Lincoln Savings And Loan Case Study

Creative accounting, influence peddling and other abuses at Lincoln Savings and Loan Charles Keating employed accounting schemes to divert the savings and loan’s federally insured deposits into ACC’s treasury. Keating would be permitted to withdraw funds from Lincoln and invest them in ACC or use them for only to the extent that Lincoln reported after-tax profits. He and his associates wove together complex real estate transactions involving Lincoln, ACC, and related third parties to make profits for Lincoln. Kenneth Leventhal & Company, an accounting firm to analyze and report on Lincoln’s accounting practices.
In 1987 Lincoln was the large Hidden Valley transaction that took place. On March 30, 1987, Lincoln loaned $19.6 million to E.C. Garcia & Company. And Garcia is a close friend of Keating and the owner of the land development company; extended a $3.5 million loan to Wescon, a mortgage real estate concern owned by Garcia’s friend, Fernando Acosta and Wescon purchased 1,000 acres from Lincoln for $14 million. Acosta
Garcia that agreed to become involved in the deceptive Hidden Valley transaction only because he wanted the $19.6 million loan from Lincoln. Recognizing a profit on the Hidden Valley transaction would have openly violated financial accounting standards if Garcia had acquired the property directly from Lincoln and used funds loaned to him by the saving and loan for his down payment. Which prior to the Hidden Valley transaction has total assets of $87,000 and a net worth of $30,000, was only a straw buyer of the Hidden Valley property. Acosta reported that Wescon was too small to buy the property and he signed the documents without reading them to help his friend, Garcia. This letter Acosta wrote to Garcia to assume title to the property so that he could take it off Wescon’s