Lincoln S&L;’s Chief Sued Over Alleged Bribe : TV Firm Charges Insider Trading, ‘Greenmail’ Try
A Dallas broadcasting company has alleged that Charles H. Keating Jr., the chairman of Irvine-based Lincoln Savings & Loan Assn. and a former aide of financier Carl Lindner, tried to bribe its chairman and extort a premium price for Keating’s holdings of company stock and traded in the stock based on inside information.
The allegations are contained in a civil lawsuit filed March 5 in Reno by Gulf Broadcast Co. in reaction to a request by Keating and his holding company, Phoenix-based American Continental Corp., for several of Gulf’s financial records. Through Lincoln S&L; and another subsidiary of American Continental, Keating owns 25% of Gulf, a holding he contends gives him the right under Nevada law to see the records.
Gulf, a Nevada-chartered corporation, has agreed to sell most of its assets to Taft Broadcasting Co. for $750 million, a move that Keating apparently opposes although, according to a Gulf spokesman, the deal would mean a profit for Keating’s companies of more than $40 million.
American Continental has filed suit in a Cincinnati court seeking to block Gulf’s issuance to Taft of 22 million shares of preferred stock, a maneuver designed to facilitate the sale.
In its complaint, Gulf alleges that Keating acquired his 25% holding on the basis of non-public information he had from Lindner that the company was planning to liquidate. Lindner, the company contends, himself acquired the information during negotiations with Gulf about selling his 19% stake back to the company.
Bought Additional Shares
Instead, Lindner sold the shares to Keating, who bought an additional 9% on the open market before Gulf publicly disclosed its plans last September, Gulf contends.
Gulf also charges that Keating tried to derail the liquidation plan by offering Gulf Chairman E. G. Fitts a premium for his 122,000 shares as well as $10 million, to be paid over five years, if Fitts “would resign and turn over control” of Gulf to Keating.
Furthermore, the complaint charges that Keating attempted to “greenmail” Gulf--that is, force the company to buy back his stake at a premium to the prevailing market price--while threatening to block the Taft transaction.
Keating could not be reached for comment at his Phoenix office Thursday. Jay Strum, a New York attorney for American Continental, said the company and Keating would shortly ask to have the Reno lawsuit dismissed on jurisdictional grounds. He declined to react to the specific charges. “I’m not going to presume to speak to the accusations,” he said.
Keating’s holding company, American Continental Corp., acquired Lincoln S&L; in February, 1984, for $50 million.
Keating and Lindner have had a business relationship that dates back at least as far as 1976, when Keating was a vice president and director of Lindner’s American Financial Corp. In July, 1979, both men, without admitting or denying the charges, consented to Securities and Exchange Commission orders enjoining them from fraudulently diverting corporate assets to personal use.
The case stemmed from SEC charges that Lindner and Keating allowed a bank controlled by American Financial to make $14 million in improper loans to officers of the company, their families and members of Keating’s Cincinnati law firm.
