The $5-Million Message

Setting Charles H. Keating Jr.’s bail at a hefty $5 million sent a clear message about the seriousness of white-collar crime. Keating, accused of criminal fraud by a state grand jury, personifies to many people the greed and abuse that triggered the savings and loan debacle.

Of course, bail is not a form of punishment, but a form of assurance that the accused will not skip town. Yet many people are shocked when alleged white-collar crime receives any type of tough scrutiny. So Keating’s $5-million bail was widely noted.

A man accused of using a gun to rob a bank is customarily dealt with harshly by the courts. But the public has come to expect “soft” treatment for a different sort of looting.

But if the legal system appears to look the other way when those in business suits are accused of crime, it undermines public confidence and creates an environment in which even more white-collar crime can flourish.

Keating, the former chairman of American Continental Corp., and three of his business associates--for which bail was set at $1 million each--are accused of making false and misleading statements and committing other violations in the sale of about $200 million high-risk bonds sold through Lincoln Savings & Loan of Irvine, which American Continental owned.

Thousands of investors, many of them elderly, invested their life savings and bought the bonds believing they were insured, which was not the case.

Those investors lost their money when American Continental filed for bankruptcy in 1989. Keating has steadfastly denied any fraud. He further blames Lincoln’s failure, which will cost taxpayers more than $2 billion, on its seizure by federal regulators.

Keating’s innocence or guilt has yet to be determined by the courts. An executive who once had a net worth of $39 million, Keating now claims to be broke and a hearing to cut the bail is scheduled today.

He is entitled to seek lower bail. But the amount of the original bail has already sent a powerful message to the financial industry: Accusations of impropriety will be treated with all the appropriate seriousness.