BLACK: No. Justice would skin us alive if we did. Those referrals are very confidential. We can’t prosecute anyone ourselves. All we can do is refer it to Justice.
DECONCINI: They make their own decision whether to prosecute?
BLACK: Yes. I also want to mention that we are already investigating Arthur Anderson because of their role in the file stuffing. We don’t know whether they knew the purpose for which they were preparing the materials. I don’t want to get harassed... no, that’s not the right word; I don’t want to get criticized if we Find out that Arthur Anderson was involved criminally and we have to make a referral on them. We don’t want them to claim retaliation. We’re in a tough spot. With regard to what you can say to Lincoln, you might want to simply have them call us. If you really want to talk to them you can say that it will take us 7 to 10 days to Finish the exam.
RIEGLE: Is this institution so far gone that it can’t be salvaged?
PATRIARCA: I don’t know. They’ve got enough risky assets on their books that a little bad luck could nail them. You can’t remove the risk of what they already have. You can reduce what new risks they would otherwise add on.
BLACK: They have huge holdings in Tucson and Phoenix. The. market there can’t absorb them for many years. You said earlier that ACC was extremely good but ACC has gotten out of its former primary activity, homebuilding. I’m not saying they’re bad businessmen but they had to get out of one homebuilding market after another. They had to get out of Colorado when they had bad models and soil problems. They also had to get out of their second leading activity, mortgage banking. They’re now down to Arizona. That’s not a bad market but no one knows how well it will do over the many years that it would take to absorb such huge holdings in Tucson and Phoenix.
DECONCINI: So you don’t know what you’d do with the property even if you took them over?
BLACK: Bill Black doesn’t. Bill Black is a lawyer. We hire experts to do this work. Our study of their Arizona holdings was done by top experts. Our study of below investment grade corporate debt securities – what folks usually call junk bonds, but I avoid it because I don’t know where you stand on such bonds – was done by top outside experts. I see in this Arthur Young letter that they criticize us for having an accountant with “only” eight years of experience. Well, I think... I don’t see how you can claim eight years as inexperienced. But we didn’t simply rely on him. We had... wasn’t it Kenneth...
SANCHEZ: Yes. Kenneth Laventhol.
BLACK: We had Kenneth Laventhol, outside accountants, work on this. These are also some of the reasons the exam took time.
PATRIARCA: I think my colleague Mr. Black put it right when he said that it’s like these guys put it all on 16-black in roulette. Maybe, they’ll win, but I can guarantee you that if an institution continues such behavior it will eventually go bankrupt.
RIEGLE: Well, I guess that’s pretty definitive.
DECONCINI: I’m sorry, but I really do have to leave now.
DECONCINI: They make their own decision whether to prosecute?
BLACK: Yes. I also want to mention that we are already investigating Arthur Anderson because of their role in the file stuffing. We don’t know whether they knew the purpose for which they were preparing the materials. I don’t want to get harassed... no, that’s not the right word; I don’t want to get criticized if we Find out that Arthur Anderson was involved criminally and we have to make a referral on them. We don’t want them to claim retaliation. We’re in a tough spot. With regard to what you can say to Lincoln, you might want to simply have them call us. If you really want to talk to them you can say that it will take us 7 to 10 days to Finish the exam.
RIEGLE: Is this institution so far gone that it can’t be salvaged?
BLACK: They have huge holdings in Tucson and Phoenix. The. market there can’t absorb them for many years. You said earlier that ACC was extremely good but ACC has gotten out of its former primary activity, homebuilding. I’m not saying they’re bad businessmen but they had to get out of one homebuilding market after another. They had to get out of Colorado when they had bad models and soil problems. They also had to get out of their second leading activity, mortgage banking. They’re now down to Arizona. That’s not a bad market but no one knows how well it will do over the many years that it would take to absorb such huge holdings in Tucson and Phoenix.
DECONCINI: So you don’t know what you’d do with the property even if you took them over?
BLACK: Bill Black doesn’t. Bill Black is a lawyer. We hire experts to do this work. Our study of their Arizona holdings was done by top experts. Our study of below investment grade corporate debt securities – what folks usually call junk bonds, but I avoid it because I don’t know where you stand on such bonds – was done by top outside experts. I see in this Arthur Young letter that they criticize us for having an accountant with “only” eight years of experience. Well, I think... I don’t see how you can claim eight years as inexperienced. But we didn’t simply rely on him. We had... wasn’t it Kenneth...
SANCHEZ: Yes. Kenneth Laventhol.
BLACK: We had Kenneth Laventhol, outside accountants, work on this. These are also some of the reasons the exam took time.
PATRIARCA: I think my colleague Mr. Black put it right when he said that it’s like these guys put it all on 16-black in roulette. Maybe, they’ll win, but I can guarantee you that if an institution continues such behavior it will eventually go bankrupt.
RIEGLE: Well, I guess that’s pretty definitive.
DECONCINI: I’m sorry, but I really do have to leave now.
[The meeting broke up at this point, approximately at 8:20 P.M.]
( Editor's note: Now with the sub-prime, credit crunch, foreclosure crisis gutting both consumer and investment banking one can wonder how many meetings like this are going on today. I don't know. No one has sent me a transcript -- yet. )
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