Harbor Bancorp & Subsidiaries - Page 4

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          incorporated herein by this reference.  The trial judge made the            
          following findings of fact, which we adopt.                                 

                                  FINDINGS OF FACT                                    

               At the time its petition was filed, the principal office of            
          petitioner Harbor Bancorp & Subsidiaries was Long Beach,                    
          California.  Petitioners Edward J. and Elena Keith resided in               
          Pebble Beach, California, when they filed their joint petition.             
               Riverside County is a political subdivision of the State of            
          California, governed by an elected board of supervisors.  Within            
          the Riverside County government exists the Housing Authority.               
          The Housing Authority is empowered to issue revenue bonds, the              
          proceeds of which are lent to private developers to construct               
          housing projects.  The Riverside County Housing Authority                   
          Advisory Commission (Advisory Commission) was created to review             
          proposed multifamily housing bond issuances.                                
               By the mid-1980's, there was a large demand for low- and               
          moderate-income housing in Riverside County.  In the fall of                
          1985, an established commercial and residential development                 
          company named SBE Development, Inc. (SBE), approached officials             
          of Riverside County seeking "conduit financing"3 to fund                    

               3Conduit financing is distinguishable from "governmental               
          financing" in which the bond proceeds would be used directly by             
          the governmental unit in order to construct public facilities,              
          such as roads, bridges, and schools.  Here, the Bond proceeds               
          were not going to be used directly by the issuing governmental              
          unit (the Housing Authority), but rather by a private developer,            
                                                             (continued...)           



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