Van de Kamp Bows Out of Lincoln S & L Probe : Thrifts: The attorney general cites a conflict in related civil case. He names Reiner and Sacramento County D.A. to pursue the investigation.

By PAUL JACOBS

Dec. 20, 1989 12 AM PT

TIMES STAFF WRITER

SACRAMENTO — Citing a conflict of interest in pursuing a criminal investigation of Lincoln Savings & Loan, Atty. Gen. John K. Van de Kamp Tuesday named two special prosecutors to conduct the probe--Dist. Attys. Ira Reiner of Los Angeles County and Steve White of Sacramento County.

Van de Kamp said that he took the unusual step because he already is defending state agencies and officials in a $250-million civil suit filed by Lincoln customers who bought now-worthless bonds from the S&L;’s parent company, American Continental Corp.

Van de Kamp also said that his office will open a civil investigation to help the bond purchasers--many of them Southern California retirees--recover their lost money. Van de Kamp said he will head that civil probe himself.

“Thus far, no public official, no governmental agency anywhere has taken any concrete action to help the 23,000 people who lost major parts of their life savings get their money back,” Van de Kamp said at a Capitol press conference.

The scope of the civil investigation, he said, will include an examination of Lincoln, the parent company and its officers, as well as “the accountants who vouched for the bonds that were sold through Lincoln Savings, and anyone else who may have helped perpetrate this fraud.”

A Democratic candidate for governor, Van de Kamp denied that his decision to launch a major two-pronged investigation of Lincoln’s collapse--eight months after a federal takeover of the troubled S&L--was; politically motivated. The announcement of the special district attorney task force came after weeks of questions about the failure of California law enforcement officials to investigate the possibility of criminal wrongdoing.

“We’re doing what is right,” Van de Kamp said. “If I were trying to play politics, I’d come in here and run a statewide investigation myself.”

Instead, he is turning over the criminal part of the probe--which will look at the conduct of state regulators as well as Lincoln officials--to Reiner and White, both of whom are Democrats.

If the investigation leads to criminal charges, the two district attorneys would prosecute the cases.

Van de Kamp disclosed that he had also invited Orange County Dist. Atty. Cecil Hicks, a Republican, to join the special prosecution task force, but that Hicks turned him down even though Lincoln is based in Irvine. Hicks’ chief assistant district attorney, Michael R. Capizzi, said that his office declined the invitation because of a continuing federal investigation into Lincoln.

“We first took a look at it last summer and checked with the U.S. attorney and the FBI and determined they were looking at it,” Capizzi said. “And we felt for us to do so was a duplication of effort. When we got a call last week (from Van de Kamp’s office) we checked again with the U.S. attorney . . . and we felt our manpower was better spent on other cases.”

In announcing the investigation, Van de Kamp also revealed that he had declined to participate in an ongoing U.S. Department of Justice probe into the Lincoln collapse. He said that Justice Department investigators had asked him several weeks ago to provide staff to help in the federal investigation. But Van de Kamp said he decided not to because he believed that his own people would be barred from reporting back to him on their findings because of grand jury secrecy rules.

He said that loaning state staff to the federal authorities was “like giving them a couple of people and saying goodby.”

In addition, he said it was important to conduct an independent investigation, one that would focus on the California aspects of Lincoln’s failure.

Van de Kamp said he now regrets his earlier decision to defend state regulators in the civil lawsuit filed by American Continental bond holders--a decision that he said prevented him from conducting the criminal investigation himself. It is his role as lawyer to those state officials that he believes bars him from investigating their conduct. He cited a 1981 California Supreme Court opinion in support of that view.

“Would you want your lawyer representing you . . . to go out there and run a criminal investigation trying to drum up evidence against you?” Van de Kamp asked. “Doesn’t that place you in a strange situation?”

Former San Francisco Mayor Dianne Feinstein, who is Van de Kamp’s opponent for the Democratic gubernatorial nomination, accused the attorney general of being “deaf for an entire year to the cries of 23,000 small investors who lost their savings. . . . (He) is closing the barn door after the horse has gone.”

Reiner, a candidate to succeed Van de Kamp as attorney general, held a press conference of his own in Los Angeles to announce his role as lead attorney in the statewide Lincoln investigation.

He left no doubt that he would be looking at possible corruption of state officials as well as allegations of misdeeds by Lincoln officials.

“The case is about tens of thousands of individuals who lost everything because people in government were more concerned about protecting (Lincoln owner Charles H. Keating Jr.) than people’s life savings,” Reiner said.

However, Reiner’s opponent in the upcoming Democratic primary, San Francisco Dist. Atty. Arlo Smith, expressed his dismay that Van de Kamp would appoint a candidate for statewide office as “special prosecutor.”

On Tuesday, Smith asked Van de Kamp “to reconsider this decision and appoint the most qualified person for this sensitive position.”

“Historically,” Smith said, “special prosecutors have been judges or law professors with impeccable credentials that transcend politics. In this instance, however, we have an active candidate for statewide office who may use this case to advance his political career at the expense of impartiality.”