Judge Forces Freeze, Disclosure on Keating
In a victory for thrift regulators, a Los Angeles judge Wednesday ordered Charles H. Keating Jr., former chief of the failed Irvine-based Lincoln Savings & Loan, to abide by a government action requiring him to disclose his personal finances and partially freezing his assets.
Ruling after negotiations between Keating and government attorneys stalled, U.S. District Court Judge Stephen V. Wilson ordered Keating to abide by an Office of Thrift Supervision complaint requiring him to disclose his assets within five days.
Wednesday’s ruling also activates OTS measures barring Keating from transferring assets overseas and requiring him to notify the government two days before transactions exceeding $5,000.
“It’s an absolute victory, and we’re very pleased,” said OTS Director Tim Ryan.
Wilson ruled on a suit the Justice Department filed Friday to enforce an Aug. 9 OTS complaint pursuing the largest restitution claim sought by S&L; regulators.
Charging improper use of the thrift’s money, OTS wants Keating, chairman of the former parent of Lincoln, and five associates to pay $40.9 million in restitution for their roles in the failure of the thrift. Keating heads American Continental Corp., a Phoenix company undergoing reorganization under bankruptcy protection laws.
OTS is seeking the restitution for three transactions involving a Detroit hotel in 1985, an American Continental employee stock-option plan and a tangled deal in which Lincoln sold desert land to a partnership that used funds borrowed from Lincoln.
The subsequent failure of Lincoln, seized by federal regulators in April, 1989, likely will cost taxpayers $2 billion.
Bradley J. Boland, a spokesman for American Continental and a Keating son-in-law, denounced the OTS complaint, calling the agency’s action “harassment” and “nothing more than a waste of taxpayers’ money.”
Keating was unavailable for comment Wednesday. Earlier this week one of his attorneys characterized the Justice Department action as an ambush by government agencies that will yield little benefit while burdening taxpayers with huge legal bills.
“They are clearly on the hunt for scalps so that they can create the impression that they are handling the crisis, and they’re not,” said attorney James Ham. “They know damn well the guy doesn’t have a dime. The lawyers are getting rich off it. But nobody else is.”
He also portrayed the government’s actions as an attempt to derail a bankruptcy plan Keating submitted Aug. 10 as part of efforts to reorganize American Continental, which filed for bankruptcy protection in April, 1989.
Keating’s plan is meant to supplant an earlier one filed by American’s unsecured creditors and federal regulators.
OTS Director Ryan denied the harassment charges.
“Our goal here is to protect the American taxpayers,” he said. “Certainly, I would not consider the actions of this agency to be harassment. It’s not harassment when we’re asking this gentleman to return $41 million to this institution and ultimately to the American taxpayers.”
Keating, reportedly worth as much as $39 million in 1987, now claims he is broke.
During the five years Keating and his family owned the thrift, they funneled $34 million to themselves in salaries, stock options and other transactions, the government charges.
