State Inquiry Into Activities of Lincoln Savings Is Soon Ended

It was a short-lived inquiry, something that has been rare for the folks at Lincoln Savings & Loan in Irvine and its parent company, American Continental Corp. in Phoenix.

The inquiry by the state Department of Savings and Loan was started Monday but was over by late Tuesday.

The state agency, reacting to a tip from an Arizona newspaper reporter, wanted to learn about claims that Lincoln was promoting and selling debt securities being offered by American Continental. State law prohibits S&Ls; from selling the corporate debt of its parent.

William J. Crawford, commissioner of the state agency, said his office was also concerned about the possibility that a false impression may have been given that those securities were federally insured.

Over the last 2 years, American has sold more than $190 million in debt securities, some of it from American Continental desks stationed in some of Lincoln’s 12 branch offices in Southern California. The offering, the location of sales staff in Lincoln’s offices and other procedures were approved by regulators before securities were sold, a company spokesman said.

A new debt offering of more than $30 million is being sold only through corporate offices, including 11 American Continental financial services offices in Southern California.

Lincoln employees, questioned by potential investors about the securities, always had been careful to give out minimal information about rates and to refer them to American Continental offices, said Robert J. Kielty, a corporate senior vice president and general counsel.

Late Tuesday, the state agency agreed to drop its inquiry after the company agreed that the S&L; would cease giving out any corporate rate information and refer callers to corporate offices immediately, according to Kielty and William B. Davis, chief deputy S&L; commissioner.

But the company, which has long wrestled with state and federal regulators, still faces an inquiry in Arizona.

The Arizona Banking Department, acting on an anonymous tip, is probing allegations that American Continental’s financial services offices set up in Arizona in September were accepting deposits on behalf of Lincoln.

Those offices were closed Dec. 5, apparently because they didn’t produce projected profits.

Kielty said the offices had used overnight couriers to send depositors’ funds to Lincoln. He said depositors were clearly told that they did not have an account until the money was deposited in Lincoln.