Keating Asks Appeals Court to Reduce Bail

Charles H. Keating Jr., on his sixth day in Los Angeles County Jail, asked a state appellate court on Monday to lift or reduce his $5-million bail while he awaits trial on state securities fraud charges.

Lawyers for Keating claim in their petition--technically a writ of habeas corpus--to the California Court of Appeal that he is being held under an excessive bail that violates provisions of the state Constitution and the Eighth Amendment of the U.S. Constitution.

“It (the bail) bears no relation to ensuring Keating’s appearance at future proceedings,” the appeal states. “It is 50 times higher than bail set for other defendants faced with identical charges.”

Keating, former chairman of American Continental Corp., the former parent of failed Lincoln Savings & Loan in Irvine, was jailed last Tuesday after a 42-count indictment was unsealed in Los Angeles Superior Court.

No hearing has been set on Keating’s petition. The Los Angeles County District Attorney’s office, which earlier did not object to Keating’s release on his own recognizance, said it would fight efforts to lift or reduce the bail.

Superior Court Judge Gary Klausner set the $5-million bail for Keating, citing the severity of the charges. Keating and three co-defendants are charged with misleading mostly elderly investors in the purchase of more than $200 million in American Continental bonds through Lincoln branches.

After two days of hearings last week, Klausner rejected arguments to lower Keating’s bail. The judge said Keating was a flight risk because of criminal charges, investigations and civil lawsuits filed against him.

Stephen C. Neal, Keating’s attorney, said his client’s six children would provide most of the security for a reduced bail and that he would never skip town and leave them with the debt. “There is no risk of flight in this case,” he said.

Keating, who just three years ago estimated his wealth at nearly $40 million, has testified that he is now destitute. His former accountant testified last week that Keating has a negative net worth of $5.2 million. Federal regulators, however, have expressed skepticism of his claim of poverty.

They have been investigating him since they seized Lincoln in April, 1989--a day after American Continental filed for bankruptcy protection. It is estimated that Lincoln’s collapse--caused by risky investments in real estate and junk bonds--will cost U.S. taxpayers more than $2 billion, making it one of the most expensive thrift failures ever.

A special state grand jury, impaneled last April, indicted Keating and three of his former aides Sept. 13 on state securities law violations stemming from the sale of American Continental debt securities at Lincoln’s 29 Southern California branches.

American Continental’s bonds are now nearly worthless. Many of the bond buyers said they were misled into believing that the bonds were as safe as federally insured deposits. The bonds, however, were not insured.

Klausner stunned everyone when he set the high bail for Keating because Los Angeles Dist. Atty. Ira Reiner, acting as a special state prosecutor in the case, had not sought such a high bond. The judge also initially set the co-defendants’ bail at $1 million each.

On Friday, Klausner reduced the bail on Judy J. Wischer, former American Continental president, to $200,000 and cut the bail on Robin S. Symes and Ray C. Fidel, both former Lincoln presidents, to $100,000 each. All three posted bail and were released.

All four defendants are scheduled for arraignment on Oct. 5.