Court Rejects Keating’s Bid to Cut $5-Million Bail

A state appellate court refused Tuesday to lift or trim the $5-million bail set last week for Charles H. Keating Jr., ensuring that he will remain in jail a while longer awaiting trial on state criminal charges of securities fraud.

A three-judge panel of the state Court of Appeal in Los Angeles unanimously denied Keating’s petition to be released from Los Angeles County Jail without bail or on a substantially reduced bond.

Attorneys for Keating, former chairman of American Continental Corp., the parent firm of failed Lincoln Savings & Loan, are expected to appeal to the state Supreme Court as soon as possible, possibly today.

Keating has been jailed since Sept. 18 on charges stemming from the sale of more than $200 million in American Continental bonds, mostly through the 29 Southern California branches of Irvine-based Lincoln.

The bonds, sold mostly to elderly and unsophisticated investors who thought the bonds were insured and safe, became worthless when the company filed for bankruptcy protection in April, 1989. Federal S&L; regulators seized Lincoln the next day.

Regulators contend that Lincoln is one of the nation’s biggest thrift disasters and will eventually cost U.S. taxpayers more than $2 billion.

Keating and three former associates surrendered to the Los Angeles County district attorney’s office last week to face a 42-count indictment charging them with violations of state securities laws that could put them in prison for up to 10 years.

Citing both the seriousness of the charges and the risk of Keating fleeing, Los Angeles County Superior Court Judge Gary Klausner set bail at $5 million and refused to lower it. But Klausner did reduce the $1-million bail he had set on each of the co-defendants, and they have been released from jail.

“We are firmly convinced that Mr. Keating is not a flight risk,” his attorney, Stephen C. Neal of Chicago, said Tuesday. “He has known that these charges were coming, and he has looked forward to defending himself in court and clearing his name. The last thing he’s thinking about is flight.”

The appeals court ruled just a day after Keating filed a petition seeking to overturn the bail ruling, which was made without comment after the judges reviewed the bail hearing transcripts and evidence.

Although more than 17,000 investors lost money buying American Continental bonds, the indictment is narrowly focused on just 20 bondholders who lost $50,000 to $100,000 each. It is the first criminal case to arise out of the collapse of Lincoln.

Keating and others at the company and the S&L; have said they expect to be indicted on U.S. charges once the federal grand jury in Los Angeles completes its wide-ranging investigation.

In addition, the former top executives face a plethora of civil lawsuits filed by bondholders, insurers, the state and the federal government. The litigation includes a $1.1-billion lawsuit in which federal regulators accuse Keating and others of racketeering.

Keating, long vocal in his opposition to increasingly restrictive thrift rules and to federal regulators who investigated his company, has become the symbol for criticism about S&L; deregulation and events that led to the thrift industry disaster.

Federal authorities now estimate that the industry debacle will cost U.S. taxpayers more than $500 billion in the next 30 years.