SEC Looks Into Stock Trades of OCC Employee

WASHINGTON -- The Securities and Exchange Commission is investigating possible violations of insider-trading rules by a midlevel employee of the Office of the Comptroller of the Currency.

OCC spokeswoman Lee Cross confirmed the investigation but declined to name the individual, who works in the Washington office. He has been placed on administrative leave with pay, Ms. Cross said.

The matter has been referred to the Treasury Department's Office of the Inspector General, which audits and investigates Treasury programs.

Clarke Under Fire

News of the investigation could not come at a worse time for Comptroller Robert L. Clarke, who is facing a tough confirmation hearing on Thursday before the Senate Banking Committee. The panel has been critical of Mr. Clarke's own investment habits as well as his management of the agency that regulates national banks.

Mr. Clarke put his money in a blind trust earlier this summer because of the controversy, even though an ethics probe found no evidence of wrongdoing. Despite his action, the Senate Banking Committee is expected to raise the issue again on Thursday.

Sen. Donald W. Riegle, D-Mich., chairman of the banking committee, asked Mr. Clarke 17 questions about his financial activities, and Mr. Clarke responded in detail on Monday.

He revealed for the first time publicly that Joe F. Lynch, a business associate, is involved in litigation with the Federal Deposit Insurance Corp., over a "personal investment," and that companies in which Mr. Clarke has been either an active or passive investor have received millions of dollars in loans from national banks.

The banks include, Washington-based American Security Bank; Allied Champions2 Bank of Houston, which subsequently became a national bank, First Interstate Bank of Texas; and Citizens and Southern, now C&S/Sovran, of Atlanta.

Loan from Lynch's Thrift

In 1989, Mr. Clarke received a $1.4 million home loan from Farm and Home Savings, a Missouri thrift where Mr. Lynch is vice chairman. Mr. Clarke also represented Mr. Lynch while he was practicing law with Bracewell & Patterson, and the two have been involved in several investments, including two banks.

Mr. Clarke said Mr. Lynch told him of his problems with the FDIC at a social occasion in 1990. He also said that Daniel Arnold, another Farm and Home official, had called him in 1990 for "advice" after the Office of Thrift Supervision disapproved of Mr. Lynch's appointment as vice chairman. The OTS later dropped its objections.

"I advised him that it would be inappropriate for me to be involved in Mr. Lynch's discussions with the OTS," said Mr. Clarke in a written response to Sen. Riegle. The Comptroller emphasized that he did not participate in decisions affecting any of his own investments.

Exams to Be Stepped Up

Meanwhile, Mr. Clarke defended his agency against charges made by House Banking Committee Chairman Henry B. Gonzalez, D-Tex., that the agency's supervision is flawed. He also said he will hire 300 additional examiners over two years and start examining all national banks at least every 18 months.

"The assertion that the OCC's supervision is inferior to that of the other federal bank supervisors is unfounded," Mr. Clarke said in a letter to Mr. Gonzalez. But Mr. Gonzalez said Monday the committee stands by its report and Mr. Clarke's response was "typical of an agency caught red-handed in a failure to carry our its statutory responsibilities."

The Independent Bankers Association of America, in a letter to Sen. Riegle on Monday, supported the confirmation of Mr. Clarke to a second five-year term.

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