for
further
credit
to
ACC
Account
#20429-0,
using
i n t e r s t a t e t e l e p h o n e li nes.
(l)
O n o r a b o u t N o v e m b e r 21, 1988, t h e R a c k e t e e r i n g
Defendants caused $74,478.47 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, usin g in terstate te le ph on e
lines.
\
(m)
O n o r a b o u t D e c e m b e r 21, 1988, t h e R a c k e t e e r i n g
Defend an ts caused $66,850.00 to be t r an sf er re d
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, us i n g i n t e rs ta te t e l e p h o n e
lines.
(n)
O n o r a b o u t J a n u a r y 23, 1989, t h e R a c k e t e e r i n g
De fe n d a n t s ca u s e d $82,60 0. 00 to be t r a n s f e r r e d
from
Old
Lincoln
to
First
Minneapolis,
M i n n e a p o l i s , M i n n e s o t a , ■T r u s t T e l l e r A c c o u n t
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g in te rs ta te t e l e p h o n e
lines.
135
V .
(o)
O n o r a b o u t .February 21, 1989, t h e R a c k e t e e r i n g
Defendants caused $69,881.25 to be transferred
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
#402-8054-353,
for
further
credit
to
ACC
A c c o u n t #20429-0, u s i n g i n t e r s t a t e t e l e p h o n e
li nes.
(P)
O n o r a b o u t M a r c h 21, 1989, t h e R a c k e t e e r i n g
De fe nd an ts caus ed $69,662.50 to be t r an sf er re d
from
Old
Lincoln
to
First
Minneapolis,
Minneapolis, Minnesota, Trust Teller Account
(1)#402-8054-353, for fu rt he r c r e d i t to ACC
A c c o u n t #20429-0, u s i n g in t e r s t a t e te l e p h o n e
lines.
C LA IM S
A .
FOR
R E L IE F .
COUNT I - V io la tio
C o n d u c tin g o r P a r
o f th e A f f a ir s o f
th ro u g h a P a tte r n
27 1.
n o f 18 U . S . C .
§ 1962(c) by
tic ip a tin g in th e C o n du ct
th e ACC E n te r p r is e
o f R a c k e te e rin g A c t i v i t y .
- Plaintiff
adopts
and
incorporates
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s
270,
inclusive,
of
this
Complaint
for
Count
I
by
1 through
against
the
Ra cketeering Defendants.
272.
A t al l t i m e s r e l e v a n t h e r e i n , t h e A C C E n t e r p r i s e w a s
a n e n t e r p r i s e e n g a g e d in a n d a f f e c t i n g i n t e r s t a t e c o m m e r c e .
273.
The R a c k e t e e r i n g De f e n d a n t s k n o w i n g l y e x e c u t e d and
attempted to execute a scheme and artifice to defraud a federally
insured
financial
credits,
assets,
institution
securities,
or
obtained
the
monies,
or othe r p r o p e r t y o w ne d by
funds,
or under
the c u s t o d y or co nt ro l of a fede ra ll y in su re d fi nancial i n st it ut io n
by
means
promises
of
false
or
fraudulent
in v i o l a t i o n of 18 U . S . C .
136
pretenses,
§ 1344.
representations,
or
refere
274.
The
participated
Enterprise's
directly
affairs
Racketeering
or
in
a
indirectly
in
scheme
artifice
Lincoln^ in o r d e r t o d e p r i v e
s c he me
and
artifice
to
Defendants
and
conducting
to
conducted
the
defraud
it o f m o n e y o r p r o p e r t y r i g h t s .
defraud
had
the
purpose
or
ACC
Old
The
effect
of
d i v e r t i n g a n d w a s t i n g t h e a s s e t s of O l d L i n c o l n f o r t h e b e n e f i t of
the
Racketeering
purpose
or
Defendants.
effect
of
The
scheme
seriously
and
artifice
prejudicing
Old
had
the
Lincoln's
e x p e c t a t i o n a n d a b i l i t y t o m e e t its o b l i g a t i o n s t o d e p o s i t o r s a n d
other s u b s t a n t i a l c r e d i t o r s ,
in t h e
Lincoln Subsidiaries,
of d a m a g i n g Old Li nc ol n' s investments
of
impairing
loans t o t h e L i n c o l n S u b s i d i a r i e s ,
its a b i l i t y t o c o l l e c t
a n d of i m p e d i n g t h e r e g u l a t o r y
a u t h o r i t i e s in t h e p e r f o r m a n c e of t h e i r d u t i e s .
I n f u r t h e r a n c e of
the s c h e m e a n d a r t i f i c e , t h e R a c k e t e e r i n g D e f e n d a n t s u s e d o r c a u s e d
to b e u s e d t h e U n i t e d S t a t e s m a i l s a n d t e l e p h o n e w i r e s as d e s c r i b e d
herein w i t h th e s p e c i f i c intent to d e f r a u d Ol d Lincoln,
and o t h e r r e g u l a t o r y a u t h o r i t i e s .
mails
described
herein
was
in
t h e FSLIC,
Ea ch use of the U n i t e d States
furtherance
of
the
scheme
and
a r t i f i c e a n d e a c h s u c h u s e w a s in v i o l a t i o n o f a n d i n d i c t a b l e u n d e r
the p r o v i s i o n s
wires
of
described
18
U.S.C.
herein
was
§
1341.
in
Each
use
furtherance
of
of
the
the
telephone
scheme
and
a r t i f i c e a n d e a c h s u c h u s e w a s in v i o l a t i o n of a n d i n d i c t a b l e u n d e r
the p r o v i s i o n s
of
18
U.S.C.
§ 1343.
wires as d e s c r i b e d h e r e i n w e r e
fraudulent transa ct io ns
order
to
facilitate
or
The
undertaken,
and to deceive
prevent
137
the
uses
of
the
mails
inter a l i a , to
effect
regulatory
authorities
detection
of
the
and
in
frauds
or
perpetrated
on
Old
Lincoln,
the
F S LI C,
and
other
or
value
regulatory
authorities.
275.
actions,
Keating
decisions,
Jr.
received
money
transactions
knowledge
The
Racketeering
involving
that
Defendants
proceeds
the property
§ 1954.
of
unlawful
involved
financial
activity,
to
transactions
conceal
or
with
the
disguise
conducted
activities
the
§ 1956.
reporting
requirements
intent
to
nature,
promote
the
of
a
financial
under
state
277.
The
of
an
illegal
Defendants
a c t i v i t i e s g e n e r a t i n g s u c h p r o c e e d s we re :
18
U.S.C.
financial
§ 1344 ;
and to avoid
and
federal
gratuity
knowingly
and
the
§ 1957.
b a n k fraud
or
gift
in
engaged
in
The unlawful
acceptance
by
an
officer
of
a
in v i o l a t i o n
§ 215.
278.
A s d e s c r i b e d ab ov e, t h e R a c k e t e e r i n g D e f e n d a n t s w e r e
em pl oy ed by or associated wi th the ACC Enterprise.
law.
b a n k f r a u d in v i o l a t i o n
i n s t i t u t i o n of a n i l l e g a l g r a t u i t y o r g i f t
o f 18 U . S . C .
the
in c r i m i n a l l y d e r i v e d p r o p e r t y d e r i v e d f r o m
u n l a w f u l a c t i v i t y in v i o l a t i o n of 18 U . S . C .
of
unlawful
§ 215.
Racketeering
monetary transactions
of
§ 1344; a n d t h e a c c e p t a n c e b y a n o f f i c e r
institution
v i o l a t i o n o f 18 U . S . C .
the
location,
Th e u n l a w f u l a c t i v i t i e s g e n e r a t i n g such p r o c e e d s were:
in v i o l a t i o n of 18 U . S . C .
with
They conducted
s o u r c e , t h e o w n e r s h i p , o r t h e c o n t r o l of t h e p r o c e e d s ,
transaction
financial
represented the proceeds
u n l a w f u l a c t i v i t y in v i o l a t i o n of 18 U . S . C .
such
of
or othe r duti es r e la ti ng to m a t t e r s c o n c er ni ng
t h e A C C E S O P in v i o l a t i o n of 18 U . S . C .
276.
because
138
279.
pa’r t i c i p a t e d
The
Defendants
Racketeering
directly
and
indirectly
in
the
and
conducted
conduct
of
the
ACC
E n t e r p r i s e ’s a f f a i r s t h r o u g h a p a t t e r n of r a c k e t e e r i n g a c t i v i t y as
set f o r t h in p a r a g r a p h s
U.S.C.
18
s u p r a . in v i o l a t i o n of 18
§ 1 9 6 2 (c).
280.
of
53 t h r o u g h 270,
B y r e a s o n of t h e R a c k e t e e r i n g D e f e n d a n t s ' v i o l a t i o n
U.S.C.
business
or
§
1962 (c),
property
as
New
Lincoln
more
has
fully
been
set
injured
forth
in
its
The
a b ov e.
Ra ck et ee ri ng D e f e n d a n t s are jo in tl y and s e v e r a l l y l i ab le for such
damages.
281.
P u r s u a n t t o t h e p r o v i s i o n s o f 18 U . S . C .
§ 19 64 (c ),
the R T C is e n t i t l e d t o r e c o v e r t h r e e f o l d t h e d a m a g e s s u s t a i n e d as
a r e s u l t o f t h e a b o v e - d e s c r i b e d v i o l a t i o n s o f 18 U . S . C .
The
RTC
is
also
entitled
to
recover
including r e a s o n a b l e attorneys'
B .
282.
the
costs
of
§ 1 9 6 2 (c ).
this
a c ti on ,
fees.
COUNT I I - V i o l a t i o n o f 18 U . S . C .
§ 1962(b) b y A c q u irin g o r M a in ta in in g an
In te r e s t in and C o n tro l o f O ld L in c o ln
th ro u g h a P a tte r n o f R a c k e te e rin g A c t i v i t y .
Plaintiff
adopts
and
incorporates
by
reference
he rein e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
281,
inclusive,
of
this
Complaint
for
Count
II
against
the
Racketeering Defendants.
283.
At all ti me s re le v a n t h e r e i n the AC C E n t e r p r i s e and
Old L i n c o l n w e r e e n t e r p r i s e s as d e f i n e d b y 18 U . S . C .
were e n g a g e d in a n d a f f e c t i n g i n t e r s t a t e c o m m e r c e .
139
§ 19 61 (4 )
and
284.
racketeering
The
Racketeering
activity
s u o r a . acquired
as
set
Defendants,
forth
or m a i n t a i n e d
through
in p a r a g r a p h s
directly
or
a pattern
53 t h r o u g h
indirectly
an
in a n d c o n t r o l o f O l d L i n c o l n in v i o l a t i o n o f 18 U . S . C .
285.
of
18
U.S.C.
business
or
of
270,
interest
§ 1962 (b).
B y r e a s o n of t h e R a c k e t e e r i n g D e f e n d a n t s ' v i o l a t i o n
§ 1962 (b),
property
New
as
Lincoln
more
has
fully
been
set
injured
forth
in
a b ov e.
Ra c k e t e e r i n g Defendants are jointly and severally liable
its
The
for said
damages.
286.
the RTC
P u r s u a n t t o t h e p r o v i s i o n s of 18 U . S . C .
§ 19 64 (c ),
is e n t i t l e d t o r e c o v e r t h r e e f o l d t h e d a m a g e s s u s t a i n e d as
a r e s u l t of t h e a b o v e - d e s c r i b e d v i o l a t i o n s of § 1 9 6 2 ( b ) .
is
also
entitled
to
recover
reasonable attorneys'
C .
COUNT
by R e
o f Ra
in O p
287.
the
costs
of
this
action,
I I I - V io la tio
c e iv in g In c o m e
c k e te e rin g A c t
e ra tio n o f th e
Plaintiff
inclusive,
of
including
fees.
adopts
n o f 18 U . S . C .
§ 1962(a)
D e r iv e d fro m a P a t t e r n
iv it y and In v e s tin g I t
ACC E n t e r p r is e .
and
incorporates
by
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s
286,
The RTC
this
Complaint
for
Count
III
reference
1 through
against
the
Ra ck et ee ri ng Defendants.
288.
A t al l t i m e s r e l e v a n t h e r e i n , t h e A C C E n t e r p r i s e w a s
an e n t e r p r i s e e n g a g e d in a n d a f f e c t i n g i n t e r s t a t e c o m m e r c e .
289.
The Racketeering Defendants received income derived
f r o m t h e p a t t e r n o f r a c k e t e e r i n g a c t i v i t y s e t f o r t h in p a r a g r a p h s
53
through
270,
s u p r a . and
invested
140
directly
or
indirectly
such
income in t h e e s t a b l i s h m e n t o r o p e r a t i o n of t h e ■A C C E n t e r p r i s e
v i o l a t i o n o f 18 U . S . C .
290.
§ 1962(a).
By r e a s o n of th e R a c k e t e e r i n g D e f e n d a n t s ’ v i o l a t i o n
of 18 U . S . C .
§ 1962(a),
been i n j u r e d
in
above.
Racketeering
The
in
the RT C as C o n s e r v a t o r for N e w L i n c o l n has
its b u s i n e s s
o r p r o p e r t y as m o r e
Defendants
are
fully set
jointly
and
forth
severally
liable f o r s a i d d a m a g e s .
291.
P u r s u a n t t o t h e p r o v i s i o n s of 18 U . S . C .
§ 19 64 (c ),
the R T C is e n t i t l e d t o r e c o v e r t h r e e f o l d t h e d a m a g e s s u s t a i n e d as
a r e s u l t o f t h e a b o v e - d e s c r i b e d v i o l a t i o n s of 18 U . S . C .
The
RTC
is
also
entitled
to
recover
including r e a s o n a b l e attorneys'
D .
292.
the
costs
of
this
adopts
and
R IC O .
incorporates
by
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s
291,
inclusive,
of
this
a c ti on ,
fees.
COUNT I V - V i o l a t i o n o f 18 U . S . C .
6 19 6 2 (d ) b v C o n s p irin g To V io la te
Plaintiff
§ 1 9 62 (a ).
Complaint
for
Count
IV
reference
1 through
against
the
Racketeering Defendants.
293.
The Ra ck e t e e r i n g Defendants cons pi re d to v i ol at e the
p r o v i s i o n o f 18 U . S . C .
18 U . S . C .
undertake
§ 1962(a),
(b), or
(c) a n d t h e r e b y v i o l a t e d
§ 19 62 (d) .
294.
The 'Racketeering
Defendants
the
conduct
to
necessary
realize
agreed
the
to
purposes
and
of
did
the
co ns pi ra cy .
295.
in
paragraphs
T h e c o n d u c t of t h e R a c k e t e e r i n g D e f e n d a n t s d e s c r i b e d
53
through
270,
141
supra.
of
this
Complaint
was
u n d e r t a k e n in f u r t h e r a n c e o f t h e c o n s p i r a c y t o r e a l i z e t h e c o m m o n
go al s and p u r p o s e s of the conspiracy.
296.
of
18
By re as on of the R a c k e t e e r i n g Defendants' vi o l a t i o n
U.S.C.
business
§ 1962 (d),
or
property
New
as
Lincoln
more
has
fully
been
set
injured
forth
in
a b ov e.
R a ck et ee ri ng Defendants are jointly and severally liable
its
The
for said
damages.
297.
P u r s u a n t t o t h e p r o v i s i o n s o f 18 U . S . C .
§ 1 9 64 (c ),
t h e R T C is e n t i t l e d t o r e c o v e r t h r e e f o l d t h e d a m a g e s s u s t a i n e d as
a r e s u l t o f t h e a b o v e - d e s c r i b e d v i o l a t i o n s o f 18 U . S . C .
The
RTC
is
also
entitled
to
recover
including reasonable attorneys'
E .
COUNT
Under
298.
Plaintiff
the
costs
of
§ 1 9 62 (d ).
this
a c ti on ,
fees.
V - C o m m is s io n o f R a c k e t e e r in g
A .R .S .
S 13 -2 3 0 1.D .4
adopts
and
incorporates
by
reference
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
270,
inclusive,
of
this
Complaint
for
Count
V
against
the
Ra cketeering Defendants.
299.
The
Racketeering
Defendants
violated
the
felony
s t a t u t e s of the St at e of Arizona.
300.
as
defined-
financial
of
the
The Racketeering Defendants^committed racketeering
by
A.R.S.
§ 1 3 - 2 3 0 1 . D . 4.
gain wh ic h are chargeable
State
of A r i z o n a
and
punishable
t h a n o n e ye ar .
or
142
by
committing
indictable under
by
imprisonment
acts
for
the
laws
for more
301.
The
Racketeering
Defendants
committed
crimes
involving the following:
302.
(a)
Th ef t u n d e r A.R.S.
(b)
False statements or publications concerning
l a n d f o r s a l e o r l e a s e o r s a l e of s u b d i v i d e d
l a n d s o r s a l e a n d m o r t g a g i n g of u n s u b d i v i d e d
lands ?
(c)
A scheme or artifice
§§ 13 - 2 3 1 0 , 2311;
(d)
R e c e i v i n g or c o n c e a l i n g r a c k e t e e r i n g pr oc e e d s
in v i o l a t i o n of A . R . S . § 1 3 - 2 3 1 7 . A.
The
Racketeering
or a r t i f i c e t o d e f r a u d ,
false
and
fraudulent
The
to d e f r a u d
Defendants,
u n d e r A.R.S.
pursuant
to
a scheme
knowingly obtained a benefit by means
pretenses,
o m i s s i o n s in v i o l a t i o n o f A . R . S .
303.
§ 13-1801 et s e a . ;
Racketeering
representations,
of
or
material
to
a scheme
§ 1 3 - 2 3 1 0 . A.
Defendants,
pursuant
or artifice, t o d e f r a u d a n d d e c e i v e , k n o w i n g l y f a l s i f i e d , c o n c e a l e d ,
and c o v e r e d u p m a t e r i a l
made a n d u s e d
facts by tricks,
false writings
schemes,
and documents
or devices
knowing
and
such writings
and d o c u m e n t s c o n t a i n e d false, f i c t i t i o u s , o r f r a u d u l e n t s t a t e m e n t s
and
entries
in
matters
related
to
the
business
conducted
by
d e p a r t m e n t s a n d a g e n c i e s of t h e S t a t e o f A r i z o n a a n d t h e S t a t e of
Cali fo rn ia ,
i n c l u d i n g t h e CDSL,
Specifically,
Old
in v i o l a t i o n of A . R . S .
§ 13-2311.
t h e s e d e f e n d a n t s c o n c e a l e d t h e i r f r a u d s in r e p o r t i n g
Lincoln's
condition
and
transactions
to
state
and
federal
authorities.
304.
an i n t e r e s t
in,
The R a c k e t e e r i n g De fendants a c qu ir ed or m a i n t a i n e d
transferred,
transported,
143
received,
or concealed
the e x i s t e n c e and na t u r e of r a c k e t e e r i n g p r o c e e d s k n o w i n g or wi th
reason
to
know
that
v i o l a t i o n of A.R.S.
305.
violation
property
of
The
they
were
proceeds
of
an
offense
in
theft
in
§ 1 3 - 2 3 1 7 . A.
Racketeering
A.R.S.
the
Defendants
§ 1 3 - 1 8 0 2 . A . 1.
of Ol d L i nc ol n w i th the
by
committed
knowingly
intent
controlling
of d e p r i v i n g O l d
the
Lincoln
of it s p r o p e r t y .
306.
The
Racketeering
v i o l a t i o n of A.R.S.
Defendants
committed
in
§ 1 3 - 1 8 0 2 . A . 2. b y k n o w i n g l y c o n v e r t i n g f o r an
u n a u t h o r i z e d t e r m the p r o p e r t y of Old
Lincoln and
e n t r u s t e d t o d e f e n d a n t s o r p l a c e d in d e f e n d a n t s '
limited,
theft
its d e p o s i t o r s
possession
for a
a u t h o r i z e d term.
307.
The
Racketeering
Defendants
obtained
the
property
of O l d L i n c o l n b y m e a n s o f m a t e r i a l m i s r e p r e s e n t a t i o n s w i t h i n t e n t
to
deprive
Old
Lincoln
of
its
property
in
violation
of
A.R.S.
§ 1 3 - 1 8 0 2 . A . 3.
3 08.
By
reason
Racketeering
Defendants,
business
property
or
of
the
New
as
racketeering
Lincoln
more
fully
has
set
perpetrated
been
injured
forth
by
the
in
its
above.
R a ck et ee ri ng Defendants are jointly and severally liable
The
for said
damages.
309.
P u r s u a n t t o t h e p r o v i s i o n s o f A . R rS.
§ 1 3 - 2 3 1 4 . A.
t h e R T C is e n t i t l e d t o r e c o v e r t h r e e f o l d t h e d a m a g e s s u s t a i n e d as
a
result
of
the
above-described
racketeering.
e n t i t l e d t o r e c o v e r t h e c o s t s of t h i s a c t i o n ,
attorneys' fees.
144
The
RTC
is
also
including reasonable
F.
CO U N T VI - Illegal Co nt ro l of
an E n t e r p r i s e in V i o l a t i o n of
A . R . S . S 1 3 - 2 3 1 2 .A._______________
310.
Plaintiff
adopts
and
incorporates
by
reference
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
309,
inclusive
of
this
Complaint
for
Count
VI
against
the
Racketeering Defendants.
311.
Old
Lincoln
A t al l t i m e s r e l e v a n t h e r e i n , t h e A C C E n t e r p r i s e a n d
were
enterprises
within
The
Racketeering
the
meaning
of
A.R.S.
§ 1 3 - 2 3 0 1 . D . 2.
312.
defined by A.R.S.
Defendants
§ 1 3 - 2 3 0 1 . D . 1.,
possessed
control,
as
over, t h e A C C E n t e r p r i s e a n d O l d
L i n c o l n a n d e x e r c i s e d s u b s t a n t i a l d i r e c t i o n o v e r t h e a f f a i r s of t h e
ACC E n t e r p r i s e a n d O l d L i n c o l n .
313.
illegal
The Racketeering Defendants acquired or maintained
control
of
the
ACC
Enterprise
r a c k e t e e r i n g in v i o l a t i o n o f A . R . S .
314.
of
A.R.S.
business
Old
Lincoln,
through
§ 1 3 - 2 3 1 2 . A.
By r e as on of the R a c k e t e e r i n g Defendants' v i o l a t i o n
§ 1 3 - 2 3 1 2 . A.,
or
and
property
New
as
Lincoln
more
has
fully
been
set
injured
forth
in
a b ov e.
its
The
Racketeering D e f e n d a n t s are j o in tl y and s e ve ra ll y liable for said
damages.
315.
RTC
is
result
The
RTC
P u r s u a n t t o t h e p r o v i s i o n s of A . R . S .
entitled
of
the
is
to
recover
threefold
above-described
also
entitled
to
violations
recover
including r e a s o n a b l e attorneys'
the
fees.
145
the
damages
of
§ 1 3 - 2 31 4,
sustained
A . R. S.
costs
of
the
as
a
§ 1 3 - 2 3 1 2 . A.
this
action,
G.
COUNT V I I - C o n d u c tin g o r
P a r t i c i p a t i n g i n t h e A f f a i r s of a n
E n te r p r is e th ro u g h R a c k e te e rin g in
V io la tio n o f A .R .S .
S 13-2312.B .
316.
Plaintiff
adopts
and
incorporates
by
reference
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
315,
inclusive,
of
this
Complaint
for
Count
VII
against
the
R a ck et ee ri ng Defendants.
317.
Old
Lincoln
A t all ti me s r e l e v a n t herein, the A C C E n t e r p r i s e and
were
enterprises
within
The
Racketeering
the
meaning
of
A.R.S.
§ 1 3 - 2 3 0 1 . D.2.
318.
Defendants
at
all
times
relevant
he re in w e re em pl oy ed or associated with the ACC En te rp ri se and Old
L i n c o l n a n d c o n d u c t e d o r p a r t i c i p a t e d in t h e c o n d u c t of t h e a f f a i r s
of A C C E n t e r p r i s e and Old L i n c o l n t h r o u g h racketeering.
319.
of
A.R.S.
business
By reas on of the R a c k e t e e r i n g Defendants' v i o l a t i o n
§ 13-2312.B . ,
or
property
New
as
Lincoln
more
fully
has
been
set
injured
forth
in
above.
its
The
R a c k e t e e r i n g D e f e n d a n t s are j o in tl y and s e v e r a l l y l i ab le for said
damages.
320.
RTC
is
result
The
RTC
P u r s u a n t t o t h e p r o v i s i o n s of A . R . S .
entitled
of
is
the
to
recover
threefold
above-described
also
entitled
to
violations
recover
including reasonable attorneys'
the
fees.
146
the
damages
of
§ 13-2314, the
sustained
A.R.S.
costs
of
as
a
§ 1 3 - 2 3 1 2 . B.
this
ac ti on ,
COUNT VIII
H.
321.
C o m m o n L a w Fraud.
Plaintiff
adopts
and
incorporates
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s
270,
inclusive
Jr.,
K e a t i n g III,
Ni eb li ng ,
of
Sauter,
this
Wischer,
Kielty,
factual
misrepresentations
a p p r o v e A C C ’s a p p l i c a t i o n
fo r c o n t r o l
and to re fr ai n
operations
of
im pr ud en t,
and
Keating
Hubbard,
Old
Lincoln
fraudulent
order
t h r o u g h FH LBB,
of O l d L i n c o l n ,
from intervening
in
described
in
f a l s e at t h e t i m e t h a t t h e y
T h e y w e r e m a d e t o i n d u c e t h e FSLIC,
Plan,
against
W u r z e l b a c h e r , Ligget,
53 t h r o u g h 270 a b o v e w e r e
were m a d e .
the T a x
for Count VIII
1 through
a n d Hall.
322.. T h e
paragraphs
Complaint
by
to
transactions.
approve
in t h e a f f a i r s
stop
They
to
unsafe,
were
to
and
unsound,
also
made
to
induce O l d L i n c o l n t o e n g a g e in f r a u d u l e n t l o a n s a n d t r a n s a c t i o n s
with
the
ACC
borrowers"
engage
in
in
insiders,
constituents,
insiders, - and
"straw
for the b e n e f i t of d e f e n d a n t s and ot he r insiders.
323.
material
Enterprise's
The factual misrepresentations described above were
that
Old
Lincoln
transactions
with
was
the
and "straw borrowers"
induced
ACC
to
make
Enterprise's
loans
to
and
constituents,
f o r t h e b e n e f i t of d e f e n d a n t s a n d
other i n s i d e r s .
324.
The factual mi sr ep re se nt ati on s described above were
made w i t h t h e i n t e n t t o d e c e i v e a n d d e f r a u d O l d L i n c o l n .
325.
justifiably
At
and
al l
times
relevant
reasonably
relied
herein,
upon
Old
the
Lincoln
factual
m i s r e p r e s e n t a t i o n s b y m a k i n g l o a n s t o a n d e n g a g i n g in t r a n s a c t i o n s
147
reference
with
the
ACC
borrowers"
constituents,
insiders,
and
"straw
f o r t h e b e n e f i t of d e f e n d a n t s a n d o t h e r i n s i d e r s .
326.
reliance
Enterprise's
on
Lincoln was
As
the
a direct
factual
and proximate
result
misrepresentations
of Old
described
Lincoln's
above,
i n j u r e d in its b u s i n e s s o r p r o p e r t y as m o r e
f o r t h a b ov e,
Old
f u l l y set
a n d t h e R T C as C o n s e r v a t o r f o r N e w L i n c o l n is e n t i t l e d
to reco ve r said damages.
327.
The
conduct
Kielty, Wu rz elbacher,
of K e a t i n g Jr.,
Keating
Ligget, Hubbard, Niebling,
III,
Sauter,
Wischer,
a n d Hall,
d e s c r i b e d h e r e i n , e v i d e n c e s a n e v i l mind , w a s i n t e n t i o n a l , k n o w i n g ,
malicious,
Lincoln,
without
done
in
reckless
disregard
for
the
rights
of
Old
and done w i t h intent to injure Old Li nc ol n substantially,
just
cause
or
excuse,
so
that
the
RTC
is
entitled
to
reco ve r p u ni ti ve damages.
328.
Wurzelbacher,
Keating
Jr.,
Ligget,
Keating
Hubbard,
III,
Niebling,
Wischer,
Sauter,
and
Kielty,
Hall
are
j o i n t l y and se v e r a l l y liable for said actual and p u n i t i v e damages.
I .
COUNT
IX
-
329.
Plaintiff
C iv il
C o n s p ira c y .
adopts
and
incorporates
by
reference
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
270,
i n c l u s i v e of t h i s C o m p l a i n t f o r C o u n t IX a g a i n s t K e a t i n g J r . ,
Keating
Niebling,
III,
Wischer,
Sauter,
330.
Keating
Ligget,
to
unlawful
Wurzelbacher,
Ligget,
Hubbard,
Wischer,
K i el ty ,
a n d Hall.
Wurzelbacher,
accomplish
Ki e l t y ,
Jr.,
Hubbard,
Keating
Niebling,
purposes.
148
III,
Sauter,
Specifically,
and
these
Hall
agreed
defendants
entered into a civil c o n s p i r a c y to d e fr au d Old L i nc ol n by inducing
Old L i n c o l n t o m a k e
loans to and engage
ACC E n t e r p r i s e ' s c o n s t i t u e n t s ,
insiders,
in t r a n s a c t i o n s w i t h t h e
a n d " s t r a w b o r r o w e r s " fo r
the b e n e f i t o f d e f e n d a n t s a n d o t h e r i n s i d e r s .
331.
T h e c o n d u c t d e s c r i b e d i n .p a r a g r a p h s 53 t h r o u g h 270
of t h i s C o m p l a i n t w a s u n d e r t a k e n in f u r t h e r a n c e o f t h e c o n s p i r a c y
to r e a l i z e t h e c o m m o n g o a l s a n d p u r p o s e s of t h e c o n s p i r a c y .
332. A s
committed
a
pursuant
described
herein,
direct
to
Old
and
and
proximate
in
furtherance
Lincoln
was
result
injured
of
in
of
the
its
the
acts
conspiracy
business
and
p r o p e r t y a s s e t f o r t h ab ove.
333.
III,
T h e c o n s p i r a c y a n d c o n d u c t o f K e a t i n g Jr.,
Wischer,
Kielty,
Wurzelbacher,
Ligget,
Hubbard,
Niebling,
Sauter, a n d H a l l e v i d e n c e s a n e v i l mi nd , w a s i n t e n t i o n a l ,
ma li c i o u s ,
done
in
reckless
disregard
for
the
Keating
knowing,
rights
of
Old
Lincoln,
and done with intent to injure Old Lincoln substantially,
without
just
cause
or
excuse,
so
that
the
RTC
is
entitled
to
re c o v e r p u n i t i v e d a m a g e s .
334.
Wurzelbacher,
Keating
Ligget,
Jr.,
Keating
Hubbard,
III,
Niebling,
Wischer,
Sauter,
and
Kielty,
Hall
are
jo i n t l y a n d s e v e r a l l y l i a b l e f o r s a i d a c t u a l a n d p u n i t i v e d a m a g e s .
J .
COUNT
W o rth
X - B reach o f N e t
M a in te n a n c e A g re e m e n t.
335.
Plaintiff
adopts
and
incorporates
by
reference
herein e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
270, i n c l u s i v e ,
of t h i s C o m p l a i n t f o r C o u n t X a g a i n s t K e a t i n g J r . ,
149
Keating
III,
Niebling,
Wischer,
Hall',
336.
Kielty,
a n d W. J.
Wurzelbacher,
Ligget,
Hubbard,
Keating.
A s p a r t o f its a p p l i c a t i o n t o a c q u i r e c o n t r o l o f O l d
L i n c o l n a n d in c o n s i d e r a t i o n f o r a p p r o v a l o f t h a t a p p l i c a t i o n , A C C
covenanted
to
maintain
Old
Lincoln's
regulatory
capital
for
a
p e r i o d of t w e n t y y e ar s at the m i n i m u m levels r e qu ir ed for insured
thrift
institutions.
Those
levels
are
set
forth
in
12
C . F. R.
§
563.13.
337.
Old Lincoln was the direct and intended beneficiary
of A C C ' s covenant;
in fact,
as t h e t a r g e t of t h e a c q u i s i t i o n ,
Old
L i n c o l n h a d a n i m m e d i a t e s t a k e in A C C ' s p e r f o r m a n c e o f its c o v e n a n t
so
that
it
could
retain
its
then
existing
ability
to
meet
obligations to depositors and other creditors.
338.
in f u l l
Th e te r m s of the net w o r t h m a i n t e n a n c e c o v e n a n t were
f o r c e a n d e f f e c t a t al l t i m e s r e l e v a n t h e r e i n *
339. A C C
breached
the
net
worth
maintenance
covenant,
t h e r e b y d a m a g i n g Ol d Lincoln.
340.
Wurzelbacher,
Keating
Ligget,
Jr.,
Hubbard,
Keating
Niebling,
III,
Hall ,
Wischer,
W.
J.
Ki el ty ,
K e a t i n g and
o t h e r c o n t r o l l i n g p e r s o n s of AC C c a us ed A C C to b r e a c h the net wo rt h
m a i n t e n a n c e c o v e n a n t b y t h e i r a c t s a n d o m i s s i o n s s e t f o r t h in t h i s
Complaint.
These
acts
and
omissions
rendered
Old
Lincoln
insolvent.
341.
worth
maintenance
K e a t i n g Jr.,
B y r e a s o n of A C C ' s b r e a c h e s of t h e t e r m s o f t h e net
covenants,
Keating
III,
resulting
Wischer,
150
from
Kielty,
the
misconduct
Wurzelbacher,
of
Li gg et ,
Hubbard,
pe r s o n s
Niebling,
of
ACC,
Hall ,
Old
W.J.
Lincoln
Keating,
has
and
sustained
other
damages
controlling
in
excess
of
by
reference
$745,000,000.
K .
COUNT
342.
h e re in e a c h
X I
- Alter Ee ro .
Plaintiff
adopts
and every allegation
and
incorporates
contained
in t h i s
Complaint
for
Count XI a g a i n s t K e a t i n g J r . , F i r s t L i n c o l n , M e d e m a H o m e s o f Utah,
Inc., U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e , A m e r i c a n C o n t i n e n t a l
Mortgage
Company,
American
Continental
Resources
C o n t i n e n t a l F i r e a n d C a s u a l t y C o m p a n y , T a t u m Pl ac e,
Continental Properties,
Real E s t a t e ,
Inc.,
Inc.,
Inc., A m e r i c a n
Park Drive Apartments,
Dunlap Apartments,
F i na nc e C o r p o r a t i o n ,
Corporation,
Inc.,
Inc.,
American
A . C. C.
Continental
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II,
Continental
Home
Finance
Corporation,
American
Home
Corporation,
Finance
American
Corporation
II,
Home
Finance
and
American
Home F i n a n c e C o r p o r a t i o n III.
343. A t a l l t i m e s r e l e v a n t h e r e i n , t h e f o l l o w i n g e n t i t i e s
were t h e a l t e r e g o s a n d m e r e i n s t r u m e n t a l i t i e s o f K e a t i n g Jr.
and
of e a c h o t h e r a n d a s s u c h a r e j o i n t l y a n d s e v e r a l l y l i a b l e f o r t h e
acts a n d o m i s s i o n s o f K e a t i n g Jr.
as s e t f o r t h i n t h i s C o m p l a i n t :
American Continental Corporation
M e d e m a H o m e s of Ut ah , Inc.
U n i t e d L e a s i n g C o r p o r a t i o n of D e l a w a r e
American Continental Mortgage Company
American Continental Resources Corporation
Continental Fire & Casualty Company
T a t u m P l ac e, Inc.
A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc.
P a r k D r i v e A p a r t m e n t s , Inc.
A . C . C . R e a l E s t a t e , Inc.
D u n l a p A p a r t m e n t s , Inc.
American Continental Finance Corporation
151
A m e r i c a n C o n t i n e n t a l F i n a n c e C o r p o r a t i o n II
Continental Home Finance Corporation
American Home Finance Corporation
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n II
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III
First Lincoln Financial Corporation
L .
COUNT
X II
344.
Plaintiff
-
B reach
o f
adopts
F id u c ia ry
and
D u tie s
incorporates
by
reference
h e r e i n e a c h a n d e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h
270,
inclusive,
Jr.,
K e a t i n g III,
Niebling,
of
Sauter,
345.
Wurzelbacher,
this
Complaint
Wischer,
Hall,
Keating
Ligget,
Ki e l t y ,
a n d W. J.
Jr.,
officers
of
Old
Count
against
Keating
Hubbard,
Keating.
III,
Niebling,
directors,
Lincoln
XII
W u r z e l b a c h e r , Ligget,
Keating
Hubbard,
K e a t i n g ei t h e r we r e officers,
facto
fo r
or
of
Wischer,
Sauter,
Hall ,
K i el ty ,
a n d W.
de facto directors,
ACC,
or
were
J.
o r de
controlling
p e r s o n s of O l d L i n c o l n a t all t i m e s r e l e v a n t h e r e t o .
346. U n d e r a p p l i c a b l e f e d e r a l a n d s t a t e law, t h e m e m b e r s ,
including de facto members,
of t h e r e s p e c t i v e B o a r d s of D i r e c t o r s
of
and the
Old
Lincoln
and
o f ACC,
officers,
including
de
facto
o f f i c e r s , of O l d L i n c o l n o w e d s t a t u t o r y , c o n t r a c t u a l , a n d f i d u c i a r y
d u ti es to Ol d Lincoln:
(a)
B e c a u s e O l d L i n c o l n w a s an i n s t i t u t i o n i n s u r e d by
t h e F S L I C , d i r e c t o r s a n d o f f i c e r s w e r e o b l i g a t e d to
c o m p l y w i t h f e d e r a l r e g u l a t i o n s w i t h r e s p e c t to
a d h e re nc e to safe and sound m a na ge ri al and financial
p r a c t i c e s a n d t o m a i n t e n a n c e of a d e q u a t e r e s e r v e s ,
i n c l u d i n g , b u t n o t l i m i t e d to, t h e f o l l o w i n g :
(1)
(2)
12 C . F. R. § 5 6 3 . 9 - 3 ( b ) , r e q u i r i n g a t h r i f t to
.limit
its
loans
to
one b o r r o w e r
and
its
affiliates;
12 C. F.R. § 5 6 3 . 9 - 8 , p l a c i n g r e s t r i c t i o n s
direct investments by insured thrifts;
152
on
(3)
12 C. F. R. § 5 6 3 . 1 3 ( a ) ,
establish and maintain
statutory reserves;
requiring a thrift
the required level
to
of
(4)
12 C . F . R . § 5 6 3 . 1 3 ( b ) ,
establish and maintain
net worth ?
requiring a thrift
the required level
to
of
(5)
12 C . F. R. § 5 6 3 . 1 7 ( a ) , r e q u i r i n g a t h r i f t to
m a i n t a i n s a f e a n d s o u n d m a n a g e m e n t a n d to
pursue
financial
policies
consistent
with
economical home financing?
(6)
12 C . F . R . § 5 6 3 . 1 7 ( b ) , r e q u i r i n g a t h r i f t n o t
t o e x c e e d r e a s o n a b l e l e v e l s o f c o m p e n s a t i o n for
its m a n a g e m e n t ;
(7)
12 C . F. R. § 5 6 3 . 1 7 - l ( c ) , r e q u i r i n g a t h r i f t to
establish and maintain accounting and other
record's s u f f i c i e n t t o p r o v i d e a n a c c u r a t e a n d
c o m p l e t e r e c o r d of .all b u s i n e s s t r a n s a c t e d b y
it ? •
(8)
12 C . F. R. § 5 6 3 . 1 7 - 1 ( c ) (1), r e q u i r i n g a t h r i f t
to obta in re qu ir ed d o c u m e n t a t i o n for loans
se cu re d by real estate;
(9)
12 C . F. R. § 5 6 3 . 1 7 - 1 ( c ) (1), r e q u i r i n g a t h r i f t
to obtain adequate appraisal reports regarding
s e c u r i t y p r o p e r t y p r i o r t o a p p r o v a l of l o a n
applications ?
(10)
12 C . F. R. § 5 6 3 . 1 7 - 1 ( c ) (1), r e q u i r i n g a t h r i f t
to obtain signed financial statements and/or
credit reports disclosing the financial ability
of loan applicants?
(11)
12 C . F . R .
§ 56 3. 18 ,
prohibiting
false
or
m i s l e a d i n g s t a t e m e n t s of a n y m a t e r i a l f a c t s a n d
omissions
of
any
material
facts
in
any
c o m m u n i c a t i o n s w i t h o r r e p o r t s to t h e F H L B B ?
(12)
12 C . F . R . § 5 6 3 . 2 3 - 1 ( f ), r e q u i r i n g a c c u r a t e
d i s c l o s u r e of t h e b o o k v a l u e of r e a l e s t a t e a n d
then, if sold, t h e p r i c e at w h i c h it is sold;
(13)
12 C . F. R. § 5 6 3 . 2 3 - 3 ( c ) , r e q u i r i n g p r e p a r a t i o n
of financial st at em en ts and reports to the
F S L I C on t h e b a s i s
of g e n e r a l l y
accepted
accounting principles;
153
(14)
12 C . F. R. § 56 3. 41 , p r o h i b i t i n g r e a l p r o p e r t y
transactions with affiliated persons without
o b t a i n i n g full d i s c l o s u r e of all m a t e r i a l facts
a n d o t h e r w i s e c o m p l y i n g w i t h a p p l i c a b l e law;
(15)
12
C . F. R.
§ 571.7,
generally
prohibiting
c o n f l i c t of inte re st t r a n sa ct io ns ; and
(16)
12 C . F . R . § 5 8 4 . 3 a n d 12 U . S . C . § 1 7 3 0 a ( d ) ( 4 ) ,
p r o h i b i t i n g ex te ns io ns of cr ed it to af fi li at ed
persons.
(b)
B e c a u s e O l d L i n c o l n w a s a n i n s t i t u t i o n c h a r t e r e d by
t h e S t a t e of C a l i f o r n i a , d i r e c t o r s a n d o f f i c e r s w e r e
o b l i g a t e d t o c o n d u c t it s b u s i n e s s a n d a f f a i r s in
c o n f o r m i t y w i t h C a l i f o r n i a law, i n c l u d i n g , b u t n o t
l i m i t e d to,
the
rules
and
regulations
of the
C a l i f o r n i a D e p a r t m e n t of S a v i n g s a n d Loan.
(c)
As'members,
including de facto members,
of O l d
L i n c o l n ' s a n d A C C ' s B o a r d s o f D i r e c t o r s a n d of
v a r i o u s c o m m i t t e e s e s t a b l i s h e d by t h e s e Boards, and
as officers, i n cl ud in g de facto officers, of Old
Lincoln,
t h e d e f e n d a n t s h a d c o n t r a c t u a l du t i e s ,
f i d u c i a r y duties, and s t a t u t o r y du t i e s to m a n a g e and
a d m i n i s t e r d i l i g e n t l y t h e b u s i n e s s a n d a f f a i r s of
O l d L i n c o l n , i n c l u d i n g , b u t n o t l i m i t e d to, t h e
d u t i e s t o a s s u r e c o m p l i a n c e w i t h a p p l i c a b l e laws,
r u l e s , a n d r e g u l a t i o n s ; t o p r e v e n t s e l f r d e a l i n g an d
w a st e of corporate assets; to exercise due diligence
in t h e s e l e c t i o n , r e t e n t i o n , s u p e r v i s i o n , e v a l u a t i o n
a n d c o m p e n s a t i o n o f o f f i c e r s a n d e m p l o y e e s , in t h e
d e l e g a t i o n of m a t t e r s to o f f i c e r s and employees,
and
in
the
review
of
loan
and
investment
transactions which did not conform to previously
approved internal loan underwriting and investment
standards; to e s t a bl is h st an da rd s for reviewing,
documenting, and a d m i n i s t e r i n g c o m m e r c i a l loans and
real estate i n v e s t m e n t s ; to monitor the performance
of the co mm e r c i a l loan and real es t a t e in vestment
p o r t f o l i o s ; a n d t o d e v e l o p a n d m a i n t a i n a s y s t e m of
internal controls and docu me nt at io n to prom ot e sound
managerial and financial practices.
Such duties
i n c l u d e d , b u t w e r e n o t l i m i t e d to, t h e f o l l o w i n g ;
(1)
A p p r o v i n g e x t e n s i o n s of c r e d i t a n d i n v e s t m e n t s
which were prudent and rejecting imprudent
ones;
(2)
Adopting
adequate
internal
standards,
guidelines,
limitations,
and
policies
for
making loans and investments;
154
(3)
C o n d u c t i n g i n de pe nd en t reviews of loans
l o a n a d m i n i s t r a t i o n a n d of i n v e s t m e n t s
investment m a na ge me nt;
and
and
(4)
M o n i t o r i n g the activi ti es of of fi ce rs
employees
charged
with
reviewing
documenting loans and investments;
and
and
(5)
M a i n t a i n i n g loan, i n v e s t m e n t , e x e c u t i v e , audit,
and compensation committees which effectively
p e r f o r m e d the functions d e l e g a t e d or de le ga bl e
to such committees;
(6)
D e v e l o p i n g and m a i n t a i n i n g a s y s t e m of internal
controls
and
documentation
sufficient
to
promote
sound
managerial
and
financial
p r a c t i c e s and to m i n i m i z e losses on loan and
investment transactions;
(7)
C o m p l y i n g w i t h all a p p l i c a b l e laws,
regulations; and
(8)
A v o i d i n g and p r e v e n t i n g c o n f l i c t s of interests,
u s u r p a t i o n s of c o r p o r a t e o p p o r t u n i t i e s , w a s t e s
of a s s e t s , a n d s e l f - d e a l i n g .
rules,
and
D e f e n d a n t s K e a t i n g Jr. , K e a t i n g III, W i s c h e r , K i e l t y , W u r z e l b a c h e r ,
Ligget, H u b b a r d , N i e b l i n g , S a u t e r , Hall , a n d W. J. K e a t i n g b r e a c h e d
the
foregoing
duties
to
Old
Lincoln,
as
described
in
this
Comp la in t.
347.
duties
assets,
with
These defendants were obligated to discharge their
respect
to
Old
Lincoln,
including
the
management
in g o o d f a i t h a n d w i t h t h e d e g r e e of d i l i g e n c e ,
care,
of
and
skill w h i c h p r u d e n t p e r s o n s w o u l d e x e r c i s e in l i k e p o s i t i o n s .
348.
These
defendants
assumed
the
contractual
duty
to
a d m i n i s t e r d i l i g e n t l y a n d h o n e s t l y t h e b u s i n e s s of O l d L i n c o l n a n d
to r e f r a i n f r o m p e r m i t t i n g v i o l a t i o n s of s t a t u t e s a n d r e g u l a t i o n s ,
waste o f c o r p o r a t e a s s e t s ,
and self-dealing.
155
349.
These
defendants
breached
their
duties
by
failing
to co mp ly w i th the applicable statutory, contractual, and fiduciary
d u t i e s d e s c r i b e d a b ov e.
350.
Keating
W u r z e l b a c h e r , Ligget,
Jr.,
Keating
Hubbard,
Niebling,
III,
Wischer,
Sauter,
Ki el ty ,
Ha ll ,
a n d W.
J.
K e a t i n g are s t r i c t l y liable for the losses s u s t a i n e d by Old Lincoln
in
connection
with
transactions
which
violated
the
foregoing
regulations.
H.
COUNT XIII - Gross Negligence
351.
Plaintiff
adopts
and
incorporates
herein
e v e r y a l l e g a t i o n c o n t a i n e d in p a r a g r a p h s 1 t h r o u g h 270,
each
an d
inclusive,
a n d in p a r a g r a p h s 344 t h r o u g h 350, i n c l u s i v e , o f t h i s C o m p l a i n t for
Count
XIII
against
Wurzelbacher,
Keating,
Ligget,
Jr.,
Hubbard,
Keating
Niebling,
III,
Wischer,
Sauter,
Ha ll ,
K i el ty ,
a n d W.
J.
Keating.
352.
Wurzelbacher,
Keating
Ligget,
Jr.,
Hubbard,
Keating
Niebling,
III,
Wischer,
Sauter,
Hall ,
Kielty,
a n d W.
J.
K e a t i n g d i r e c t e d a n d / o r p e r m i t t e d the i m pr ov id en t and im pr o p e r use
or
investment
acts
and
of
Old
omissions
Lincoln's
set
forth
assets.
in
Count
This
XII
misconduct
of
this
and
the
Complaint
c o n s t i t u t e d g r o s s n e g l i g e n c e c a u s i n g O l d L i n c o l n t o s u s t a i n injury.
353.
Wurzelbacher,
Keating
Ligget,
Jr.,
Hubbard,
Keating
Niebling,
III,
Wischer,
Sauter,
Hall ,
Ki e l t y ,
a n d W.
J.
K e a t i n g are s t r i c t l y liable for the losses s u s t a i n e d by Old Lincoln
as a r e s u l t o f t h e i r g r o s s n e g l i g e n c e .
156
N .
COUNT X IV
L ia b ility
- J o in t and S e v e ra l
o f th e S p o u sa l D e fe n d a n ts .
354.
Plaintiff
adopts
and
herein each and every allegation
against
Mary
Kielty,
Elizabeth
Ni e b l i n g ,
Elaine
Keating,
355.
The
in t h i s C o m p l a i n t
Krista
Wurzelbacher,
M i c h e l l e Ligget,
incorporates
K.
Keating,
Kathleen
M.
G e o r g e J. W i s c h e r ,
defendants
named
in
by
reference
for Count XIV
Elizabeth
Hubbard,
Helen
a n d M a r y A.
paragraphs
15
-A.
M.
Hall.
through
22
in cl us iv e, a n d 24 c o m m i t t e d w r o n g f u l a c t s a n d o m i s s i o n s , as a l l e g e d
in t h i s C o m p l a i n t , c a u s i n g d a m a g e t o t h e R T C as C o n s e r v a t o r f o r N e w
Lincoln.
S u c h w r o n g f u l a c t s a n d o m i s s i o n s w e r e f o r t h e b e n e f i t of
and o n b e h a l f o f t h e S p o u s a l D e f e n d a n t s '
356.
The
Spousal
Defendants
marital communities.
are
jointly
and
severally
li ab le f o r t h e a c t s a n d o m i s s i o n s of t h e i r r e s p e c t i v e s p o u s e s .
357.
Sp ou sa l
T h e R T C is e n t i t l e d t o r e c o v e r d a m a g e s a g a i n s t t h e
Defendants
for
the wrongful
acts
and
omissions
of
their
spouses.
O .
COUNT
358.
Plaintiff
h e re in e a c h
Count
XV
XV
-
C o n s tru c tiv e
adopts
and every allegation
against
Wurzelbacher,
Keating
Hubbard,
Jr.,
Ligget,
and
T ru s t.
incorporates
contained
Keating
Niebling,
in t h i s
III,
by
reference
Complaint
Wischer,
Sauter,
Mary
fo r
Kielty,
Elaine
Keating, K r i s t a K. K e a t i n g , G e o r g e J. W i s c h e r , E l i z a b e t h A. K i e l t y ,
E l i z a b e t h W u r z e l b a c h e r , K a t h l e e n M. H u b b a r d , M i c h e l l e L i g g e t , H e l e n
M. N i e b l i n g ,
First Lincoln Financial Corporation,
Utah,
United
Inc.,
Leasing
.Corporation
157
of
M e d e m a H o m e s of
Delaware,
American
Continental
Mortgage
Company,
Corporation,
Continental
Fire
American
and
Continental
Casualty
Company,
Resources
Tatum
Place,
Inc., A m e r i c a n C o n t i n e n t a l P r o p e r t i e s , Inc., P a r k D r i v e A p a r t m e n t s ,
Inc.,
A.C.C.
Continental
Real Estate,
Finance
Inc.,
Dunlap Apartments,
Cgrporation,
American
Inc.,
American
Continental
Finance
C o r p o r a t i o n II, C o n t i n e n t a l H o m e F i n a n c e C o r p o r a t i o n , A m e r i c a n H o m e
Finance
Corporation,
American
Home
Finance
Corporation
II,
and
A m e r i c a n H o m e F i n a n c e C o r p o r a t i o n III.
359.
Hubbard,
Keating
Ligget,
Jr.,
Niebling,
Keating
III,
Kielty,
and Sauter breached
Wurzelbacher,
f i d u c i a r y du ti es ,
e n g a g e d in s e l f - d e a l i n g , a n d v i o l a t e d a p p l i c a b l e c o m m o n l a w du ti es ,
statutes,
and
regulations,
as
described
above.
Their
o m i s s i o n s h a v e r e s u l t e d in t h e a p p r o p r i a t i o n o f a s s e t s ,
p r o f i t s r i g h t f u l l y b e l o n g i n g to Ol d Lincoln.
acquired
2 3 0 1 . D . 4.
property
and
through
2312.
conduct
By
of
and
funds, and
Th es e d e f e n d a n t s have
in v i o l a t i o n
virtue
acts
A.R.S.
of
§
A.R.S.
§§
13-2314.E . ,
13-
these
d e f e n d a n t s a r e i n v o l u n t a r y t r u s t e e s of t h e p r o p e r t y o f O l d L i n c o l n
and
hold
such
property,
its
proceeds,
and
its
fruits
in
c o n s t r u c t i v e t r u s t f o r t h e b e n e f i t o f t h e RTC.
360.
On
the
basis
of
information
and
belief,
the
RTC
f u r t h e r a l l e g e s t h a t t h e d e f e n d a n t s n a m e d in p a r a g r a p h 358 o f t h i s
Complaint
utilized
wrongfully
Old
have
Lincoln's
di re ct ly or indirectly,
361.
constructive
The
RTC
trust
on
retained
Old
Lincoln's
assets to obtain
other
assets
assets
or
have
controlled,
b y them.
is
and
entitled
a
tracing
158
to
the
of
al l
imposition
assets
of
a
wrongfully
ob ta in ed ,
utilized,
or he l d b y the d e f e n d a n t s n a m e d
358 of t h i s C o m p l a i n t , d i r e c t l y o r i n d i r e c t l y ,
conduct
and
breaches
of
various
duties
as
in p a r a g r a p h
as a r e s u l t o f t h e i r
set
forth
in
this
Complaint.
V I.
DAM AGES.
3 62. A s
a
direct
and
proximate
result
acts a n d o m i s s i o n s s e t f o r t h in C o u n t s I, II,
VIII,
IX, XI, XII,
relief,
Old
XIII,
Lincoln
XIV,
was
a n d XV,
damaged
III,
inclusive,
in
an
of
the
wrongful
IV, V, VI, VII,
of the cl ai ms for
amount
in
excess
of
$390,000,000.
363.
As
a
direct
and
proximate
result
of
acts a n d o m i s s i o n s s e t f o r t h in C o u n t X of t h e c l a i m s
the
wrongful
f o r re li ef ,
Old L i n c o l n w a s d a m a g e d in a n a m o u n t in e x c e s s o f $ 7 4 5 , 0 0 0 , 0 0 0 .
V II.
PRAYERS
FOR
364.
New L i n c o l n ,
R E L IE F .
T h e R e s o l u t i o n T r u s t C o r p o r a t i o n , as C o n s e r v a t o r f o r
prays that the following relief be granted:
(a)
A c t u a l d a m a g e s u n d e r C o u n t s I, II, III, IV, V,
VI, VII, VI II , IX, XI, XII, XIII, XIV, a n d X V
in
favor
of
the
plaintiff
in
an
amount
presently
undetermined
but
in
excess
of
$390,000,000;
(b)
T r e b l e t h e a c t u a l d a m a g e s u n d e r C o u n t s I, II,
III, IV, V, VI, VII, XI, a n d XIV, i n c l u s i v e ,
t o t a l l i n g in e x c e s s o f $ 1 , 1 7 0 , 0 0 0 , 0 0 0 t o b e
a s s e s s e d in f a v o r of t h e p l a i n t i f f p u r s u a n t t o
18 U . S . C . § 1964(c) a n d A . R . S . § 1 3 - 2 3 1 4 ;
(c)
A c t u a l d a m a g e s , u n d e r C o u n t X in f a v o r o f t h e
p l a i n t i f f in a n a m o u n t p r e s e n t l y u n d e t e r m i n e d
b u t in e x c e s s o f $ 7 4 5 , 0 0 0 , 0 0 0 ;
(d)
A t t o r n e y s ’ f e e s a n d e x p e n s e s u n d e r C o u n t s I,
II,
III,
IV,
V,
VI,
VII,
XI,
and
XIV,
i n c l u s i v e , t o b e a s s e s s e d in f a v o r o f t h e
159
p l a i n t i f f p u r s u a n t t o 18 U . S . C .
A.R.S. § 13-2314;
§ 19 64(c)
an d
(e)
P u n i t i v e d a m a g e s u n d e r C o u n t s V I I I a n d I X to
b e a s s e s s e d in f a v o r o f t h e p l a i n t i f f in an
a m o u n t w h i c h is r e a s o n a b l y c a l c u l a t e d b y t h e
Court or jury to deter defendants and others
from engaging
in c o n d u c t
like that which
p r e c i p i t a t e d p l a i n t i f f ' s clai ms and th at said
s u m b e in a n a m o u n t n o t l e s s t h a n $ 1 0 0 , 0 0 0 , 0 0 0 ;
(f)
T h e c o s t s of t h i s a c t i o n b e a s s e s s e d a g a i n s t
a l l d e f e n d a n t s in f a v o r of t h e p l a i n t i f f ;
(g)
T h e O r d e r of t h i s Co ur t:
(1)
t h a t a c o n s t r u c t i v e t r u s t b e i m p o s e d , and
a t r u s t e e b e a p p o i n t e d , w i t h r e s p e c t to
t h o s e as s e t s , funds, o r p r o f i t s , o b t a i n e d ,
u t i l i z e d , h e l d o r a c q u i r e d , d i r e c t l y or
i n d i r e c t l y , b y t h o s e d e f e n d a n t s n a m e d in
paragraph
3 58 o f t h i s C o m p l a i n t w i t h
r e s p e c t t o t h e a s s e t s a n d f u n d s of O l d
L i n c o l n , a n d in c o n n e c t i o n t h e r e w i t h , s u c h
assets
and
funds,
together
with
any
profits
derived
therefrom,
should
be
traced;
(2)
t h a t t h o s e d e f e n d a n t s n a m e d in p a r a g r a p h
358 of t h i s C o m p l a i n t b e r e q u i r e d to
a c c o u n t for all assets, funds or p r of it s
o b t a i n e d , u t i l i z e d , h e l d o r a c q u i r e d in
connection wi th the tr an sa ct io ns set forth
he r e i n and any ot he r t r a n s a c t i o n s wi t h Old
Lincoln;
(3)
that
the
Court
enter
a
preliminary
injunction
and
permanent
injunction
against
those
defendants
named
in
paragraph
358
of
this
Complaint
r e s t r a i n i n g a n d e n j o i n i n g t h e m j o i n t l y and
i n d i v i d u a l l y , o r t h e i r a g e n t s , d u r i n g the
p e n d e n c y of t h i s a c t i o n ,
d i r e c t l y or
indirectly, from transf er ri ng , selling,
conveying,
assigning,
dissipating,
concealing,
converting,
exchanging,
encumbering,
hypothecating,
pledging,
leasing, impairing, or o t h e r w i s e d i s p o s i n g
in a n y m a n n e r o f a n y a s s e t s w i t h o u t th e
p r i o r w r i t t e n a p p r o v a l of a n a u t h o r i z e d
r e p r e s e n t a t i v e of t h e RTC, e x c e p t , in t h e
c a s e o f t h e i n d i v i d u a l d e f e n d a n t s , for
160
$ 3 , 0 0 0 p e r m o n t h w h i c h m a y b e e x p e n d e d for
the p u rp os es of living expenses; and
(4)
(h)
V III.
JU R Y
t h a t t h o s e d e f e n d a n t s n a m e d in p a r a g r a p h
358 of t h i s C o m p l a i n t b e o r d e r e d t o f i l e
w i t h the Court w i t h i n ten days of the end
o f e a c h m o n t h a v e r i f i e d a c c o u n t i n g of a l l
expenditures made by th em du ri ng the
previous month; and
S u c h o t h e r a n d f u r t h e r r e l i e f as m a y b e d e e m e d
j u s t a n d p r o p e r b y t h i s Co ur t.
DEM AND.
Pursuant
to
R u l e 38,
Fed.
R.
Civ.
P. , t h e
RTC
hereby
de ma nd s a t r i a l b y jury.
Respectfully submitted,
MORRISON, HECKER, CURTIS, K U D E R & P A RR IS H
B y : _______
M i c h a e l C. M a n n i n g
R o b e r t J. I t k i n
1 6 00 F i n a n c i a l C e n t e r A v e n u e
Phoenix, A r i z o n a
85012
B y : _______
OF C O U N S E L :
P. J o h n O w e n
N a n c y L. S h e l l e d y
11 02 G r a n d A v e n u e
K a n s a s City, M i s s o u r i
Steven K. W h i t e
MORRISON, H E C K E R , C U R T I S , K U D E R & P A R R I S H
919 1 8 t h S t r e e t , N . W . , S u i t e 901
Washington, D.C.
20006
Rex R. V e a l
Michael E. T u c c i
OFFICE O F G E N E R A L C O U N S E L
Federal D e p o s i t I n s u r a n c e C o r p o r a t i o n
550 1 7 t h S t r e e t , N.W.
Washington, D.C.
20429
Attorneys f o r P l a i n t i f f
Re solution T r u s t C o r p o r a t i o n
161
N
64106
@FedFRASER