Criminal Probe of Lincoln S&L; Is Begun by U.S. : Thrift Regulator Refers Allegations to Justice Dept.

In an escalating battle between regulators and American Continental Corp., the nation’s top savings and loan regulator said Monday that his office has referred criminal allegations involving the management of American’s Lincoln Savings & Loan Assn. to the U.S. Justice Department.

At the same time, American Continental Chairman Charles H. Keating Jr. lashed out at regulators who seized Irvine-based Lincoln on Friday, charging that “malicious bureaucrats” were out to destroy his company. Keating threatened to fight the Federal Home Loan Bank Board in court.

Board Chairman M. Danny Wall, in a telephone interview from Washington, said several complaints involving the management of Lincoln have been referred to the Justice Department for investigation. He said the inquiry also could involve American Continental.

Wall declined to be specific about the types of potentially criminal activities the bank board had referred to the Justice Department.

He did say, however, that the bank board’s most recent audit of both Lincoln and American Continental turned up evidence of assets being shifted from the S&L; to the parent company.

Wall also said bank board personnel believe possibly critical documents pertaining to the S&L;’s activities were ordered destroyed by the thrift’s management just before American Continental filed for bankruptcy protection from creditors.

“We have not seen those comments,” said Mark M. Connally, spokesman for American Continental. “Until there’s actually something factual presented by Mr. Wall to back up the allegations, there is no way we can adequately and properly respond.”

$70 Million Withdrawn

American Continental and 11 subsidiaries filed for Chapter 11 bankruptcy on Thursday. Regulators seized control of Lincoln the following day. The seizure, coupled with the bankruptcy, prompted depositors to withdraw nearly $70 million from the thrift’s 29 Southern California branches on Friday and Saturday.

By Monday, however, federal regulators who are operating Lincoln under a conservatorship said that the pattern of heavy withdrawals by panicked or confused customers had died down.

At a news conference in Phoenix, Keating accused regulators of engaging in a politically motivated campaign to destroy Lincoln Savings and American Continental.

Keating said that Lincoln “may well become the first thrift to defend itself to the full extent . . . if need be to challenge in court those who would destroy us, and (to) call for a full federal investigation of the abusive power by one or more regulatory offices.”

Keating bought Lincoln in 1984 and has since been involved in a number of feuds with S&L; regulators. The battles generally have centered on his practice of involving the S&L; in commercial real estate and development rather than sticking to more traditional single-family home loans.

Keating declined to answer questions at the news conference, choosing instead to appeal to the citizens of Arizona.

Visibly upset and hands shaking as he stared into the television cameras, Keating warned that federal savings and loan regulators would destroy the Arizona economy if they succeeded in pulling down Lincoln.

American Continental claims to directly employ 2,300 people with a payroll of over $70 million in Arizona and to generate countless other projects around the state.

In its bankruptcy filing, American Continental and the 11 subsidiaries listed $3 billion in debt and $3.85 billion in assets in its Chapter 11 petition.

While many of Lincoln Savings’ Southland branches were back to normal after the weekend rush, Bank Board spokeswoman Martha Gravlee said the thrift’s Sherman Oaks branch was still seeing “heavier traffic than usual.”

“It’s considerably fewer people than we saw Friday and Saturday,” Gravlee said, “but there are still some accounts being closed. And there are some people drawing their accounts down to the federally insured limit (of $100,000). Many people are calling in to get reassurance, but calls have been dropping off, too.”

David Loveday, a Bank Board spokesman stationed at Lincoln’s corporate headquarters in Irvine, said that regulators have not tallied the outflow of money from the thrift on Monday. And he did say that an unknown number of depositors are taking Wall’s advice and putting their money back into the certificate accounts that they had drained over the weekend.

“There have been branches reporting people bringing back CDs,” Loveday said. “The second they reopen the account, the amount is back to where it was before they closed it, with the withdrawal penalties reimbursed.”