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OTS ACTION AGAINST FORMER FHLBB MEMBER

 WASHINGTON, Nov. 18 ~PRNewswire~ -- Former Federal Home Loan Bank Board (FHLBB) member Lee H. Henkel Jr., has agreed to be banned from the banking industry in a consent order issued today by the Office of Thrift Supervision (OTS).
 Henkel, an attorney, also agreed to be debarred from practice before OTS and to pay restitution of $50,000. He neither admitted nor denied charges against him.
 The charges stem from certain activities undertaken by Henkel on behalf of Charles Keating's failed Lincoln Savings and Loan Association while Henkel was a Bank Board member and while he was legal counsel to Lincoln and a venture partner of the thrift. He was also a former joint venture partner of Keating's Lincoln Savings.
 OTS charged Henkel with unsafe and unsound practices, conflict of interest, breaches of fiduciary duty and violations of federal ethics rules. The charges relate to the sale at an inflated price of Henkel's interest in a firm capitalized by Lincoln, releases from loan guarantees to Lincoln that he secured at less than actual value and Henkel's attempt as a Bank Board member to get a regulation passed that was favorable almost solely to Lincoln.
 OTS said Henkel, while a Bank Board member on Dec. 18, 1986, proposed that the Bank Board modify an existing regulation on direct investments by thrifts. The modification would have benefited only Lincoln and one other S&L.
 OTS also charged that on the day Henkel submitted his proposal to the Bank Board, he first sent a review draft to his ethics counselor, Margery Waxman, who represented Lincoln and its holding company, American Continental Corp. (ACC). She, in turn, had the proposal reviewed by three other attorneys also retained by ACC and Lincoln, who made recommended changes that were included in the proposal Henkel submitted to the Bank Board, OTS said. The proposal was rejected. OTS charged Henkel's action was a violation of government regulations governing ethical conduct and responsibilities of government employees.
 As a partner in the Atlanta law firm of Troutman, Sanders, Lockerman & Ashmore, Henkel was legal counsel to Lincoln from early 1984 until November 1986. In July 1986, while involved in a number of business relationships with Lincoln, Henkel was considered for Bank Board membership.
 OTS said Henkel hired Waxman, an attorney with the Washington office of Sidley & Austin, as his ethics counselor on issues relating to his possible Bank Board post. Waxman allegedly advised Henkel that he would need to sever all ties with Lincoln, including the sale of his shares in Continental Southern Inc. (CSI), a real estate venture firm. In addition, Waxman advised Henkel he would have to obtain releases on a number of loan guarantees he had made to Lincoln. Henkel's outstanding indebtedness to Lincoln totaled more than $8 million. Waxman further advised Henkel that he should obtain independent valuations of his CSI stock and loan guarantees prior to divestiture.
 OTS charged that representatives of a blind trust set up to hold Henkel's Lincoln-related assets, negotiated and sold to Lincoln Henkel's CSI stock. In disregard of Waxman's advice, the stock was sold at a substantially inflated price without first obtaining an independent valuation of its worth. As a consequence, the regulator charged that Keating, acting on behalf of the Lincoln subsidiary that ultimately purchased Henkel's CSI shares, paid too much for the shares to the enrichment of Henkel.
 OTS also charged that Henkel profited at the expense of Lincoln in obtaining releases on his loan guarantees. Henkel did not obtain an independent analysis of the value of the guarantees, as his ethics counselor had advised, but instead, accepted an offer to pay Lincoln $125,000 -- substantially less than the true value -- to release him from his obligations.
 In addition, OTS charged Henkel with billing Lincoln for costs his law firm incurred in severing his personal business ties to ACC and Lincoln. This, charged the regulator, again enriched Henkel to the detriment of ACC, Lincoln's parent.
 OTS charged that Henkel's actions created the appearance of using public office for private gain. The regulator said Henkel compromised his own independence and impartiality as a member of the Bank Board and adversely affected the confidence of the public in the integrity of the Bank Board and its members.
 -0- 11~18~92
 ~CONTACT: Thomas P. Mason of the Office of Thrift Supervision, 202-906-6677~


CO: Office of Thrift Supervision ST: District of Columbia IN: FIN SU:

DC -- DC017 -- 2413 11~18~92 13:41 EST
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Publication:PR Newswire
Date:Nov 18, 1992
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