Full opinion text
MEMORANDUM OPINION BILBY, District Judge. This Opinion describes the basis of this court’s rulings by Order of February 14, 1992, on motions for summary judgment filed by parties to these consolidated actions. I. PROCEDURAL HISTORY Five separate actions are consolidated before this court. Sarah B. Shields v. Charles H. Keating, Jr. (“Shields”), a class action on behalf “all persons who purchased securities, stock or debentures, of American Continental Corporation (“ACC”) between January 1,1986 and April 14, 1989,” Shields v. Keating, No. CV 89-2052 SVW (C.D.Cal.1989) (Order re Class Certification), was transferred to this court by the Judicial Panel on Multidistrict Litigation. The Shields Plaintiffs fall into two categories. The majority purchased unsecured subordinated debentures through branch offices of Lincoln Savings & Loan Association (“Lincoln” or “Lincoln Savings”), a wholly owned subsidiary of ACC. Others purchased stock or debentures through broker/dealers. Shields alleges the following violations: Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5, 15 U.S.C. § 78j(b), 17 C.F.R. 240.10b-5; Section 18 of the Exchange Act, 15 U.S.C. § 78r; the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; the Arizona Racketeering Act (“AZRAC”), 13 A.R.S. § 13-2301 et seq., and; Sections 11 and 12 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77k, 111. Charles Roble v. Arthur Young & Co. (“Roble ”), a state action on behalf of the same class of securities purchasers, states claims for fraud, negligent misrepresentation, breach of fiduciary duty, and violations of California Corporations Code Sections 1507 and 25401. Also before the court are federal and state actions on behalf of approximately 100 individual ACC securities purchasers. Alan H. Yahr v. Lincoln Sav. & Loan Ass’n (“Yahr”). The Yahr plaintiffs allege violations of Section 10(b), RICO, negligent misrepresentation, breach of fiduciary duty, conspiracy to breach fiduciary duty, California Corporations Code Section 25401, Sections 11 and 12(2) of the Securities Act, professional negligence, and negligent infliction of emotional distress. In Resolution Trust Corp. v. Charles H. Keating, Jr. (“RTC v. Keating ”), the Resolution Trust Corporation (“RTC”), as receiver for Lincoln, brings claims under RICO, AZRAC, and various state and common law theories of liability. Finally, this opinion addresses claims made in Frey v. Hotel Pontchartrain Ltd. Partnership (“Frey”), in which investors in an ACC-related limited partnership brought claims for securities fraud, RICO, unjust enrichment, and negligent misrepresentation. These actions originate from the business dealings of Charles H. Keating, Jr. (“Keating”), former chairman of ACC. The claims at issue here were brought principally against professionals who provided services to ACC and/or Lincoln Savings. These include: Star Bank, an indenture trustee for ACC subordinated debt; Lexe-con Inc. (“Lexecon”), an economic consulting firm; Offerman & Company, Joseph Offerman, and Scott Offerman (“Offer-man”), an underwriting firm and its principals; Arthur Andersen & Co. (“Arthur Andersen”), Arthur Young & Co. (“Arthur Young”), and Touche Ross & Co. (“Touche”), accounting firms; Jones, Day, Reavis & Pogue (“Jones Day”), a Cleveland-based law firm and two of its individual partners; Troutman, Sanders, Locker-man and Ashmore (“Troutman”), an Atlanta based law firm; Societe D’Analyses et D’Etudes Bretonneau (“Bretonneau”), a French bank; First Bank National of Minneapolis (“First Bank”), former trustee of the ACC employee stock ownership plan (“ESOP”); Gene E. Phillips, former chairman of Southmark Corporation; and Industrial Indemnity Corporation (“Industrial Indemnity” or “Indemnity”), a surety. On February 14, 1992, following lengthy discovery, extensive briefing and oral argument, and after a review of voluminous pleadings, depositions, exhibits, and other papers, this court ruled on numerous motions for summary judgment. See In re ACC/Lincoln Savings Securities Litigation, MDL 834 (D.Ariz. February 14, 1992) (Order Granting and Denying Summary Judgment). At that time, the court stated that it would in due course issue this Memorandum Opinion, setting forth its analysis supporting the decision to grant or deny, in whole or in part, the various motions for summary judgment. In addition, on January 7, 1992, this court issued a Memorandum Opinion and Order setting forth the basis for its rulings on Defendants’ Motions for Class Decertifi-cation, and describing the legal basis for its decision that the plaintiff class is entitled to a presumption of reliance on the fraud-based claims discussed herein. See In re ACC/Lincoln Savings Securities Litigation, 140 F.R.D. 425 (D.Ariz.1992) (Memorandum Opinion and Order Denying Motions for Class Decertification). That Opinion is incorporated by reference herein, and forms the basis for this court’s denial of summary judgment on reliance-based grounds. II. LAW OF GENERAL APPLICATION Section 10(b) of the Exchange Act Rule 10b-5, implementing Section 10(b) of the Exchange Act, provides: It shall be unlawful for any person ... 1. to employ any device, scheme, or artifice to defraud, 2. to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or 3. to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. Therefore, a primary violation of Section 10(b) and Rule 10b-5 entails: (1) a scheme or artifice to defraud; (2) an affirmative misrepresentation or omission of a fact necessary to make other statements not misleading; or (3) a course of business which operates as a fraud or deceit. In addition, the act or omission must be made or conducted “in connection with” the purchase or sale of securities, with resultant damage to plaintiffs. Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1485 (9th Cir.1991). Proof of scienter is a requisite to any 10b-5 action. The United States Supreme Court has defined scienter as “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 1381 n. 12, 47 L.Ed.2d 668 (1976). In Hollinger v. Titan Capital Corp., 914 F.2d 1564 (9th Cir.1990), cert. denied, — U.S.-, 111 S.Ct. 1621, 113 L.Ed.2d 719 (1991), the Ninth Circuit adopted a standard for the minimal culpable mindset, referred to hereinafter by this court as “reckless scienter.” The Ninth Circuit held: [R]eckless conduct may be defined as the highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, which presents a danger of misleading buyers or sellers that is either known to the defendant or so obvious that the actor must have been aware of it. Id. at 1569 (quoting Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 1033, 1044-45 (7th Cir.), cert. denied, 434 U.S. 875, 98 S.Ct. 224, 225, 54 L.Ed.2d 155 (1977)). The Hollinger court observed that “the danger of misleading buyers must be actually known or so obvious that any reasonable [person] would be legally bound as knowing, and the omission must derive from something more egregious than even ‘white heart/empty head' good faith.” Id. at 1569-70. Thus, the court concluded, “recklessness is a lesser form of intent rather than a greater degree of negligence.” Id. at 1569. To establish that a defendant’s alleged misconduct was “in connection with” the purchase or sale of a security, three elements must be satisfied. First, there must be a causal connection between the alleged fraud and the plaintiff’s injury. Jett v. Sunderman, 840 F.2d 1487, 1494 (9th Cir.1988); In re Fin. Corp. of America Shareholder Litigation, 796 F.2d 1126, 1130 (9th Cir.1986) (“In re FCA ”); Levine, 950 F.2d at 1485 (causal connection between defendant’s misrepresentations and plaintiff’s injury required). Second, there must be a connection between the defendant’s alleged misrepresentations or fraudulent course of conduct and the securities at issue. Id. The “in connection with” requirement demands “something more than any fraud tangentially related to a securities transaction.” Id. And finally, the purchase or sale of securities must be the proximate cause of the plaintiff’s injuries. Id. at 1486. The Ninth Circuit has held: The three parts of the ‘in connection with’ requirement thus represent three lines with which one might form a triangle. Only if each of the three lines are of sufficient length to bridge the distances between three points — identified by (A) a defendant’s material misrepresentation or omission, (B) a plaintiff’s injury, and (C) a security — will a Rule 10b-5 cause of action be pleaded and proved. Id. In assessing these three fundamental criteria, Section 10(b) is to be read flexibly. Superintendent of Ins. v. Bankers Life & Casualty Co., 404 U.S. 6, 12, 92 S.Ct. 165, 168, 30 L.Ed.2d 128 (1971); In re FCA, 796 F.2d at 1129. “When there is a sale of a security and fraud ‘touches’ the sale, there is redress under Section 10(b). It does not matter that the fraud is not the ‘garden variety’ associated with securities sales.” Arrington v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 651 F.2d 615, 619 (9th Cir.1981) (citation omitted); In re FCA, 796 F.2d at 1130. Aiding and abetting securities fraud — or secondary liability — requires proof of the following elements: (1) the existence of an independent primary wrong; (2) knowledge by the alleged aider and abetter of the wrong and of his or her role in furthering it; and (3) substantial assistance in the wrong. Levine, 950 F.2d at 1483; Roberts v. Peat, Marwick, Mitchell & Co., 857 F.2d 646, 652 (9th Cir.1988) (per curiam), cert. denied, 493 U.S. 1002, 110 S.Ct. 561, 107 L.Ed.2d 556 (1989). As with a primary violation, a defendant must know of the fraud, or recklessly disregard it. Levine, 950 F.2d at 1483. Proof of substantial assistance requires a showing that the defendant’s assistance was a substantial factor in causing the plaintiffs harm. Mendelsohn v. Capital Underwriters, Inc., 490 F.Supp. 1069, 1084 (N.D.Cal.1979). “Substantial assistance means more than a little aid.” Barker v. Henderson, Franklin, Starnes & Holt, 797 F.2d 490, 496 (7th Cir.1986). Where substantial assistance is premised on actual misrepresentations, the Hollinger standard applies. Levine, 950 F.2d at 1484. If aiding and abetting liability is to be premised exclusively on silence or inaction, it may be necessary for the court to consider whether a defendant operates under a duty of disclosure. Levine, 950 F.2d at 1484, n. 4; See also Woodward v. Metro Bank of Dallas, 522 F.2d 84 (5th Cir.1975). “When it is impossible to find any duty of disclosure, an alleged aider-abettor should be found liable only if scienter of the high ‘conscious intent’ variety can be proved. Where some special duty of disclosure exists, then liability should be possible with a lesser degree of scienter.” Id. at 97. Section 11 of the Securities Act Section 11 of the Securities Act provides that every person who acquires a security burdened by an untrue statement or omission of material fact may sue: (1) every person who signed the registration statement; (2) every director and officer of the offeror; (3) “every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified” any part of the registration statement or any report or valuation used in connection with it; and/or (4) every underwriter with respect to such security. 15 U.S.C. § 77k. A purchaser’s reliance on the registration statement need not be proven unless the plaintiff “acquired the security after the issuer made generally available to its security holders an earning statement covering a period of twelve months beginning after the effective date of the registration statement.” 15 U.S.C. § 77k. Section 77k further provides that reliance may be shown without proof that the plaintiff read the registration statement. Section 12 of the Securities Act Section 12 of the Securities Act imposes liability on those who offer or sell unregistered securities, and those who sell securities by means of material misrepresentations or omissions in prospectuses or oral communications. 15 U.S.C. § 111. Section 18 of the Exchange Act Section 18 of the Exchange Act provides that any person who makes or causes to be made false or misleading statements in a document filed with the Securities and Exchange Commission (“SEC”) shall be liable to any person who buys or sells securities in reliance on such statements. 15 U.S.C. § 78r. Racketeering Influenced and Corrupt Organizations Act Section 1962(c) of RICO provides: It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. 18 U.S.C. § 1962(c). RICO also provides that it is unlawful for any person to conspire to violate subsection (c). 18 U.S.C. § 1962(d). The Code defines “racketeering activity” as any act indictable under various provisions of Title 18, including § 1341 relating to mail fraud, § 1343 relating to wire fraud, and “any offense involving fraud connected with a case under Title 11, fraud in the sale of securities....” 18 U.S.C. § 1961(1). To establish a RICO claim, plaintiffs must prove defendants intended to devise and did devise a scheme to defraud. United States v. Bohonus, 628 F.2d 1167 (9th Cir.), cert. denied, 447 U.S. 928, 100 S.Ct. 3026, 65 L.Ed.2d 1122 (1980). “The scheme must be reasonably calculated to deceive persons of ordinary prudence and comprehension.” Id. at 1172. “Thus, the fraud must be active, not merely constructive.” Id. Intent may be shown by examining the scheme itself. Id. “The fraudulent scheme need not be one which includes an affirmative misrepresentation of fact, since it is only necessary [to prove] that the scheme was calculated to deceive persons of ordinary prudence.” Id. at 1172. “[Deceitful concealment of material facts is not constructive fraud but actual fraud.” Id. (citing Cacy v. United States, 298 F.2d 227, 229 (9th Cir.1961)). The standard for aiding and abetting a RICO violation parallels that under Section 10(b). See Oscar v. University Students Co-op. Ass’n, 939 F.2d 808, 809 n. 1 (9th Cir.1991) (citing Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349 (3rd Cir.1987)). A defendant must have knowledge or act with reckless scien-ter. See discussion of Section 10(b) standards, supra. This court has previously applied the reckless scienter standard to a RICO aiding and abetting action. In re ACC/Lincoln Savings Securities Litigation, 782 F.Supp. 1382 (D.Ariz.1991) (Memorandum Opinion and Order granting summary judgment to Bankers Trust Company)- Arizona RICO (“AZRAC”) To establish a primary violation of AZRAC, plaintiffs must prove defendants were associated with an enterprise and conducted or participated in the conduct of such enterprise’s affairs through racketeering. A.R.S. § 13-2312. ‘Racketeering’ is defined, in pertinent part, to include any act, “committed for financial gain which is chargeable or indictable under the laws of this state and punishable by imprisonment for more than one year,” including: (r) Fraud in the sale of securities. (t) A scheme or artifice to' defraud. A.R.S. 13-2301(D)(4). The definition of “fraud in the sale of securities” parallels Rule 10b-5. A.R.S. § 44-1991; see discussion of Rule 10(b) standards; supra. A “scheme or artifice to defraud” involves a plan to knowingly obtain benefit by means of false or fraudulent pretenses, representations, promises or material omissions. A.R.S. § 13-2310. California Corporations Code Section 1507 of the California Corporations Code imposes liability on any corporate director, officer, employee, or agent who publishes a prospectus, report, financial statement or other public document which is false in any material respect, or who falsifies or erases in any material aspect the books, minutes, records, or accounts of a corporation. Cal.Corp.Code § 1507. It is a violation of Section 25401 of the Code to sell securities through written or oral communications which are materially untrue or omit to state material facts. Under Section 25401, proof of reliance is unnecessary. While sellers violating Section 25401 are liable to their purchasers, Section 25504.1 imposes joint and several liability on those who materially assist violations of Section 25401 with intent to deceive or defraud. Cal.Corp.Code §§ 25401 and 25504.1. Common Law Fraud and Negligent Misrepresentation Under California common law, an action for fraud and deceit requires proof of: (1) a false representation; (2) knowledge of the falsity; (3) an intent to induce reliance; (4) actual and reasonable reliance; and (5) resulting damage to the plaintiff. Secondary liability, or aiding and abetting, is defined in Restatement (Second) of Torts, 876b. It requires proof of knowledge of the primary violation, which may be inferred from the circumstances, and substantial assistance, which may be in the form of encouragement or advice. Pasadena Unified School Dist. v. Pasadena Federation of Teachers, 72 Cal. App.3d 100, 140 Cal.Rptr. 41 (1977). The aider and abetter’s conduct must be a sub-stantia] factor in causing the plaintiff’s harm. Rest.2d of Torts § 876 and comments. A negligent misrepresentation claim involves the following elements: (1) a misrepresentation of past or existing material facts; (2) a lack of reasonable grounds for believing in the truth of the representation; (3) an intent to induce reliance; (4) actual and justifiable reliance; and (5) resulting damage. Conspiracy A conspiracy involves a knowing agreement by two or more persons to take concerted action to commit an illegal act. Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 598 P.2d 45, 157 Cal.Rptr. 392 (1979). The existence of a conspiracy may be inferred from the nature of the acts, the relation of the parties, the interests of the conspirators, or other circumstances. Id. Express agreement or tacit consent will, if proven, suffice to create liability. Id.; see also Rest.2d of Torts § 876(a). Where the objective of a conspiracy has not yet been achieved when a co-conspirator manifests his or her agreement to further the objective, the co-conspirator becomes liable for all acts done in furtherance of the common objective, including acts previously done. This is so “irrespective of whether or not [the conspirator] was a direct actor and regardless of the degree of his activity.” Id.; De Vries v. Brumback, 53 Cal.2d 643, 2 Cal.Rptr. 764, 349 P.2d 532 (1960); see also Sawyer v. First City Fin. Corp., 124 Cal. App.3d 390, 177 Cal.Rptr. 398 (1981). A conspirator may not be held liable for an offense committed before his or her agreement to join the conspiracy, if that prior offense completed the ultimate objective of the conspiracy. People v. Marks, 45 Cal.3d 1335, 248 Cal.Rptr. 874, 756 P.2d 260 (1988). The distinction turns on whether the goal of the common design has been achieved with finality, as the murder in People v. Marks, supra, or is ongoing in nature, as the conversion in De Vries v. Brumback, supra. Negligent Infliction of Emotional Distress To prove a claim for negligent infliction of emotional distress under California law, “a plaintiff must either have a special relationship to the defendant, be the object of some aspect of the defendant’s conduct, or personally witness the negligently caused physical injury to a closely related primary victim.” Holliday v. Jones, 215 Cal.App.3d 102, 264 Cal.Rptr. 448 (4th Dist.1989). Moreover, the defendant must commit “outrageous conduct ... so extreme as to exceed all bounds of that usually tolerated in a civilized community.” Molien v. Kaiser Foundation Hospitals, 27 Cal.3d 916, 167 Cal.Rptr. 831, 616 P.2d 813 (1980). III. SUMMARY JUDGMENT STANDARD Rule 56(c) of the Federal Rules of Civil Procedure provides, in pertinent part, that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Whether a fact is material depends on the substantive law at issue. “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In essence, the inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2512. The initial burden rests on the moving party to point out the absence of any genuine issue of material fact. Once satisfied, the burden shifts to the opponent to demonstrate through production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). On summary judgment, the inferences to be drawn from the underlying facts contained in the moving party’s materials must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Ybarra v. Reno Thunderbird Mobile Home Village, 723 F.2d 675 (9th Cir.1984). This court’s function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. The trial court must therefore examine the facts to determine whether they are material, and assess the inferences which might reasonably be drawn from the facts. IY. LEGAL RULINGS OF GENERAL APPLICATION A.SECTION 18 OF THE EXCHANGE ACT Section 18 claims have been stated against accounting defendants Arthur Andersen, Arthur Young and Touche Ross, and against the law firm of Jones Day. These claims have not been certified for class treatment. Defendants seek dismissal of these claims, arguing that proof of “eyeball reliance” cannot be demonstrated by the class. The weight of authority holds that plaintiffs must have actually read a copy of the misleading document to sustain a cause of action. See In re M.D.C. Holdings Security Litigation, 754 F.Supp. 785 (S.D.Cal.1990); In re Genentech Inc., Securities Litigation, [1989 transfer binder] Fed.Sec.L.Rep. (CCH) ¶ 94, 544, at 93,476 (N.D.Cal.1989); Wachovia Bank & Trust Co. v. Natl. Student Mktg. Corp., 650 F.2d 342 (D.C.Cir.1980), cert. denied, 452 U.S. 954, 101 S.Ct. 3098, 3099, 69 L.Ed.2d 965 (1981); Beebe v. Pacific Realty Trust, 99 F.R.D. 60 (D.Ore.1983); Ross v. A.H. Robins Co., 607 F.2d 545 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802, reh’g denied, 448 U.S. 911, 100 S.Ct. 3057, 65 L.Ed.2d 1140 (1980). In Genentech, supra, the court compared the reliance requirements of Sections 10(b) and 18, concluding that while Section 10(b) permits courts to redefine the reliance requirement to achieve its broad objectives, Congress imposed a specific reliance requirement in Section 18. Genen-tech, [1989 transfer binder] Fed.Sec.L.Rep. (CCH) II94, 544, at 93,480. “The reliance requirement in section 18(a). is not a judicial creation. It was imposed by Congress. As a result, courts may not dilute it ... even for arguably cogent reasons.” Id. This court concludes that the requisite Section 18 reliance cannot be proven on a class basis. Accordingly, defendants’ motions on the Section 18 counts are granted. B. AIDING AND ABETTING A BREACH OF FIDUCIARY DUTY Corporate directors and officers owe a duty to the corporation and its shareholders to act in good faith, and with undivided loyalty. Cal.Corp.Code § 309(a). Such duties, however, are typically not owed to creditors, “for such a duty would seemingly turn every breach of contract action involving a corporation into a breach of fiduciary duty claim.” Gibraltar Fin. Corp. v. Fed. Home Loan Bank Bd., 1990 WL 394298, 1990 U.S.Dist. LEXIS 19,197 (C.D.Cal. June 14, 1990); see also Kessler v. Gen. Cable Corp., 92 Cal.App.3d 531, 155 Cal.Rptr. 94 (2d Dist.1979). Before Roble was removed to federal court, the Superior Court of California for the County of Los Angeles denied the Roble defendants’ demurrer on the claim of aiding and abetting a breach of fiduciary duty. The Superior Court gave the debenture holders an opportunity to demonstrate extraordinary circumstances that would create a fiduciary duty, such as long standing reliance upon Lincoln Savings personnel for investment advice. Roble v. Arthur Young, Transcript of proceedings, at 23:19-24:13 (Cal.Super.Ct. April 24, 1990). The record cannot fairly be characterized as making this kind of showing with respect to the Roble class. Accordingly, defendants’ motions for summary judgment on plaintiffs’ claim for aiding and abetting a breach of fiduciary duty are granted. C. AIDING AND ABETTING NEGLIGENT MISREPRESENTATION The Roble class alleges that the accountant, lawyer, and financial institution defendants knew that ACC/Lincoln directors and officers were negligently misrepresenting ACC/Lincoln’s true financial condition. Defendants contend that a claim for aiding and abetting negligence is not recognized by the courts. At least one California court has sustained a cause of action for aiding and abetting a negligent misrepresentation. In re ZZZZ Best Securities Litigation, [1991 Transfer Binder] Fed.Sec.L.Rep. ¶ 95,416, at 97,075 (C.D.Cal.1990). This court recognizes, however, that other courts have found the concept of secondary liability for negligence to be inherently contradictory. See Koehler v. Pulvers, 606 F.Supp. 164, 178 n. 10 (S.D.Cal.1985) (law does not impose liability for conspiring to commit negligence); Rogers v. Furlow, 699 F.Supp. 672, 675 (N.D.Ill.1988) (claim of conspiracy to commit negligence is “paradox”). After a review of the available case law, this court adopts the latter view. Defendants' motions are therefore granted. D. SECTION 10(b) — STATUTE OF LIMITATIONS At the time these lawsuits were filed, the statute of limitations for Section 10(b) actions was the state statute governing the limitations period for fraud. Davis v. Birr, Wilson & Co., Inc., 839 F.2d 1369 (9th Cir.1988) (per curiam); Volk v. D.A. Davidson & Co., 816 F.2d 1406 (9th Cir.1987); Nesbit v. McNeil, 896 F.2d 380 (9th Cir.1990). Under both California and Arizona law, the statute of limitations for fraud is three years from the date plaintiffs should have discovered the existence of their claims. Under both California and Arizona law, plaintiffs’ Section 10(b) claims were timely filed. In June 1991, the United States Supreme Court altered the Section 10(b) statute of limitations, establishing a combination of a one-year period after discovery of the violation with a three-year period of repose. In addition, the Court ruled that the new limitations period would be applied retroactively to all pending litigation. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, — U.S.-, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991); James B. Beam Distilling Co. v. Georgia, — U.S. -, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991). In response to the Supreme Court’s decision, Congress enacted Section 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991. This Act amended Section 27A of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa-l, effectively reestablishing the pre-Lampf limitations period for those cases pending on the date that Lampf was decided. Section 27A provides: SPECIAL PROVISION RELATING TO STATUTE OF LIMITATIONS ON PRIVATE CAUSES OF ACTION. Section 27A(a) EFFECT ON PENDING CAUSES OF ACTION. — The limitation period for any private civil action implied under Section 10(b) of this Act that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991. 15 U.S.C. § 78aa-l (1992). Defendants challenge the constitutionality of Section 27A, arguing that Congress may not legislate a rule of decision in a particular case. The Ninth Circuit addressed this issue in Seattle Audubon Society v. Robertson, 914 F.2d 1311 (9th Cir.1990), cert. granted, — U.S. -, 111 S.Ct. 2886, 115 L.Ed.2d 1051 (1991). In that case, the Ninth Circuit struck down a Congressional enactment which provided that a U.S. Forest Service plan for the endangered spotted owl was deemed to comply with the Endangered Species Act. However, whether the plan had been promulgated in accordance with the Endangered Species Act was an active controversy before a district court. The court held, “Congress violates the separation of powers when it presumes to dictate how the Court should decide an issue of fact (under threat of loss of jurisdiction). ...” Id. at 1315 (quotations omitted). The court continued: [T]he critical distinction, for purposes of deciding the limits to Congress’ authority to affect pending litigation through statute, is between the actual repeal or amendment of the law underlying the litigation, which is permissible, and the actual direction of a particular decision in a case, without repealing or amending the law underlying the litigation, which is not permissible. Id. The Ninth Circuit concluded that the law at issue did “not establish new law, but directed] the court to reach a specific result and make certain factual findings under existing law in connection with two cases pending in federal court.” Id. at 1316. In this instance, Section 27A repealed the statute of limitations underlying all Section 10(b) litigation. It does not apply exclusively to this controversy, nor does it legislate any particular outcome in the sense required by Seattle Audubon. Defendants further contend that even if the constitutionality of Section 27A is conceded, the trend in the law as of June 19, 1991, was toward a Lampf-like statute of limitations. The Ninth Circuit, however, was not on the brink of joining this trend. As Justice O’Connor stated in her dissenting opinion, Lampf reversed a “solid wall of Ninth Circuit authority dating back more than 30 years.” Lampf, 111 S.Ct. at 2785 (O’Connor, J., dissenting). V. RULINGS PERTINENT TO INDIVIDUAL DEFENDANTS A. STAR BANK Star Bank, a defendant only in Roble, moved for summary judgment on counts alleging fraud, negligent misrepresentation, breach of fiduciary duty, and violations of the California Corporations Code Sections 1507 and 25401. Summary judgment is granted on all counts because the record does not support reasonable inferences that are sufficient to sustain any of these claims. The key evidence upon which the court relies is summarized below: (1)Plaintiffs contend Star Bank knew that Keating and his former partner, Cincinnati businessman Karl Lindner, had entered into an SEC consent decree in 1979. The only evidence plaintiffs bring forward concerning the consent decree is the testimony of one Star Bank employee, who remembered seeing something about it in the newspaper, but thought it had been resolved without an admission of guilt. (2) Plaintiffs allege that knowledge of wrongdoing may be imputed from the fact that Lindner owned substantial stock in Star Bank’s holding company. The record contains no evidence, however, that Lind-ner had any contemporaneous involvement with Keating, nor that he played any role in Star Bank’s decision to serve as indenture trustee. (3) Mark Sauter, ACC’s in-house counsel, had previously worked at the law firm of Taft, Stettinius & Hollister from 1982 through 1987. Taft, Stettinius acts as Star Bank’s counsel. The record contains no evidence, however, that anyone at Star Bank had any contact with Sauter, nor that Taft, Stettinius had any involvement in the decision to serve as indenture trustee. (4) Plaintiffs contend that Star Bank had no procedures to govern its decision to serve as indenture trustee for ACC, which violated Comptroller of the Currency Regulations. Plaintiffs claim there was no meeting at which the decision to serve as indenture trustee for ACC was considered. This apparently is offered as indicative of Star Bank’s willingness to disregard the rules in order to assist ACC. The evidence shows, however, that Star Bank’s Trust Investment Committee reviewed and approved “new accounts activity reports,” which specifically included the ACC debentures. (5) Plaintiffs contend that Star Bank failed to do an independent credit analysis of ACC before agreeing to serve as indenture trustee, a departure from the procedure followed when Star Bank itself bought bonds. It was not until March, 1989, after intense negative publicity about ACC, that Star Bank decided to meet with ACC representatives about the company’s financial situation. At that time, Star Bank considered having its own credit department review ACC’s financial data, but this meeting never materialized because ACC’s bankruptcy intervened. Star Bank’s duties are set forth in the Trust Indenture Act of 1939, 15 U.S.C. § 77ooo(a) (1939), which expressly permits an indenture trustee to rely on public documents provided by the offeror. In the absence of independent evidence that Star Bank knew or should have known of ACC’s fraud, the bank’s failure to perform a credit analysis earlier does not permit an inference against the bank. (6) Plaintiffs allege that Star Bank participated in drafting the bond disclosure documents. The record shows, however, that it was Star Bank's practice as indenture trustee to become a member of a “working group,” comprised of those involved in the issuance, and to whom draft disclosure documents were circulated. Star Bank reviewed the documents in accordance with their duties under the Trust Indenture Act. There is no evidence that Star Bank actually participated in drafting any documents material to the issues in this case. (7) Plaintiffs contend Star Bank knew subordinated debentures were being sold through Lincoln Savings branches. The record shows that Star Bank personnel read the public prospectus, which stated that bonds were issued by ACC and sold out of Lincoln branches. Standing alone, however, this publicly available information cannot be viewed as conferring insight into the alleged fraud. (8) Plaintiffs allege Star Bank knew of ACC’s deteriorating financial condition yet did nothing to protect the bondholders. The record contains two items to support this contention. First, Star Bank’s files contained a 1987 Business Week article critical of ACC. Second, in April 1988, Eugene Jacobs wrote a file memorandum explaining his recommendation that Star Bank serve as indenture trustee on a second series of bonds. Jacobs notes in this memorandum that ACC was highly leveraged, and engaged in above-average risk investments. Jacobs further states that on a visit to ACC he saw mock-ups of ACC’s planned developments, which he considered likely to succeed due to the “delightful Phoenix weather,” “population growth of 100,000 per year,” and excellent staff at ACC. Read in conjunction with the other evidence in the record, these two facts are insufficient to charge Star Bank with knowledge of fraud at ACC. (9) Plaintiffs allege that Star Bank acquired knowledge through meetings with ACC staff. There is evidence that Star Bank personnel met with ACC controller Lynn Borushko and Lincoln Savings Vice President Debra Millard-Schwartz. Neither have been named as defendants in these consolidated actions. There is uncontested testimony that the meetings concerned only the administrative details for processing the bonds. There is no evidence from which to infer conspiratorial intent. (10) Plaintiffs contend Star Bank knew that ACC’s independent accountants, Arthur Andersen and later Arthur Young, had resigned. The only evidence relevant to this contention is the fact that two Star Bank employees checked these names on their Deposition Questionnaires. These employees testified that at some time they had learned these firms had audited ACC/Lincoln. There is no evidence, however, of contemporaneous knowledge about disagreements between ACC and either accounting firm. This court finds the evidence before it is insufficient to sustain a reasonable, inference that Star Bank knew of or intended to further a fraud. Nor is there a showing that Star Bank breached its duties as indenture trustee, or made negligent misrepresentations to the bondholders. Accordingly, Star Bank’s Motion for Summary Judgment is granted. B. TOUCHE ROSS & COMPANY Touche is a defendant in Shields, Roble, and Yahr. Claims against Touche include Section 10(b), RICO, AZRAC, fraud and misrepresentation, and violations of the California Corporations Code. In addition, the Yahr plaintiffs allege negligent misrepresentation and professional negligence. Touche became involved with ACC/Lincoln toward the end of its business existence in October, 1988. Touche argues it did not complete an audit, and had no duty to disclose information until the audit was completed and a report issued. Touche contends it was not named in a registration statement or prospectus, and gave no public opinions with respect to ACC/Lincoln for which it could be held liable. Touche further argues that plaintiffs did not rely on its statements, and could not have relied indirectly, as Touche made no representations in any offering documents. Finally, Touche contends there is no evidence that its conduct affected regulatory decision-making. Plaintiffs, on the other hand, argue that by accepting the ACC/Lincoln engagement, and by continuing to work for ACC/Lincoln, Touche permitted the additional sale of millions of dollars in bonds. Plaintiffs contend that the evidence raises genuine questions as to whether Touche took and retained the engagement with knowledge of or in reckless disregard of the alleged fraud by ACC/Lincoln. The United States Supreme Court has discussed the duties of an independent public accountant: Corporate financial statements are one of the primary sources of information available to guide the decisions of the investing public. In an effort to control the accuracy of the financial data available to investors in the securities markets, various provisions of the federal securities laws require publicly held corporations to file their financial statements with the Securities and Exchange Commission. Commission regulations stipulate that these financial reports must be audited by an independent certified public accountant in accordance with generally accepted auditing standards. By examining the corporation’s books and records, the independent auditor determines whether the financial reports of the corporation have been prepared in accordance with generally accepted accounting principles. The auditor then issues an opinion as to whether the financial statements, taken as a whole, fairly present the financial position and operations of the corporation for the relevant period. United States v. Arthur Young & Co., 465 U.S. 805, 810-811, 104 S.Ct. 1495, 1499-500, 79 L.Ed.2d 826 (1984). Plaintiffs view such statements of an auditor’s responsibilities as affirmations of the accountant’s duty to the public. Touche argues that its duties are limited to the completion of the audit it was hired to perform. An accountant is not obligated to disclose ordinary business information. Rudolph v. Arthur Andersen & Co., 800 F.2d 1040 (11th Cir.1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1604, 94 L.Ed.2d 790 (1987). Knowledge of an ongoing fraud is a different matter entirely: The situation is quite different, however, where the issue is disclosure of actual knowledge of fraud. Standing by while knowing one’s good name is being used to perpetrate a fraud is inherently misleading. An investor might reasonably assume that an accounting firm would not permit inclusion of an audit report it prepared in a placement memo for an offering the firm knew to be fraudulent, and that such a firm would let it be known if it discovered to be fraudulent an offering with which it was associated. It is not unreasonable to expect an accountant, who stands in a “special relationship of trust vis-a-vis the public” (citation omitted) and whose duty is to safeguard the public interest, (citation omitted) to disclose fraud in this type of circumstance, where the accountant’s information is obviously superior to that of the investor, the cost to the accountant of revealing the information is minimal, and the cost to the investors of the information remaining secret potentially enormous. Id. This court holds that an independent public accountant who knows of or recklessly disregards a client’s fraud, may be held liable for aiding and abetting that fraud where the auditor provides services which constitute substantial assistance. Whether an audit has been completed is not necessarily determinative of whether the assistance is “substantial.” If an auditor is aware that an ongoing fraud is a real possibility, he or she may not act as an advocate for its wrongdoing client. Nor may the auditor stand by, knowing of a fraud, and withhold damaging information from the SEC and federal bank regulators. Nondisclosure under these circumstances may constitute substantial assistance because regulators and the public are entitled to assume that an independent public accountant would take steps — either through frank discussions with regulators, the issuance of a preliminary cautionary report, or withdrawal from the account — if the auditor is aware that its client is perpetrating an ongoing fraud. Finally, an auditor may not enjoy the pecuniary benefits of an engagement, while protecting itself by postponing the issuance of an audit opinion, or making highly qualified representations to the public or regulators. On the other hand, the court holds that an auditor may not be held liable merely for accepting an engagement unless the auditor actually knows its prospective client is committing a fraud, and provides services which substantially assist the execution of the fraud. In addition, an auditor may not be held liable under the securities laws for innocently or negligently failing to discover a fraud sooner than it did. The line may be difficult to discern. Based on the record, the court cannot determine, as a matter of law, that Touche’s conduct was innocent or negligent. When viewed in the light most favorable to the nonmovants, the evidence regarding Touche’s acceptance of the ACC/Lincoln engagement and its ongoing services raises genuine questions concerning (1) whether Touche knew of the fraud and tacitly agreed to provide assistance in exchange for fees, and/or (2) whether Touche’s conduct was such an extreme departure from the standards of ordinary care as to present a danger of misleading buyers that was either known to Touche, or so obvious that Touche must have been aware of it, and (3) whether Touche provided “substantial assistance” by agreeing to serve as auditor, advocating for its client, and by withholding material information from regulators which may have been a factor in permitting the fraud to continue. Hollinger, supra. The record contains the following evidence: On October 13,1988, Keating offered the ACC engagement to the Phoenix office of Coopers Lybrand, which previously had been hired for the limited purpose of reviewing a transaction involving General Oriental Investments Limited (“GOIL”). Coopers Lybrand responded that they would immediately put GOIL on hold, until the completion of its client acceptance procedures, a process which would take two to three weeks. GOIL was a pivotal transaction on which ACC proposed to book significant gain. Only days earlier, ACC’s prior auditor, Arthur Young, had refused to book gain on the GOIL transaction, precipitating its withdrawal from the ACC account. In early October 1988, Touche’s Phoenix office learned that ACC and Arthur Young would part company, and on October 17, 1988, Touche delivered an unsolicited bid of $1.075 million for the ACC audit engagement. Over the next several days, private meetings were held between Jerry Mayer, head of Touche’s Phoenix office, Jack At-chison, and Keating, which resulted, on October 25, 1988, in Touche preparing an engagement letter for ACC. The events surrounding Touche’s retention of ACC as a client are summarized in two lengthy file memoranda written by Touche partners Jerry Mayer and Fred Martin. On October 19, Mayer had lunch with Jack Atchison, who had been at ACC for over six months, after having left his post as Arthur Young engagement partner for the ACC account. At the time this court rendered its summary judgment decisions, Atchison, a defendant in these proceedings, had asserted his Fifth Amendment privilege. According to Mayer’s November 7th file memo, Atchison was impressed with-the Touche proposal, but stated that “ACC was pretty far down the road with Coopers Lybrand.” Mayer’s memo states that At-chison “several times mentioned the reason for the ACC-Arthur Young disagreement, but that Atchison blamed it totally on the relationship of Arthur Young’s new lead partner and members of ACC and not on any particular accounting issues in which AY and the company had disagreements.” Mayer comments, “it was obvious that these disagreements did bring sharp focus to the relationship process.” At his deposition, Mayer had no independent recall of the topics discussed with Atchison. Kevin O’Connell of the Federal Home Loan Bank Board (“FHLBB”) testified Mayer had told him that Atchison was “feeling out firms.” O’Connell Deposition, 9-25-90 at 261. On the evening of October 19, Mayer called Keating. Mayer, Keating, and Charles Keating III later met privately at the Phoenician Hotel for approximately 45 minutes. Although Touche partners Dave Martin and Fred Martin accompanied Mayer to the hotel, they did not attend the meeting. At his deposition, Mayer could not recall “what the strategy was.” In his November 7 file memo, Mayer wrote that Keating told him he had intended to say ACC was pretty far along with Coopers, but that at the end of his discussions with Mayer, “he was not comfortable with that conclusion any more.” Kevin O’Connell testified Mayer told him that during a private meeting, Keating “had presented hypothetical accounting situations to him” and Mayer had professed they would “keep an open mind.” See O’Connell deposition. On or about October 20th, Touche asked the chief executive officer of their client, M.D.C. Holdings, Inc. (“M.D.C.”), to call Keating on their behalf. At the time, M.D.C. was under SEC investigation. Touche was aware of transactions between ACC and M.D.C. Touche partner Thomas Bintinger testified that Touche had audited real estate transactions between ACC and M.D.C., but could not recall their conclusions. He testified that in the fall of 1988, Touche had concerns about the integrity of M.D.C. management. On October 21, Mayer wrote to Judy Wischer, reassuring her that the selection of Touche as auditor could be handled in a noncontroversial way. Mayer suggested that Touche Chairman Ed Kangas meet with FHLBB Chairman Danny Wall, if necessary, to explain that Touche’s selection was the result of its unsolicited proposal, rather than “a request by ACC following any reaction by Coopers Lybrand.” Also on October 21, Douglas McEachern of Touche’s Los Angeles office and a former FHLBB fellow, reassured Keating that he would be “a team player,” who would discuss issues with regulators on ACC’s behalf, and that he was not negatively predisposed to ACC — an impression Keating apparently had formed. McEachern testified that he was not concerned with management integrity at ACC because Darrell Do-chow, Executive Director of the FHLBB Office of Regulatory Policy, Oversight, and Supervision had told him that ACC’s directors were “honorable people.” Dochow testified, however, that he did not recall making that statement, “especially during that time period.” On October 24, Keating offered the ACC engagement to Touche. Mayer testified that it was during this conversation that Keating said he wanted to discuss a transaction. Prior to this phone call, Mayer testified, although he knew that Coopers Lybrand had been auditing a transaction, he did not know which transaction it was. That same afternoon, Keating and Mayer met privately for a few minutes before a larger meeting with Fred Martin, Judy Wischer and Andrew Ligget. Mayer could not recall what was discussed at this private meeting. At the larger meeting, ACC explained GOIL and gave Martin and Mayer reports written by Lexecon and Professor Sidney Davidson. On the evening of October 24, Mayer and Martin called Robert Kay, Touche senior national technical partner, at his home to explain the GOIL transaction. They sent the Lexecon and Davidson reports to Kay by overnight mail. On October 25, Mayer advised Keating that Touche found support in the accounting literature for ACC’s position that profit should be booked on GOIL. That same day, Touche prepared an engagement letter, to examine all consolidated and separate subsidiaries’' financials for the year ending December 1988. The $1.075 million audit bid was gone; the letter contained no estimated audit fee. Fred Martin testified that Keating had released Mayer from the earlier bid some time after the meeting on the evening of October 24 and before the engagement letter was prepared on October 25, although Martin was not present during the conversation. Jerry Mayer, however, could not recall why the audit fee changed, nor could he recall any discussions about audit fees. On October 26, Mayer and Keating met privately to discuss the basis for Touche’s GOIL opinion. Mayer advised Keating that because the opinion would be disputed by the SEC, he recommended that ACC obtain an SEC opinion. Also on October 26, Keat-ing signed the Touche engagement letter, subject to Touche meeting with Arthur Young, as required by the audit rules. On or about October 26, Keating informed Coopers Lybrand that they would not receive the engagement because “the chemistry was better with Touche Ross.” On November 1, 1988, Mayer, Fred Martin and Kay met with auditors from Arthur Young. Arthur Young testified that they withheld nothing. Touche, however, disputes that Arthur Young told them anything which raised concerns about management integrity. The record reflects extensive discussion among the accountants. For example, Arthur Young partner Kenneth Kroese took notes of the meeting, which state in part: Touche asked about management credibility problems and Janice [Vincent] said she believed that the question they were asking was about facts which might bear on the integrity of management. Those facts might be that we believed their accounting was aggressive, that they had several transactions with follow on transactions and that they had many transactions with the same parties. Bob Kay asked what that had to do with management credibility, and Janice repeated that she felt that those were facts that could bear on management integrity. Bob Kay asked then whether we would say our firm had not concluded that we had a management credibility problem. Janice said yes (we had not concluded). On the same day, Touche accepted the engagement. The evidence reflects that Touche was aware of ACC’s sale of subordinated debentures. On November 1, ACC issued a prospectus for an additional $300 million debt offering. At about this time, Forbes magazine published an article about ACC entitled “Trust Me,” which was critical of Keating and described ACC’s voluminous sales of debentures. The article was produced from Touche’s files. When asked whether he was aware of the debenture sales, Mayer testified that he had a “vague recall” about subordinated debentures during this time. Martin testified that, on occasion, he looked into whether ACC could sell debt without the assistance of an independent auditor, but could not recall when or why he had done so. On November 8, Mayer and Martin wrote their lengthy and arguably self-conscious memoranda for their files, explaining the chronology of Touche’s retention and discussions of the GOIL transaction. At deposition, Mayer’s recollection of the events at issue was sketchy. On November 14, 1988, ACC filed a.form 8K with the SEC, accompanied by Touche’s letter agreeing with statements contained therein. The form 8K stated: On November 1, 1988, the registrant engaged Touche Ross as independent accountants to audit registrant’s financial statements. Registrant offered the engagement to Touche Ross on October 24, 1988. Subsequent thereto and prior to accepting the engagement, in accordance with professional standards, Touche Ross discussed with the registrant and its former accountants matters relating to the engagement including the matter of disagreement concerning the non-monetary exchange of assets in September, 1988 (described in the registrant’s form 8K filed with the SEC on October 28, 1988). During the course of completing its procedures, Touche Ross expressed its preliminary view that the accounting literature appeared to support the registrant’s analysis of the transaction. Touche Ross accepted the engagement on November 1, 1988. In a letter to SEC’s chief accountant, Touche stated that ACC’s accounting treatment of GOIL was supported by accounting literature. On November 18, Touche and ACC met with the SEC to discuss GOIL. The SEC rejected ACC’s proposed profit recognition on the GOIL transaction, and a press release was issued. On November 21, 1988, ACC filed a third quarter 10Q with the SEC. Touche’s name does not appear in the 10Q. The document provides that although GOIL profit “is not recognized this quarter, the company expects that it will be in the future.” On December 12, 1988, Touche met with FHLBB’s Kevin O’Connell and Carol Larson at the Dallas airport. The FHLBB arranged the meeting because of its concern that Touche’s retention was the result of opinion shopping on the GOIL issue. FHLBB records reflect that Touche assured the regulators there was no “meaningful” discussion of GOIL until two days after the engagement. See note 2, supra. Based on these representations, FHLBB consented to Touche’s retention as auditor for Lincoln. Nevertheless, Larson informed her superiors that she was “dismayed by Touche Ross’ answers to questions concerning GOIL because they show no independent investigation by Touche Ross. They were just accepting Lincoln’s answers.” On December 20, 1988, FHLBB sent Touche the results of its 1988 examination of ACC. The findings included: Management repeatedly engaged in material violations of law and regulations regarding affiliated transactions, ESOP, Hotel Pontchartrain, and tax sharing agreement; ACC is operating Lincoln solely for its own benefit; Lincoln is severely undercapitalized; Regulators have great concerns about Lincoln’s continued viability; Lincoln due over $50 million in tax payments upstreamed to ACC. When questioned about the report, Mayer later testified that he recalled little about the FHLBB examination findings, and that the report raised no concerns in his mind concerning management integrity. Mayer testified that he did not know, even upon reading the report at his deposition, if it was “critical of management.” Fred Martin testified that his first concerns about ACC’s management integrity did not develop until March 1989. Touche was engaged in December, 1988, to perform due diligence of Lincoln’s assets for Spencer Scott Group, a prospective buyer of Lincoln. Touche ultimately disassociated itself from the proposed plan of sale. Information from this due diligence team was fully available to the ACC audit team. On December 22, the California Department of Savings and Loan issued a cease and desist order, prohibiting illegal loans. On December 28, 1988, Touche wrote to Darrell Dochow in response to the December 20 exam findings. Touche stated “we assume (though we do not necessarily concur) that the FHLBB’s substantive conclusions are correct.” Touche professed that it could only address substantive issues upon completion of the audit, and took issue with certain “calculation errors”. On January 3 and 30, 1989, ACC filed prospectus supplements for $50 million in additional bonds. On January 31, 1989, Darrell Dochow, by letter to Touche, requested elaboration on statements in the December 28 letter concerning reversals of income on the Crescent and Phoenician Hotels, and raised issues as to capitalized interest, capital requirements, proper accounting for a land development called Rancho Vistoso, and recovery of lost reserves. FHLBB requested the information within ten days. On February 8,1989, Touche informed the FHLBB that they had just received the letter and could not comply within the time frame. On February 28, FHLBB’s Alvin Smuzyn-ski noted that Touche’s answer had not arrived. In an E-mail to his colleagues, Smuzynski stated, “I get the impression Touche is ducking for cover now.” Fred Martin testified that he first thought about “going concern” issues and discussed the possibility of qualifying Touche’s audit opinion with Keating during March 1989. He said Keating seemed to understand, and said he would get him the necessary information to avoid a qualification, but never did. Martin testified that he had his first concerns about management integrity in March 1989, when he learned about the criminal referral and about certain real estate transactions. Touche’s Robert Kay testified that he never had concerns about management integrity. On March 23, 1989, Touche wrote to the FHLBB regarding the proper accounting treatment for the sale of Lincoln Savings. This was followed by a one-hour phone meeting with Touche, ACC, and FHLBB. FHLBB’s Larson subsequently summarized the letter and meeting for Darrell Dochow. She wrote, “Touche Ross refused to make a concise comment regarding the value of the hotels and the stock. They just repeated several times that they were not far enough into the audit to determine that yet.” Larson concluded, “I do not believe Touche Ross was being totally honest with us regarding the status of the audit. They have to file something with the SEC by mid-April ... they must be closer to reaching conclusions than they were willing to admit.” On March 28, Larson wrote to Dochow, stating, “I agree with your sentiment regarding holding Touche to the standard audit report deadline. They have been less than forthright in their dealings with us to date and I would like to return the favor.” On April 1, 1989, Keating wrote, and Touche accepted, a check for $2.2 million for services in anticipation of bankruptcy. On April 13, 1989, ACC filed its Chapter 11 petition. One day later, FHLBB imposed a conservatorship on ACC. On April 14, 1989, Mayer sent an intra-office memorandum to Touche’s Phoenix staff, instructing, “Your only proper response [to questions about ACC] is that you are unfamiliar with ACC’s situation. Refer them to Ma