SANCHEZ: It was an extremely complex exam because of their various investments. The examiners were actually in the institution from March to October – 8 months. The asset classification procedure is very time consuming.
McCAIN: What’s the longest exam you ever had before?
CIRONA: Some have technically never ended, where we had severe problems with a shop.
McCAIN: Why would Arthur Young say these things about the exam – that it was inordinately long and bordered on harassment?
GLENN: And Arthur Anderson said they withdrew as Lincoln’s prior auditor because of your harassment.
RIEGLE: Have you seen the Arthur Young letter?
CIRONA: No.
RIEGLE: I d like you to see the letter. It’s been sent all over the Senate. [Hands Cirona the letter.]
PATRIARCA: I’m relatively new to the savings and loan industry but I’ve never seen any bank or S&L that’s anything like this. This isn’t even close. You can ask any banker and you know about these practices. They violate the law and regulations and common sense.
GLENN: What violates the law?
PATRIARCA: Their direct investments violate the regulation. Then there’s the file stuffing. They took undated documents purporting to show under writing efforts and put them into the files sometimes more than a year after they made the investment.
GLENN: Have you done anything about these violations of law?
PATRIARCA: We’re sending a criminal referral to the Department of Justice. Not maybe; we’re sending one. This is an extraordinarily serious matter. It involves a whole range of imprudent actions. I can’t tell you strongly enough how serious this is. This is not a profitable institution. Prior year adjustments will reduce that reported $49 million profit. They didn’t earn $49 million. Let me give you one example. Lincoln sold a loan with recourse and booked a $12 million profit. The purchaser rescinded the sale, but Lincoln left the $12 million profit on its books. Now, I don’t care how many accountants they get to say that’s right. It’s wrong. The only thing we have as regulators is our credibility. We have to preserve it.
DECONCINI: Why would Arthur Young say these things? They have to guard their credibility too. They put the firm’s neck out with this letter.
PATRIARCA: They have a client. The $12 million in earnings was not unwound.
DECONCINI: You believe they’d prostitute themselves for a client?
McCAIN: What’s the longest exam you ever had before?
CIRONA: Some have technically never ended, where we had severe problems with a shop.
McCAIN: Why would Arthur Young say these things about the exam – that it was inordinately long and bordered on harassment?
RIEGLE: Have you seen the Arthur Young letter?
CIRONA: No.
RIEGLE: I d like you to see the letter. It’s been sent all over the Senate. [Hands Cirona the letter.]
PATRIARCA: I’m relatively new to the savings and loan industry but I’ve never seen any bank or S&L that’s anything like this. This isn’t even close. You can ask any banker and you know about these practices. They violate the law and regulations and common sense.
GLENN: What violates the law?
PATRIARCA: Their direct investments violate the regulation. Then there’s the file stuffing. They took undated documents purporting to show under writing efforts and put them into the files sometimes more than a year after they made the investment.
GLENN: Have you done anything about these violations of law?
PATRIARCA: We’re sending a criminal referral to the Department of Justice. Not maybe; we’re sending one. This is an extraordinarily serious matter. It involves a whole range of imprudent actions. I can’t tell you strongly enough how serious this is. This is not a profitable institution. Prior year adjustments will reduce that reported $49 million profit. They didn’t earn $49 million. Let me give you one example. Lincoln sold a loan with recourse and booked a $12 million profit. The purchaser rescinded the sale, but Lincoln left the $12 million profit on its books. Now, I don’t care how many accountants they get to say that’s right. It’s wrong. The only thing we have as regulators is our credibility. We have to preserve it.
DECONCINI: Why would Arthur Young say these things? They have to guard their credibility too. They put the firm’s neck out with this letter.
PATRIARCA: They have a client. The $12 million in earnings was not unwound.
DECONCINI: You believe they’d prostitute themselves for a client?
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