U.S. Targets Keating for $41 Million : Failed S&L; Owner, 5 Others Ordered to Pay Restitution
Federal regulators moved today to get $40.9 million in restitution from Charles H. Keating Jr. and five other officers of a Phoenix holding company that owned the failed Lincoln Savings & Loan Assn.
The Office of Thrift Supervision also said it wanted to remove Keating and five other officers from American Continental Corp., which owned the Irvine, Calif., thrift before its $2-billion failure last year.
Timothy Ryan, director of the federal agency, called the move “the most significant enforcement action OTS has ever undertaken.”
Until today, the largest restitution action was a $24-million suit filed earlier this year against Thomas Spiegel, former owner of the failed Columbia Savings & Loan Assn. of Beverly Hills.
The administrative action against Keating and the other American Continental officers seeks to recover $40.9 million in losses from three business deals that one official said showed “evidence of blatant disregard for the safety and soundness of Lincoln.”
If recovered, the money would be returned to Lincoln, which was seized by federal regulators April 14, 1989.
The restitution order applies to Keating and the five executives, and Ryan said the agency is seeking the money from all six, either individually or as a group.
Keating is already named in a $1.1-billion racketeering suit filed by the Resolution Trust Corp. charging him with fraudulently diverting depositors’ money.
A federal grand jury in Los Angeles is conducting a criminal investigation of Keating’s financial dealings, and sources say the Justice Department is investigating whether he improperly donated $1.3 million to five senators who intervened with regulators on his behalf three years ago.
OTS also issued an order demanding that Keating produce in five days a detailed accounting of his own assets. Ryan said regulators do not believe Keating’s repeated claims since his company filed for bankruptcy protection last year that he is broke.
“There was just too much money available to him and too short a time for it to disappear,” Ryan told reporters at a news conference. “We believe Mr. Keating and his associates profited from the improper use of depositors’ funds and we want that money returned to Lincoln.”
The order requires Keating to identify all foreign bank accounts and assets and bars him from transferring any money overseas. It also requires Keating to give OTS two days notice before he transfers any money or assets worth more than $5,000, OTS said.
The administrative action seeks to remove Keating and the top executives of American Continental from office and to bar them “from ever serving in a position in any federally insured institution,” Ryan said.
OTS also sought to remove Judy J. Wischer, president and chief executive officer of American Continental; Robert J. Kielty, a director, senior vice president and general counsel of the company; Keating’s son, Charles H. Keating III, an executive vice president and director, and two of Keating’s sons-in-law who are vice presidents--Robert J. Hubbard and Robert M. Wurzelbacher Jr.
