In Re American Continental Corporation/Lincoln Savings And Loan Securities Litigation (Jones Day)

794 F.Supp. 1424 (1992)

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Nature of the Case

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Facts

Five separate actions are consolidated before the court. Keating, Jr. was the former chairman of D. These claims were brought against professionals who provided services to D. Prior to joining Jones Day, Schilling (D) was director of the FHLBB Office of Examinations and Supervision. Schilling (D) was directly involved in the supervision of Lincoln Savings (D). During the summer of 1985, he wrote at least one memorandum and concurred in another, expressing serious regulatory concerns about numerous aspects of Lincoln's (D) operations. Schilling (D) was hired by Jones Day (D) to augment its expertise in thrift representation. Schilling (D) and Jones Day's Ron Kneipper flew to Phoenix to solicit D's business. D retained Jones Day (D) to perform 'a major internal audit of Lincoln's FHLBB compliance and a major project to help Lincoln deal with the FHLBB's direct investment regulations.' During the regulatory compliance audit, Jones Day found multiple regulatory violations. There is evidence that Jones Day knew that D had backdated files, destroyed appraisals, removed appraisals from files, told appraisers not to issue written reports when their oral valuations were too low and violated affiliated transaction regulations. There was a litany of violations. There is evidence that Jones Day may have tacitly consented to removal of harmful documents from the files. There is evidence that Jones Day instructed D in how to rectify deficiencies so that they would not be apparent to FHLBE examiners. Jones Day attorneys told ACC/Lincoln personnel to provide the Jones Day-generated 'to do' lists only to the attorneys responsible for rectifying the deficiencies, and to destroy the lists so that FHLB-SF would not find them in the files. For the same reason, Jones Day's regulatory compliance reports to D were oral. Jones Day paralegals testified that responsibilities for carrying out the 'to do' lists were divided among Jones Day and D staff. The evidence indicates that Jones Day may have been aware that D did not follow its compliance advice with respect to ongoing activities. Jones Day attorneys participated in creating corporate resolutions to ratify forged and backdated corporate records. Jones Day motioned for summary judgment in that it claimed its activities were merely counseling a client and it could not be held liable.