Keating Says He’s Broke, but OTS Seeks Restitution

In 1987, Charles H. Keating Jr. had a net worth of about $39 million. Today, he claims he is a pauper.

Federal regulators are incredulous.

So the Office of Thrift Supervision filed administrative charges Thursday seeking $40.9 million in restitution from Keating, the chairman of American Continental Corp., the company that once owned Irvine-based Lincoln Savings & Loan. They also want Keating, who gave up his salary last fall as American Continental’s chairman, to produce in five days a detailed accounting of his own assets.

“There was just too much money available to him and too short a time for it to disappear,” said T. Timothy Ryan, OTS director. “We believe Mr. Keating and his associates profited from the improper use of depositors’ funds, and we want that money returned to Lincoln.”

Despite appearances, the well-dressed, tanned Keating insists that he is flat broke, that his debts equal or surpass his assets.

He has practically lived out of suitcases this year. Keating has flown often to Washington to appear on television programs, shown up at industry conventions and visited editorial boards of the nation’s major newspapers to tell his side of the April, 1989, failure of Lincoln, which is expected to cost taxpayers more than $2 billion.

He recently signed a so-called forebearance agreement with creditors and the Federal Deposit Insurance Corp., which insures banks and thrifts. Under the agreement, he promises not to file for personal bankruptcy and they promise to give him more time to pay off debts, said Bradley J. Boland, a company spokesman and one of Keating’s sons-in-law.

Keating’s $5-million house--at least, that’s the amount of the mortgages on it--is scheduled for a foreclosure sale next week, and it probably won’t sell for anywhere near that amount in Phoenix’s depressed real estate market. Keating is trying to come up with money to pay off the loan amount due, Boland said.

Early this month, he borrowed $690 to put an advertisement in the Arizona Republic saying he is now in business to “remodel, repair or custom-build your residential or commercial property.”

Late last month, he auditioned before the International Platform Assn. in an effort to win a spot on the sometimes high-paying lecture circuit. His topic, of course, would be the savings and loan industry.

“There were a lot of requests that he start speaking for fees,” Boland said. “It’s certainly a good way for us to start generating some income for him, and we’ve got to start generating some income.”

Boland said the trips are often paid by media groups or others seeking him, or by his bankrupt company, American Continental in Phoenix.

Keating, who is also a lawyer, has in addition been talking about practicing law again but has found little time to start such a venture, Boland said.

“What we do is no secret to anybody,” he said. “And the worst part is that we haven’t done anything wrong, and we have to live in this reign of regulatory terror.”

Last December, American Continental bondholders tried to freeze Keating’s assets both here and abroad. Keating swore that neither he nor anyone in his family has bank accounts overseas.

In court papers at that time, he said he sold his land and home in the Bahamas, which he bought in the 1970s before American Continental bought Lincoln, and he pledged the proceeds from the sale to bank creditors. He also pledged land he owns in Canada and in Flagstaff, Ariz., to the banks.

His net worth, as high as $39 million in 1987, had fallen to $7.8 million at the end of July, 1989. But included in that figure is about $1.35 million in American Continental stock, which is close to worthless now, and $6 million in loans that Keating had given his children in the late ‘70s to buy American Continental stock. Those loans, due in 2002, are largely uncollectable, Keating said in the court document.

Keating’s protestations notwithstanding, regulators and bondholder attorneys believe that he has funds stashed away somewhere. Regulators also have claimed that he and his family took $34 million in salaries, stock options, stock sales and other benefits out of Lincoln in the five years they owned it.