Free Motion to Amend/Correct - District Court of Federal Claims - federal

Case 1:95-cv-00468-TCW

Document 185-3

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IN THE UNITED STATES COURT OF'FEDERAL CLAIMS NO. 95-468C (Senior Judge Loren A. Smith)

ASTORIA FEDERAL SAVINGS &.LOAN ASSOCIATION, Plaintiff, vs. THE UNITED STATES OF AMERICA, Defendant.

/

DEPOSITION OF ANDREW KANE, JR. Taken before Kerry A. Serey, Registered Professional Reporter, Notary Public in and for the State of Florida at Large, pursuant to Notice of Taking Deposition filed by the Defendant in the above cause.

Thursday, July 27, 2000 505 South 2nd Street Fort Pierce, Florida 9c54 a.m. - 12:25 p.m.

' REPORTING CORP

230 Park Avenue, Suite 650 New York, N e w York 10169

Telephone: 212-557-5558 Fax: 212-557-0050 EmaiI:[email protected]

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ANDREW K A N E , o f f e r e d . m e the

JR.

job,

so I took i t .

Q-

So y o u c a m e t o S u b u r b i a a s a n

executive vice-president
A. Yes. D i d you

i n 1974?

QCEO? A.

l a t e r become p r e s i d e n t . a n d

Yes.

Q
l a t e r ? A.

When w a s t h a t ,

sir?

About

a year

Maybe

t w o years,

maybe.
o f t h e b o a r d of

Q.
d i r e c t o r s of
A.

A n d w e r e you a m e m b e r

Suburbia,
Yes,

s i r ?

I was.

Q.
directors,
A.
SO.

When d i d y o u

j o i n t h e b o a r d of

do you r e m e m b e r ?
I became p r e s i d e n t

same t i m e ,

'76

or

Q.
chairman? A.

A n d d i d you u l t i m a t e l y

become

Yes. A n d do you r e m e m b e r w h e n you b e c a m e

Q.
chairman? A.

No,

I don't.

Q.

Around 1980?

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ANDREW KANE, JR. Around
1980

I would guess, yes.

Q.

And who was the president of Suburbia

when you were chairman? A. Robert Miller. D o you know if h e ' s alive, sir? H e ' s dead. D o you keep in touch with any people

Q.
A.

Q.

from Suburbia? A .. No. Did you serve o n any committees at

Q.

Suburbia, sir? A. Well, as the CEO an e x officio on

every committee really.
Q.

And when you became executive
1974

vice-president in there?
18 19

what were y o u r duties

A.

Administrative basically. D o you remember what Suburbia's
1974?

Q

20
21 22
23

financial condition was in A. No, I don't.

I believe it was okay.

Q

And then Suburbia merged with

Fidelity, didn't it, sir?
A.
Q-

24 25

Yes. Did you take a position with

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1 2

ANDREW KANE, JR. Fidelity?
A.
Q.

3
4
5
6

Yes. What was your position with Fidelity

after the merger? A. I believe it was vice-chairman. What were your duties a s

7
8 9

Q.

vice-chairman, sir? A. Basically administrative. Were you involved in the d a y - t o - d a y

10 11

Q.

operations of Fidelity, sir? A. Yes. And how long were y o u vice-chairman

12 13

Q

of Fidelity, sir?
A.
Q.

About a year and a half. And then did you take another

position with Fidelity? A. N o , they offered me a consulting

position, and I took that for maybe a month and then left there and went with a place called Central Federal.

QA.

D o you remember when that was, sir? I believe it was in
1986.

Q-

Why did you decide not to take the

consultant's position with Fidelity?

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ANDREW KANE, J R . BY MR. MCCLAIN:

Q.

D o you remember what Suburbia's asset

size was when you started in 1974? A. Well, I would say close to 5 0 0 That's only a guess.

million maybe.

Q.

And do you remember what the asset

composition was in 1974? A. It was primarily first mortgage

loans, for family mortgage loans.

Q

And again you said that Suburbia's

condition was okay in 1974? A. Yes. Did that ever change, sir? Yes, it did over the years it

Q.
A. changed.

Q.
A.

How did it change? Because of the interest rate

differential.

Q.

And when you say, "interest rate

differential," sir, I just want to know exactly what you mean by that? A. Well, I mean mortgages were pulling

out on the books at an average of about six percent and cost of savings was up around ten

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ANDREW KANE, JR. percent.
Q.

And the mortgages were long-term

mortgages?
A.

Thirty year mortgages. Was Suburbia alone in facing that

Q.

problem, sir?
A.

N o , it was basically a n industry

problem.
Q.

Did it affect Suburbia more than

other industries o r excuse me more than any other thrifts? A.
Q-

No.

I would say no.

S o many other thrifts i n the industry

were facing the very same problems a s Suburbia was facing?
A.

Yes. MR. MCCLAIN:
I'd like to mark as an
- -

exhibit a document 109.

I think we are u p to

(Defendant's Exhibit No. 109 w a s marked for identification.) BY MR. MCCLAIN:
Q.

I ' v e placed in front of y o u , s i r , It

what's been marked as Defendant's Exhibit 109.

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18
1

ANDREW K A N E ,

JR.

2

i s a document

B a t e s s t a m p e d OAA0052432 MR. EISENHART:

and 2 4 3 3 .

3
4

I ' m sorry, m i n e is

actually

--

5
6
7

MR. MR.

MCCLAIN: EISENHART:

2344? Yes. Off

the record

a second.
(A discussion w a s held off t h e

8

9
1 0
11

record. )
BY M R . MCCLAIN:

Q.

C a n you t e l l

m e w h a t t h i s is, sir?

1 2
13

Is t h i s a l e t t e r t h a t A. Yes. And

you w r o t e t o M r . V i g n a ?

1 4
15

Q.

f e e l f r e e t o r e a d a s much of sir, but

the

l e t t e r a s you l i k e ,

I ' m going t o a s k you

1 6

q u e s t i o n s about t h e t h i r d f u l l paragraph and
f o u r t h f u l l p a r a g r a p h on t h e f i r s t p a g e .
You've

17
18
1 9 20 2 1
22

read i t , sir?
A. Yes,
I have.

Q.

D o you see t h e t h i r d

f u l l paragraph

it refers t o a negative trend i n operating
p r o f i t a b i l i t y ? A. D o you s e e t h a t ,

sir?

23 24 25

Yes.

Q.
right

When d i d t h a t t r e n d b e g i n ?

W a s

it

around 1 9 7 9 / 1 9 8 0 ?

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ANDREW KANE, JR. A. Yes. Prior to that time had Suburbia been

Q.

operating profitably? A. Yes. And do you remember what the profits

Q.

were per year prior to that time?

A.
Q.
A.

No. Ballpark estimate? No. I t ' s a long time ago, wasn't it? Yes. And you said that the negative trend

Q.

rA-

Q.

was due primarily to the high cost of savings and borrowed money. Is that that interest rate

differential that you were referring to before?
17 18 19

A.

Right. Now, in that fourth full paragraph,

Q.

sir, you said that the long range plans to restore profitability included controlling the association's growth to match the earnings potential. How did you expect that to restore profitability, sir?

20
21 22 23 24 25

A.

I don't know really.

Might have been

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1 2

ANDREW KANE, JR. something I just wrote.

3
4 5

Q.
time, sir? A.

You were chairman and CEO at this

Yes. Did you have your subordinates draft Like

6
7 8

Q.

letters to regulators for you at that time? say Mr. Miller? A.

9
10 11 12

I would say we might have done it i n

conjunction drafted it together.

Q.

Can you think of any waysJ that

controlling Suburbia's growth to match earnings potential woul-d restore profitability?
.

13
14 15 16 17 18 19 20 21 22 23 24 25

A.

Well, it would reduce the cost of

money, which savings and borrowed money which was
- - savings was I guess about nine o r ten percent,

borrowed money was around the same range maybe.

Q

So by having less borrowings and

savings, you wouldn't have to pay as much out? A. That's right. And by having less savings and

Q

borrowings, of course, that would control your growth? A. Yes. And did you in fact attempt to do
'

Q.

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ANDREW KANE, JR. that, sir? A. Yes, we did, but it was difficult. Why was it difficult, sir? It was difficult in that we kept

Q
A.

losing savings you know because of the high cost of money, and to kind of cut that down was - - you know it was very difficult to do.

Q

Would you say that the Long Island

--

what was the market in which Suburbia was competing at that time? A. County. In Long Island, Nassau, Suffolk

Q.
A.

Was that a competitive market, sir? Very competitive. So if Suburbia lowered the rate it

Q.

paid on its savings or borrowings, then other thrifts would step up to the plate and offer more?
A.

Well, other thrifts and also the

brokerage houses.

Q
thrifts? A.

So you weren't just competing with

No, we were competing with the

brokerage houses.

Q.

Would you consider the Long Island
I

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22 1 2
3
4

ANDREW KANE, J R . market one of the most competitive in the nation? A.
Q.

I would, yes.
Did you at the time that you wrote

5 6
7
8 9

that letter, sir, did you expect Suburbia t o return to profitability? A. The only way I probably expected it

was if things changed I mean.

Q
A.

When you s a y , "things changed " - The cost of borrowing and t.he cost of

10 11 12 13 14 15 16
17

savings would go down.
Q.

S o if interest rates fell - We would but you know. Is it fair t o say that other thrifts

A.
Q.

had similar hopes that if interest rates came down that they would also come back to profitability? A. Yes. MR. MCCLAIN: Exhibit 110. (Defendant's Exhibit No. 110 was marked for identification.)
M R . MCCLAIN:

18 19 20 21 22
23

I'll mark this as

I've marked a s Exhibit

110 and handed it t o the witness a document Bates stamped OAA0052225 to 2360. BY MR. MCCLAIN:

24 25

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ANDREW KANE,
A.

JR.

J u s t t h a t h e was I t h o u g h t
I

a fair

examiner.

t h i n k he l e f t and went

somewhere w i t h

the industry.

Q

Do y o u r e m e m b e r m e e t i n g w i t h h i m examination? remember, no.

a f t e r t h i s r e p o r t of
A.

I don't

Q.
A.

You j u s t

remember him?

I remember him.

Q-

And y o u d o n ' t r e m e m b e r d i s c u s s i n g Suburbia?

w i t h him t h e f i n a n c i a l c o n d i t i o n o f
A.

I d o n ' t remember,

no. same p a g e , sir,

Q.

Do y o u s e e o n t h a t

there is a section called operating r e s u l t s a t the b o t t o m of
A.

t h e p a g e on t h e r e p o r t Yes.

summary?

Q.

Do y o u s e e t h a t d u r i n g t h e l a s t t h r e e

semi-annual p e r i o d s S u b u r b i a ' r e p o r t e d d e f i c i t o p e r a t i n g r e s u l t s of dollars?
A.

about f i v e and a h a l f

million

Yes. And w h a t w a s t h e p r i n c i p a l c a u s e o f

Qthat, sir?
A.

The i n t e r e s t r a t e d i f f e r e n t i a l . Were t h e r e a n y o t h e r f a c t o r s t h a t

Q.

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1

ANDREW KANE,

JR.

2

played a significant
A.

role in this deficit?

3
4

No. So i n t e r e s t r a t e d i f f e r e n t i a l was

Q

5
6

b a s i c a l l y t h e p r i m a r y c a u s e of t h i s ?
A.

Yes. And d i d y o u e x p e c t t h a t if interest faced

Q.

r a t e s came down t h a t y o u w o u l d n o l o n g e r b e with a d e f i c i t
A.

i n operating results?

Yes. Should be s t a r t i n g t o r e t u r n t o

Q.

favorable operating results?
A.

Yes. Now 1 ' 1 1 r e f e r t o y o u , sir, a g a i n on Do you

Q-

t h e b o t t o m r i g h t - h a n d c o r n e r 2355 p l e a s e . s e e t h i s page,

s i r , r e f e r s t o a wholly-owned

s e r v i c e corporation Suburbia?
A.

Yes.

Q.
A.

And i t ' s SFS R e s o u r c e s C o r p o r a t i o n ? Yes. And d o y o u s e e t h e r e i s a d e s c r i p t i o n sir, i n t h e middle of the

Q
of

activities there,

page?
A.

Yes.
Is t h a t

Q.

a f a i r d e s c r i p t i o n of

what

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33

1
2

ANDREW KANE, JR. that were explored by Suburbia a s of September 18, 1981? A. No, I don't. What were t h e various options Were they referring t o the

3

4

5

Qreferring to?

declining net worth position that Suburbia was facing? A.
Q.

I d o n t recall. D o you see the next sentence? The

chairman was authorized t o explore the availability of a n appropriate merger partner. D o you think that was one of t h e options that Suburbia explored at that time? A.
Q

Yes. D o you remember any of the - - what

y o u did to explore the availability of a appropriate merger partner? A.
20 21 22 23 24
25

Y e s , we had discussions with other

institutions.

Q.

D o y o u remember what other

institutions y o u discussed the possible merger with? M R . EISENHART: I'll place o n the

record my objection to this line of

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34
ANDREW KANE, JR.

questioning.

I believe

t h a t t h i s does not To t h e

go t o i s s u e s of extent

damages i n t h e c a s e .

it is relevant

a t a l l i t goes t o

liability issues.
MR.
MCCLAIN:

M question is not y
It

directed t o l i a b i l i t y issues. damages, Frank. EISENHART: Well,

is t o

MR.

I ' m simply

o b j e c t i n g b e c a u s e I t h i n k you would b e v e r y hard pressed t o define, you t o d o i t , b u t and I ' m not a s k i n g

I ' m simply saying you

w o u l d b e v e r y h a r d p r e s s e d t o d e f i n e how t h i s r e l a t e s i n a n y way t o d a m a g e i s s u e s i n the case. But I ' m s i m p l y p u t t i n g my Go a h e a d .

o b j e c t i o n on t h e r e c o r d .
BY M R .

MCCLAIN:

Q.

Do y o u r e m e m b e r w h a t t h e o t h e r

i n s t i t u t i o n s were?
A.

Yes,

Island Federal,

Southshore

Pederal, ones.

Heritage Federal,

t h e y were t h e s p e c i f i c other

I discussed with

a number o f

associations also. t h e time mergers.

E v e r y b o d y was d i s c u s s i n g a t

Q.

Were t h o s e i n s t i t u t i o n s i n t e r e s t e d i n

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1
2

ANDREW K A N E ,

JR.

merging with Suburbia?
A.

3
4

Yes. Why d o y o u t h i n k t h e y w e r e i n t e r e s t e d

Q.

5

i n merging with Suburbia?
A.

6

I think --

I really

c a n ' t g i v e you

7 8 9 10
11

a n y r e a s o n why.

Q-

Do y o u r e m e m b e r w h a t S u b u r b i a ' s s i z e

w a s around t h i s time?
A.

Maybe 8 0 0 m i l l i o n . Was S u b u r b i a o n e o f the larger

Q

12 13
14

t h r i , f t s i n Long I s l a n d ?
A.

Yes. Did Suburbia have any f r a n c h i s e

Q.
value, sir?
A.

15
16

I don't

believe so. the larger

17 18 19
20

Q
deposit bases
A.

Did S u b u r b i a h a v e o n e of i n Long I s l a n d ?
I would t h i n k s o ,

yes.

Q.

Do y o u t h i n k t h a t w o u l d b e v a l u a b l e

21 22

t o o t h e r t h r i f t s having access t o t h a t deposit base?
A.

No. Why n o t , sir?

Q.
A.

I t w a s b a s i c a l l y we w e r e a l l

in

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1 2
3

ANDREW KANE,
A.

JR.

Yes. And w h a t d i d y o u c o n c l u d e ? W couldn't f i n d an investor. e Did you remember c o n t a c t i n g a n y

Q.
A.

4

5
6

Q.
investors?
A.

W c o n t a c t e d a number o f e Do y o u r e m e m b e r a n y o f

them.

Q.
A. Company.

them?

The o n l y o n e I r e m e m b e r i s A l l e n a n d

Q.
A.

And why d i d t h e y n o t
I d o n ' t know,

infuse capital?

but

I assume t h e y

thought

i t was n o t g o i n g t o b e a p r o f i t a b l e

v e n t u r e a s l o n g a s i n t e r e s t r a t e s s t a y e d h i g h even if they put c a p i t a l i n .

Q.

Do y o u r e m e m b e r M r .

Beesley ever

saying anything about t h a t meeting?
A.

l i q - u i d a t i n g weak t h r i f t s a t

No. Did any r e g u l a t o r s e v e r s a y t o you

Q

t h a t S u b u r b i a was g o i n g t o b e l i q u i d a t e d ?
A.

No. Did you e v e r s e r i o u s l y t h i n k t h a t

Q

S u b u r b i a would be l i q u i d a t e d ?
A.

No.

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41

1 2

ANDREW K A N E ,

JR.

Q.

Why n o t ?

The g o v e r n m e n t w a s n ' t

3
4

liquidating thrifts at that p o i n t ?
MR.
of

EISENHART:

I object t o the f o r m

5

t h e question.

I t ' s leading.
I don't

6
7

THE WITNESS: BY M R . MCCLAIN:

remember.

8
9

Q.
that Mr.

D o you s e e t h e v a r i o u s p o s s i b i l i t i e s B e e s l e y m e n t i o n e d and/or
It

noted i n t h i s

1 0

paragraph three?
mergers,

says he m e n t i o n e d u n a s s i s t e d
outside capital,

m e r g e r s w i t h infusion,

FSLIC assistance. MR. BY M R . MCCLAIN: EISENHART:
What's

the question?

Q.
sir, that

The q u e s t i o n i s :

Is i t

fair t o say,

a t t h i s t i m e F S L I C w a s considering about

every s t e p possible t o keep t h r i f t s a f l o a t besides
liquidating? A. Yes. MR. EISENHART: Object to the f o r m of

t h e question.
BY M R . MCCLAIN:

Q

D o you r e m e m b e r w h a t a l t e r n a t i v e s
that point?

that you reviewed at

A.

No.

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48
ANDREW K A N E ,
JR.
115 w a s

(Defendant's E x h i b i t No. marked for i d e n t i f i c a t i o n . ) BY M R . MCCLAIN:

Q.
the annual
A.
--

I s t h i s a m e s s a g e t h a t you g a v e t o
at

the annual report? so.
D i d you m e a n t o say

I believe

MR.

EISENHART:

a t the annual m e e t i n g ?
MR. BY M R . MCCLAIN: MCCLAIN: Yes,

I ' m sorry.

Q.
paragraph,
1982,

A n d do you s e e i n t h e

first

sir, t h a t w h i l e Suburbia l o s t m o n e y i n
of the net

it w a s about one h a l f 1981?

loss for

the p r i o r year,
A.

Yes. A n d w h y w a s Suburbia st'ill o p e r a t i n g

Q.

under a net loss?
A. B e c a u s e it

s t i l l had t h e i n t e r e s t

rate differential.

Q.
paragraph,

A n d do y o u s e e i n t h e t h i r d f u l l

s i r , you n o t e t h a t t h e f i r s t h a l f o f

1 9 8 2 w a s m a r k e d by u n c e r t a i n t y a n d c o n t i n u i n g h i g h

interest rates.
A. Yes.

Was t h a t t r u e ,

sir?

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ANDREW KANE,

JR.

Q

- .

What was t h e u n c e r t a i n t y t h a t y o u

referred to?
A.

Whether t h e y were g o i n g t o go up o r

down.

QA.

Uncertainty about Yes.
.

interest rates?

Q.

And t h e f i r s t h a l f

of

1982 t h e y

c o n t i n u e d t o go up o r t h e y c o n t i n u e d t o be h i g h a t least?
A.

Yes. And i t s a y s i n y o u r n e x t s e n t e n c e o r e x c u s e me, by l a t e

Q-

t h a t by l a t e S e p t e m b e r , summer h o w e v e r i n t e r e s t

r a t e s began t o d e c l i n e . sir?

Did t h a t i n f a c t h a p p e n , A. If
I

said so,

it did.
independently recollect

Q.
that

But you d o n ' t

i t happened?
A.

No. Do y o u r e c a l l i n t e r e s t r a t e s time?'

Q

d e c l i n i n g d u r i n g t h a t p e r i o d of
A.

I

d o n ' t know. sir,

Q
it said i f

And t h e f o u r t h f u l l p a r a g r a p h ,

i n t e r e s t r a t e s continue t h e i r decline,

S u b u r b i a s h o u l d b e a b l e t o show a p r o f i t s o m e t i m e

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1 2
3

ANDREW KANE , J R

.

i n t h e f o u r t h q u a r t e r of

1983.

Why d i d y o u t h i n k t h a t ,
A.

sir?

4

Again,

t h e h i g h c o s t o f money

w o u l d n ' t be costing us. money,

--

c o s t u s a s much a s i t h a d b e e n money, t h e h i g h c o s t of
15

The c o s t o f

I b e l i e v e t h e p r i m e r a t e was a b o u t

percent a t t h a t time.

Q

And i s i t f a i r t o s a y t h a t t h e

d e c l i n e i n i n t e r e s t r a t e s would p r o b a b l y h e l p other t h r i f t s too?
A.

Yes. Do y o u r e m e m b e r i f you d i d p o s t a

Qprofit

a t some t i m e ?
A.

I don ' t

remember.

Q.

Do you s e e i n t h e f i f t h f u l l sir, t h e l a s t p a r a g r a p h on

p a r a g r a p h on t h a t p a g e ,

t h a t p a g e i t r e f e r s t o a l a w s i g n e d by P r e s i d e n t Reagan, comprehensive l e g i s l a t i o n a f f e c t i n g

s a v i n g s and l o a n a s s o c i a t i o n s ?
A.

Yes. Do y o u r e m e m b e r w h a t t h a t l a w w a s ? No. The G a r n - S t . Germain A c t ?

Q.
A.

Q
A.

Could have b e e n .

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51

ANDREW KANE,

JR.

Q
Act w a s ?
A.

D you know what t h e G a r n - S t . o

Germain

I remember

i t but

I d o n ' t know

e x a c t l y what

i t was.
Did i t g i v e t h r i f t s new p o w e r s ?

Q.
A.

I t gave us a chance t o have checking
w h i c h I t h i n k was a b i g power we h a d . Did i t e n a b l e you t o make more t y p e s loans?

accounts,

Qof

consumer l o a n s and commercial
A.

I don't

remember. sir, t h e second f u l l

Q-

The n e x t p a g e ,

p a r a g r a p h and t h e f i r s t

f u l l paragraph r e f e r s t o

c a p i t a l a s s i s t a n c e program.
A.

Yes. D you remember what t h a t o capital

Q.

a s s i s t a n c e program was?
A.

No. D you remember i f o Suburbia received

Q

capital assistance?
A.

I believe so.

Q

And i n what

form d i d S u b u r b i a r e c e i v e

capital assistance?
A.

I d o n ' t remember.

Q-

The n e t w o r t h c e r t i f i c a t e s ?

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52
1 2

ANDREW K A N E , A.

JR. i t ,

Sounds l i k e p r o b a b l y c o u l d be

3
4

yes.

Q

D o you r e m e m b e r w h a t n e t w o r t h

5

certificates were?
A. No. You don't r e m e m b e r how net w o r t h

6
7

Q.

8 9 10
11
12

c e r t i f i c a t e s w e r e t r e a t e d on b a l a n c e s h e e t s ?
A. No,
I don't

remember. Suburbia did

Q.

A n d do you r e m e m b e r i f

receive net w o r t h c e r t i f i c a t e s ?
A.
I

believe w e did, yes.

13
14

Q.

D o you r e m e m b e r h o w m u c h i n n e t w o r t h

c e r t i f i c a t e s it received?
A. No. D o you s e e t h e second t o l a s t

15

16
17
18

Q
paragraph, A.

sir?
Yes. D i d you f e e l t h a t a t t h e t i m e ?
If I wrote

1 9
20 21 22

Q.
A.

i t ,

I

felt

i t ,

yes.

Q.

D o ,you' r e m e m b e r f e e l i n g t h a t Suburbia

c o u l d r e m a i n v i a b l e and c o n t i n u e t o m e e t t h e
i n v e s t m e n t s and h o u s i n g needs of our community at

23
24 25

that time?
A. Yes.

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ANDREW K A N E ,

JR.

QA.

A n d did Suburbia r e m a i n viable? \ N o t a s v i a b l e a s w e - - I w o u l d have

l i k e d t o t r y t o say here.

Q.
s i r ? A.

What w e r e y o u t r y i n g t o s a y h e r e ,

Well,

i f

economic

inflation declined

and i n t e r e s t r a t e s d e c l i n e d ,

t h a t w e w o u l d be a b l e

to,

b u t i t had t o happen f a s t and d i d n ' t happen a s

f a s t a s I w a s hoping it w o u l d .

Q.

A n d w h a t happened t o S u b u r b i a w h e n economic

t h a t d i d n o t happen a s f a s t a s i t c o u l d ,

c o n d i t i o n s d i d n o t i m p r o v e a s f a s t as y o u had
hoped?
A.

W e continued looking for m e r g e r

partners.

Q.

D i d you e x p l o r e any o t h e r m e t h o d s of time? Other

raising capital a t that
MR. MR.

EISENHART: MCCLAIN:

than w h a t ?

O t h e r than m e r g e r

partners.
THE WITNESS: As

I said before, w e

looked f o r o u t s i d e c a p i t a l b u t
work:
BY M R .

it didn't

MCCLAIN:

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54

1
2
3

ANDREW KANE, JR.
Q-

Any other ways of raising capital

that you explored? A. No. (Defendant's Exhibit No. 116 was marked for identification.) MR. MCCLAIN: Defendant's 116 is These

4

Bates stamped PAA0500642 through 4 3 .

are minutes from the regular monthly meeting board of directors of Suburbia, dated September 16, 1983. BY MR. MCCLAIN:

Q

I'll ask to you turn to the second Let me know

page on paragraphs eight and nine. when you've finished reading, sir. A. Okay.

Q.
Mr. Lovely? A.

Do you remember this meeting with

No. Do you remember Mr. Lovely ever

Q.

outlining a plan of merger for Fidelity and Suburbia in a conversion to a stock association? A. No. Do you remember discussing with

Q

Mr. Lovely converting to a stock in connection

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1 2
3

ANDREW

KANE,

JR.

w i t h A l l e n and C o m p a n y w a s p r i o r

to this.
F i d e l i t y was

Q-

Do you

remember

if

4
5

smaller than A s t o r i a a t t h i s t i m e ?
MR. MR. MR. EISENHART: MCCLAIN: EISENHART:
- -

A s t o r i a or F i d e l i t y ?

6 7
8 9

Suburbia,

excuse m e . that

I ' m sorry,

q u e s t - i o n came o u t BY MR. MCCLAIN:

1 0
11

Q.

Do you

remember

if

F i d e l i t y was

smaller than S u b u r b i a a t t h i s t i m e ?
A. Y.e s And Yes. Do y o u remember how m u c h s m a l l e r ?

1 2 1 3 1 4
15

.
it was s m a l l e r ?

Q.
A.

Q
A.

1 6 1 7
18

I w o u l d guess about

half

the s i z e .

Q.

Do y o u

remember w h y F i d e l i t y w a s

i n t e r e s t e d i n merging w i t h S u b u r b i a a t t h a t t i m e ?
A. No.

1 9 20 2 1
22

Q.

Why do y o u t h i n k F i d e l i t y w a s
time? f o r m of

interested i n m e r g i n g w i t h Suburbia at that
MR.
EISENHART: Object

t o the

23 24 25

the q u e s t i o n ,

c a l l s for speculation.
I really can't

THE W I T N E S S :

--

e v e r y b o d y w a s t a l k i n g mergers a t t h a t t i m e .

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1

ANDREW KANE,

J R

.

2
3
4

I ' m s u r e F i d e l i t y was t a l k i n g w i t h a l o t of other people a l s o .
BY MR.
MCCLAIN:

5
6
7
'

Q

Do you remember i f

you w e r e t a l k i n g

t o o t h e r i n s t i t u t i o n s t o o a b o u t a p o s s i b l e merger a t t h a t time?
A.
.

8
9

I was c o n s t a n t l y t a l k i n g t o o t h e r

institutions.

10
11

Q.

What o t h e r i n s t i t u t i o n s w e r e you

t a l k i n g t o a t t h a t time?
A.

12

Maybe S u f f o l k C o u n t y F e d e r a l ,

County

13
14

Federal,

we w e r e t a l k i n g - - e v e r y b o d y was t a l k i n g W had m e e t i n g s , e r e g i o n a l meetings

t o each o t h e r .

15

and weld d i s c u s s i t a t t h o s e m e e t i n g s .

16
17

Q.

Do you remember a n y o t h e r

i n s t i t u t i o n s o t h e r t h a n t h e o n e s t h a t you j u s t mentioned?
A.

18
19

No.

Well o t h e r t h a n t h e o n e s I h a d

20

an agreement w i t h a t one t i m e .

Q
22 23 24 25
A.

Heritage? H e r i t a g e I s l a n d and S o u t h s h o r e . And t h i s i s a f t e r t h a t f e l l through,

Q.
i s n tt

it?
A.

I ' m not s u r e .

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1

ANDREW KANE,

JR.

2

d o c u m e n t B a t e s s t a m p e d WOL3150758 t h r o u g h 0 7 8 6 . T h i s i s a r e p o r t of 1983. examination, dated October 7,

3
4

I ' d l i k e you t o t u r n t o p a g e 2 . 1 ,
A.

sir.

5
6
7

Yes. And t h e f i r s t p a r a g r a p h s a y s t h a t the

Q-

association experienced operating l o s s e s of $ 1 6 , 4 2 0 , 0 0 0 f o r t h e y e a r - e n d e d December 3 1 , and j u s t under s i x m i l l i o n s d o l l a r s f o r n i n e 1983. So o p e r a t i n g 1982

8 9 10
11 12
13

months e n d i n g September 30,

l o s s e s w e r e down f r o m t h e y e a r b e f o r e ?
A.

Yes And why i s t h a t , Because of

Q.
A.

sir?

14

interest rates primarily. Service

15
16
17

Q.

Any o t h e r f a c t o r s ?

c o r p o r a t i o n income?
A.
A

l i t t l e b i t of

this but primarily

18 19
20

the interest rate differential.

Q.
t h a t page,

Do y o u s e e i n t h e f o u r t h p a r a g r a p h of sir,
i t s a y s management's been

21 22

following the business plan it submitted to the F e d e r a l Home Loan Bank B o a r d i n J u n e o f you s e e t h a t ,
A.

1983.

Do

23
24 25

sir?
Yes. Were you i n v o l v e d a t a l l i n

Q-

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64

1 2

A N D R E W KANE,

JR.

Q.

Was t h e c o n s u m e r l e n d i n g o p e r a t i o n

3
4

g r e a t l y expanded?
A.

I don't

think so, no.

5 6

Q.
A.

Why n o t ? Because of the competition i n the

a r e a w i t h commercial banks.

Q.
A.

What d o y o u mean b y c o m p e t i t i o n , Well,

sir?

t h e r e i s o n l y s o much c o n s u m e r and t h e commercial banks were And w e ' d j u s t started in i t , and

lending available, i n it for years.

we h a d t o s t a r t f r o m s c r a t c h , w e l l a s we m i g h t h a v e h o p e d .

s o i t d i d n ' t work a s

Q.

Did consumer l e n d i n g p r o v e t o be

p r o f i t a b l e f o r Suburbia?
A.

Yes. Who was t h e new v i c e - p r e s i d e n t hired

Q.

f o r consumer l e n d i n g ?
A.

I d o n ' t remember.

Q.
21

The s e c o n d t o l a s t s e n t e n c e o n t h a t s a y s t h a t t h e major p r o j e c t t o improve

page,

sir,

22 23 24 25

n e t worth i s a planned s a l e of b r a n c h o f f i c e s . Do y o u r e m e m b e r i f b r a n c h o f f i c e s w e r e s o l d b y Suburbia? A. No, they weren't.

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ANDREW K A N E ,

JR.

QA.

Why n o t ?
I

a s s u m e we c o u l d n ' t g e t a n y b u y e r s . in those

Q.

Was F i d e l i t y i n t e r e s t e d

branch o f f i c e s ?
A.
I don't

think so.

Q.

Do you r e m e m b e r w h a t F i d e l i t y d i d

w i t h t h e b r a n c h o f f i c e s a f t e r t-hey were a c q u i r e d i n t h e merger?

MR.
11

EISENHART:

I think you've

just

made y o u r p r i o r q u e s t i o n v e r y a m b i g u o u s . You a s k e d him i f Fidelity was interested i n

12

13
14

t h e branch o f f i c e s , i n t h e c o n t e x t of of October 7,

and I t h i n k he answered of examinati'on

t h i s report

15
16
17

1983.

Y o u ' v e now j u m p e d a h e a d

t o t h e merger.
MR.

MCCLAIN: sir?

Did y o u u n d e r s t a n d m y

18 19 20
21

question,

T H E WITNESS:

I understand

it

t o be

this

(indicating,) yes. MR. EISENHART: Referring t o the

22
23

report.
BY M R . MCCLAIN:

24 25

Q.

Do you r e m e m b e r ,

sir,

if

Fidelity

s o l d the branches?

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66

ANDREW KANE, J R .
A.

No, they maintained all branches. Do you remember after the merger

Q

Fidelity ever discussing selling branch offices of Suburbia? A. No. Do you remember which branch offices

Q.

you contemplated selling?
A.

No, no idea.

Q

If you could turn to again going to
765.

the bottom right-hand corner of
A.

Okay. The bottom of the page has a

Q.

reference to Shoreham Development and SFS Resources Corporation.
A.

Do you see that, sir?

Yes. And it shows retained earnings of 931

Q-

and are those thousands of dollars? A. Yes. And 600. Does that indicate to you

Q.

that these service corporations were profitable, sir? A. Yes. And all told those two service

Q.

corporations were profitable to the tune of 1.8

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ANDREW KANE, JR. All the same operation? It was all part of the lending division.

Q.

And do you see under mortgage banking

on the next page, sir, it says this would afford us considerable servicing income o n an ongoing basis? And I think i t ' s talking about y o u r

selling strategy to Freddie Mac? A. Yes. And did that give y o u considerable

Q

servicing income? A. We had some; I don't know how much. And that became Fidelity's part o f

Q.

the merger, didn't i t , sir? A.
17 18
19

Yes. Is it fair so say, sir, this business

Q.

plan anticipated a road to profitability? MR. EISENHART: the question. THE WITNESS: question. B Y MR. MCCLAIN: I don't understand the Object to the form of

20

21
22

23
24

Q.

Let's take a look again at page 271,

25

and we looked at these different indicia before.

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80

ANDREW KANE, JR.
2

And is it fair to say that Suburbia anticipated that it would become more profitable in 1985? MR. EISENHART: the question. THE WITNESS: BY MR. MCCLAIN: This was our plan. Object to the form of

3 4
5

6 7
8

Q-

S o the plan indicates or the plan

9 10 11

contains what you anticipated Suburbia would d o in the following year? A. Yes. And there i s n o mention in here that

Q
13 14
15

y o u anticipated that you would become insolvent and liquidate, is there? MR. EISENHART: the question. THE WITNESS: NO. Object to the form of

16 17 18 19 20 21 22
23

(Defendant's Exhibit No. 121 was marked for identification.) MR. MCCLAIN: Defendant's Exhibit 121

is a document that's been Bates stamped PAA0920066 and 0067. BY MR. MCCLAIN:

24 25

Q

D o you see in the second paragraph,

sir, if you could just read that a moment and I ' l l

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82
1 2

ANDREW

KANE,

JR.

s e c o n d f u l l p a r a g r a p h on t h a t p a g e b e g i n n i n g w i t h interest rates s t a b i l i z e or decline s l i g h t l y , s h o u l d be a b e t t e r y e a r f o r S u b u r b i a F e d e r a l .
A.

3
4

1984

5
6

Yes. And you a n t i c i p a t e d i n 1984 i t would

Q.

be a b e t t e r y e a r f o r S u b u r b i a ?
A.

Yes. Why d i d you t h i n k t h a t the interest result in a

Q-

r a t e s t a b i l i z a t i o n o r d e c l i n e would b e t t e r year f o r Suburbia?
A.

B e c a u s e . o u r c o s t of

money w o u l d g o

down.

Q.

And d i d i n t e r e s t r a t e s s t a b i l i z e o r

d e c l i n e s l i g h t l y i n 1984?
A.

I d o n 1t

recall.

Q

Do you s e e a l s o on t h a t s e c o n d p a g e

t h a t S u b u r b i a h a s e n a c t e d a number o f p r o g r a m s which s h o u l d improve e a r n i n g s i n 1984 and f u t u r e years?
A.

Yes. And d o you remember w h a t t h o s e

Q-

programs were?
A.

No. The e q u i p m e n t l e a s i n g p r o g r a m , was

Q-

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1

ANDREW KANE, JR. that one of them? A. I d o n ' t recall. Who's Mr. Joseph A. O I C o n n o r ? I don't remember. (Defendant's Exhibit No. 122 was marked for identification.) MR. MCCLAIN: I've placed in front of

2
3

4

Q.
A.

5

6

the witness a document that has been marked as Defendant's Exhibit 122. stamped OAA0052722 to 2723. I t ' s Bates

BY MR. MCCLAIN:

Q.

It says that y o u ' r e aware that - -

very much aware if interest rates remain at current 'market levels, the associationls liability will depend upon its ability to obtain a significant capital infusion and/or continued regulatory assistance. What type of regulatory assistance were you referring to? A. Net worth certificates?
'

I assume net worth certificates. Do you see in the fourth paragraph

Q

you're talking about

- - talk about a merger with

another Long Island based federal savings and loan association. Do you remember who that
- -

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1

ANDREW KANE, JR.

2
3

Q.

Now, is it fair to say that if you

mark the assets of most thrifts in the industry at that period of time, 1982/1983, the book value of assets would exceed the market value of the assets?

4

5

MR. EISENHART:
the question.

Object to the form of

You can answer. I assume so.

THE WITNESS: BY MR. MCCLAIN:

Q.

And who was ultimately responsible

for the difference between the book value and the market value of the assets in the event of a liquidation? MR. EISENHART: 'the question. Object to the form of

You can answer it. I don't know.

THE WITNESS: BY MR. MCCLAIN:

Q.

Let's take a liquidation scenario.

A

thrift is liquidated, what happens to its assets?
A.

Probably would be taken over by the

FSLIC.
Q.

And what would FSLIC d o with the Sell them? They would sell them.

assets? A.

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1

ANDREW KANE,

JR.

2

preparation of
A.

t h i s proposed merger plan? remember. you were involved

3
4

I don't

Q.

Do y o u r e m e m b e r i f

5
6

a t a l l i n d i s c u s s i o n s i n what d i r e c t i o n t h e r e s u l t i n g a s s o c i a t i o n would t a k e a f t e r t h e merger?
A.

7 8
9
10
11

No.
MR.

EISENHART:

I'm not No,

sure I

understood your answer. recall or -THE WITNESS:
I don't BY MR.

you d o n ' t

No,

I

d o n ' t remember.

12

recall.

13
14

MCCLAIN:

Q.

Did you h a v e a n y r o l e

in the

15
16

a d m i n i s t r a t i o n of merger?
A.

Suburbia's assets a f t e r the

17 18 19 20
21

No. T h a t was a l l F i d e l i t y ? E v e r y t h i n g was F i d e l i t y a f t e r t h e

Q.
A.

merger.

Q.

And y o u d i d n ' t p l a y a n y r o l e i n i n what b u s i n e s s

22 23
24 25

a s s i s t i n g F i d e l i t y ' s management operations it should undertake?
A.
I was part

of

F i d e l i t y ' s management. right. Did y o u

Q.

You w e r e p a r t ,

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92
ANDREW KANE, JR.

p e r s o n a l l y h a v e a n y r o l e i n d e c i d i n g what F i d e l i t y would do w i t h S u b u r b i a ' s a s s e t s ?
MR.

EISENHART:

He j u s t

said after
I

t h e merger t h e y were F i d e l i t y ' s a s s e t s . object t o the form-of the question. s u r e what y o u ' r e a s k i n g him.
B Y MR.
MCCLAIN:

I'm not

QA.

You c a n a n s w e r .
I had r e s p o n s i b i l i t y

for the t o t a l

a s s e t s of

t h e a s s o c i a t i o n , which was F i d e l i t y ,

w h i c h was S u b u r b i a ' s a n d F i d e l i t y ' s .

Q.

So F i d e l i t y ' s

assets included assets

t h a t were f o r m e r l y S u b u r b i a ' s , c o r r e c t ?
A.

Yes. Now d i d y o u h a v e a n y r o l e i n F i d e l i t y t h a t once

Q.

a d m i n i s t e r i n g t h e a s s e t s of were S u b u r b i a ' s a s s e t s ?
MR.

EISENHART: Go a h e a d ,

He j u s . t a n s w e r e d t h a t you c a n a n s w e r i t

question. again.

THE WITNESS: same.

They w e r e a l l t h e

M e r g e d a n d e v e r y t h i n g was t o g e t h e r .

W d i d n ' t s a y t h i s i s Suburbia and t h i s i s e Fidelity. E v e r y t h i n g was a l l m e r g e d .
\.

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ANDREW KANE, JR. BY MR. MCCLAIN:

Q.
any way? A.

So you didn't segregate the assets in

No. Did you have any role in directing

Q-

the operations of Fidelity after the merger? A. Yes. What was that role? Basically an administrative role. What do you mean by an administrative

Q
A.

Qrole?

A.

Well, the operations, day-to-day

operations of the institution.

Q

And what about the day-to-day

operations of the institution were you involved? A.
Q-

I don't remember exactly.

Before the merger, do you remember

discussing with Mr. Lovely or any of Fidelity's management about how the resulting association would be run? A. No. Did you have any discussions with

Q.

Mr. Lovely about what investments the resulting association would make?

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ANDREW KANE, J R .
A.

Not really, no. What do you mean by not really? Well, I don't remember I'll put it

Q.
A.

that way.

Q.

If you could take a look at this I ' l l ask y o u again, do you

Exhibit 62 again, sir.

think you had any involvement in the preparation of this proposed merger plan? MR. EISENHART: answered. THE WITNESS: BY MR. MCCLAIN:
Q.

Objection, asked and

Yes, I did.

You did? T o what extent I don't remember. If y o u could turn to the second page, I t ' s Bate's stamped

A.

Q-

the page after that, sir.
0483

in the corner. A.
Q-

Okay. The first paragraph says: By

combining the two institutions, the services t.0 depositors will be expanded and increased b y introducing new services at both institutions to each others depositors; such a s , discount brokerage in all offices, life insurance i n all
.

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Page 41 of 54

ANDREW KANE, J R . A.
Q.

Yes. Do you remember if Fidelity was prior

to the merger?
A.
Q.

I don't remember. How about student loans, was Suburbia

offering student loans? A. Yes. Do you remember if Fidelity was? I don't remember. How about business loans, was

Q.
A.

Q.

Suburbia offering business loans prior to the merger? A. I don't know. How about home improvement loans? Yes. Was Fidelity offering home

QA.
Q.

improvements loans? A. I don't remember. Let me ask you this: Did Fidelity

Q-

pay anything for Suburbia?

A.

No.

To whom would they pay? Why did you

Q-

Well, I don't know.

merge with Fidelity?

A.

Because it seemed like an opportun-ity

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1 2

ANDREW

KANE,

JR.

a t the time.

W e were g o i n g t o have

some o f

our

3
4

d i r e c t o r s on a combined b o a r d , would s t a y i n p l a c e , t o do.

a l l o u r management

a n d i t seemed t h e r i g h t t h i n g

5
6

Q.
liquidated if
A.

Did you f e a r t h a t you would b e you d i d n ' t do t h e m e r g e r ? Not n e c e s s a r i l y l i q u i d a t e d , but
I

7
8

9 10
11

t h o u g h t maybe we w o u l d h a v e a n u n f r i e n d l y m e r g e r s e t u p by t h e e f f o r t s o f no c o n t r o l o v e r a n y of FSLIC, w h i c h ~ w o u l dh a v e

our destinies.

12 13
14

Q.
merger?
A.

And t h i s y o u r e g a r d e d a s a f r i e n d l y

Yes. Had y o u known m a n a g e m e n t o f Fidelity

15 16 17 18 19
20 21

Q-

p r i o r t o the negotiations regarding the possible merger?

A.

Yes. And w h a t w a s y o u r o p i n i o n o f

Q.

F i d e l i t y ' s management?
A.

It was rather

s h a l l o w a n d t h a t was

22 23
24

one o f t h e r e a s o n s I t h o u g h t i t would be a good merger, b e c a u s e I t h o u g h t we h a d g o o d m a n a g e m e n t

a n d i t would b e a good m i x .

25

Q.

You s a y y o u t h o u g h t

that Fidelity's

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ANDREW KANE,

JR

.

management was r a t h e r s h a l l o w ?
A.

Yes. What d i d y o u mean b y t h a t ? O u t s i d e of D i c k , L o v e l y and Bruno

QA. Greco,

i t was n e v e r - - r e a l l y n o o t h e r t o p
I would c o n s i d e r t o p management.

management what

Q.

Who f r o m S u b u r b i a ' s m a n a g e m e n t the association. You,

stayed

on a s a r e s u l t of
M r .

Miller - A.
. M r .

Miller stayed on,

Mr.

Steine,

M r .

Ogera.

Q.
A.

M r .

Ryan?

Who? Ryan? He was n o t m a n a g e m e n t . He was a

Q.
A.

board d i r e c t o r .

QFidelity?
A.

How l o n g d i d M r .

M i l l e r stay a t

He s t a y e d f o r a b o u t a c o u p l e o f

months and t o o k a c o n s u l t i n g p o s i t i o n w i t h them.

Q.
months?
A.

Why d i d h e o n l y s t a y f o r a c o u p l e of

I don't

t h i n k he and Bruno Greco g o t

along.

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Page 44 of 54

ANDREW KANE, JR.

Q.
A.

Why do you say that, sir? Just a feeling, that's all. Was Mr. Miller criticized as being

Q.

too active in board of directors meetings? A. No. Was he criticized for being t o o

Q.

critical of Mr. Greco? A. No. What was it about them that didn't

Q.
match? A.

I have no idea.
If you will turn to the next page,

Q.

s i r , introduction, 0484, do you see that? A.
Q

Yes. And there is a profile to merging

associations, and it appears that Suburbia is bigger in assets, savings and mortgages and has more branches than Suburbia, correct? than Fidelity, correct? A.
Q.

Or had more

Yes. Do you see above that there is a

sentence that says that there is n o overlap of markets and economy is t o be achieved by t h e merger planned of 1.0 million dollars in overhead,

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1 2 3
4

ANDREW KANE, JR. including the attrition of personnel requirements. Is it true that there's no overlap of markets, sir?
A.

5
6 7

Yes. And that was a benefit to Fidelity

Q.

8 9 10 11
12

and the resulting association? A. Yes. D o you know if the economies ever

Q.

achieved by the merger were at a minimum of 1.0 million dollars? A. I don't know. Were there economies that were

13 14 15
16 17

Q-

achieved by the merger? A. I don't remember. You don't remember if there were any

Q.

18 19 20 21 22 23
24

operating economies? A. I don t reme.mber. D o you see o n that page, sir, the

Q.

last sentence of that paragraph above profile of merging associations it says, the resulting association must be allowed to use purchase method accounting in order for it t o be beneficial. A. Yes.

25

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1

ANDREW K A N E , going f o r w a r d ? A. Yes. D o you k n o w i f

JR.

2
3
4

Q.

F i d e l i t y w a s caught i n

5
6

the same interest rate i n t e r m e d i a t i o n ?

MR. MR. MR.

EISENHART: MCCLAIN: EISENHART:

At what
Sir.

time?

7

8 9
10
11

O b j e c t to the

f o r m of

t h e q u e s t i o n u n l e s s you d e f i n e a t i m e . THE WITNESS: BY MR. MCCLAIN: P r i o r to the m e r g e r ?

12

Q.

Yes.

Well,

d o you t h i n k t h e y w e r e

caught i n the i n t e r m e d i a t i o n w h e n t h e i n t e r e s t

rates f e l l ?
A.

T h e y had m o r e a s s e t s on s h o r t - t e r m

m o n e y than they did i n m o r t g a g e

loans.
four, ,

That five

s h o r t - t e r m m o n e y w e n t over t h r e e , months.

Q.
Astoria? A.

And

so t h a t

enabled t h e m t o a c q u i r e

A c q u i r e Suburbia. A c q u i r e Suburbia,

Q.
know i f

excuse m e .

Do you

F i d e l i t y s o l d any a s s e t s t h a t f o r m e r l y

w e r e on S u b u r b i a . ! ~ o o k a f t e r t h e m e r g e r ? b A. Yes.

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Page 47 of 54

ANDREW KANE, JR.
Q.

Which assets? Some of the mortgage loans. D o you know if Fidelity realized a

A.

Q.

profit on those? A. I d o n 1t recall. D o you know if they sold any other

Q-

assets aside from those mortgage loans? A. Not that I know of.
M R . MCCLAIN:

L e t ' s take a

five-minute break, and I'll see what I have left and then be ready. (A recess was taken.)
BY MR. MCCLAIN:
Q.

If y o u could turn, s i r , to 488 of Were you involved at all in

that exhibit.

analyzing what the purchase accounting adjustments would be for the merger? A. I don't recall. D o you see at the bottom of the page,

Q.

sir, there is a column for discount accretion, goodwill amortization and net adjustments for Suburbia's adjustment?
A.

D o you see that?

U h huh. And there are rows corresponding to

Q.

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Page 48 of 54

ANDREW KANE, JR. years; do you see that, sir?
A.

Yes. What is your understanding of what

Q.

discount accretion is, sir?
A.

I'm not sure. Did you have any involvement in

Q.

deciding what the discount accretion and goodwill amortization of Suburbia would be, of Suburbia's assets would be? MR. EISENHART: In the mergers that

took place as distinguished from the one that's discussed o n this page? MR. MCCLAIN: Yes. I'll think you'll

see, Frank, it's the same. THE WITNESS: of this. I was involved in a lot

I don't specifically recall being

involved in this particular discussion. BY MR. MCCLAIN:

Q.

Were you involved at all in the

negotiations with regulators in connection with the merger? A. I believe s o , yes. Do you remember any of the

Q.
negotiations?

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1

ANDREW KANE, JR. A.
Q

2
3

No. Do you remember any discussions about

4

financial assistance? A. No. MR. MCCLAIN: questions. CROSS-EXAMINATION BY MR. EISENHART:
Q

5
6

I have no further

Mr. Kane, for some period of years

prior to its merger with Fidelity, Suburbia was suffering losses on a regular basis, was it not? A.
Q.

Yes. And in fact we've seen from t h e

documents Mr. McClain showed you y o u were suffering those losses every quarter? A. Yes. When Suburbia would suffer those

Q.

losses on a quarterly basis, what effect did that have on the institution's capital? A. Reduced it. S o as a result of these losses that

Q

occurred o n a regular basis for a number of years prior to the merger, what was Suburbia's capital situation at the time that it finally merged with

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1

ANDREW KANE, J R . Fidelity? A. It was below regulatory requirements. And in fact were you virtually out of

Q

capital by the time you merged? A. Yes. Now if Suburbia had not merged with

Q.

Fidelity and had kept on posting regular losses, would there have come a time when its capital would have gone negative? A. Yes. That was inevitable, wasn't it? Yes. Simple mathematics? Yes. What in your experience did the

Q.
A.

Q.
A.

Q-

regulators typically do to institutions when their capital dipped below regulatory minimums?

MR. MCCLAIN:
THE WITNESS: another institution. BY MR. EISENHART:
Q.

Objection. They merged them with

What in your experience did the

regulators typically do to institutions that had no capital left or were in a negative capital
'

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1 2
3

ANDREW KANE, JR. situation? MR. MCCLAIN: answered. THE WITNESS: As I said, they merged Objection, asked and

6 7
8

and went through some savings institution of their choice. BY MR. EISENHART:

9
10 . 11 12 13 14 15 16 17 18

Q.

And what alternatives did the

regulators have in your experience if they were not able to merge such an institution into another institution? A. were.
I don't know what their alternatives

I would assume it would be liquidated.

Q.

Now, Mr. McClain asked you about your

definition of goodwill, and you said I think that it was the difference between the market value and the book value of the institution's assets? A. Yes. Is it safe to say that you haven't

i9
20 21 22 23 24 25

Q

practiced accounting for a number of years? A. Yes. Might you be wrong about that? Yes. I want to show you Exhibit D 1 2 1 .

Q
A.

Q.

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Page 52 of 54

ANDREW KANE,

JR.

Q.
A.

And y o u b e l i e v e d t h a t Yes. When y o u s a y i f

in April

1984?

Q.

i n t e r e s t r a t e s were levels, y o u mean i f

t o remain a t c u r r e n t market t h e y d o n ' t come down?
A.

Yes. So a s of A p r i l 1984 you e i t h e r needed

Q

t h o s e i n t e r e s t r a t e s t o move d o w n w a r d o r y o u n e e d e d a c a p i t a l i n f u s i o n o r you n e e d e d a continued regulatory assistance?
A.

Yes. And i f y o u d i d n ' t g e t o n e o f those

Q.

t h i n g s , you w e r e n ' t g o i n g t o s u r v i v e ?
A.

Yes. Now y o u g o o n t o s a y , The b o a r d h a s

Q.

i n s t r u c t e d management

t o explore every area f o r a Were y o u i n f a c t d o i n g

possible capital infusion. that?
A.

Yes,

from a merger,

from i n v e s t o r s . h a s had

Q

S i n c e . O c t o b e r 1 9 8 3 management

d i s c u s s i o n s w i t h a number o f p o t e n t i a l Did you h a v e s u c h d i s c u s s i o n s ?
A.

investors.

Yes,

we d i d .
At

Q-

It says,

t h i s time,

meaning

in

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ANDREW KANE, JR. April of '84, one potential investor is reviewing our financial statements and we expect to hear from him in the near future regarding a capital infusion. Did that ever happen? MR. MCCLAIN: Did what ever happen?

BY MR. EISENHART:
Q.

Did you ever hear from him? I don't recall. Did you ever get a capital infusion

A.

Q.
from him? A.
Q-

No. It says here y o u ' r e discussing a

merger with another Long Island based federal savings and loan, and I think you said you didn't remember which one that was? A. I don't remember. And you said you're looking t o raise

Q.

additional capital through preferred stock through a financial service corporation, and I guess that didn't happen? A. Didn't happen, no. And it said you were looking for the

Q.

sale of branch offices t o help you raise capital and that didn't happen?

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1

ANDREW K A N E , A. No.
So i s i t

JR.

2

3
4

Q.

f a i r t o say,

safe t o say, i s

i t a c c u r a t e t o s a y i n A p r i l of

1 9 8 4 you w e r e

5

l o o k i n g a t every p o s s i b l e avenue t o t r y t o g e t a

6
7
8

,capital infusion t o s t a y - a l i v e ?
A. T h a t ' s correct. A n d i n t h e end the o n l y t h i n g t h a t

Q-

9 1 0
11 12

you w e r e a b l e t o do w a s e f f e c t a m e r g e r w i t h
Fidelity? A. T h a t ' s correct. A n d t h a t w a s done w i t h t h e f u l l the r e g u l a t o r s ? Yes, it w a s .

Q.
knowledge of A.

1 3 14
15

Q.
of

A n d t h a t w a s done a t t h e i n s t i g a t i o n

1 6
17
18

the regulators?

A.

Yes,
MR.

it w a s . EISENHART: T h a n k you,
M r .

Kane.

1 9
20 21
22 23 24

I

d o n ' t have any o t h e r q u e s t i o n s . MR. MCCLAIN:
I have n o f o l l o w - u p .

T h a n k you v e r y m u c h f o r y o u r t i m e ,
Mr.

Kane.
MR.

EISENHART:

L e t ' s

state f o r the

record I . w i l l r e t a i n t h e o r i g i n a l e x h i b i t s
that w e r e m a r k e d during t h i s deposition a n d

25

E L I S A DREIER REPORTING CORP.

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(212)

557-5558