Keating Freed After U.S. Judge Slashes Bail

Ending his monthlong imprisonment, former thrift executive Charles H. Keating Jr. was released Thursday night from jail after a federal judge reduced his bail from $5 million to $300,000.

Looking pale but smiling broadly, the once-wealthy and politically influential executive left Los Angeles County Jail shortly before 9 p.m., after family members posted the reduced bail.

“You know how it feels to get out,” he said as he was driven away, refusing further comment.

Keating’s release came after U.S. District Judge John G. Davies in Los Angeles ruled there was “no rational reason” for the high bail on Keating, accused of fraud in the sale of bonds at branches of Irvine-based Lincoln Savings & Loan.

In making his ruling, Davies questioned the judgment of Los Angeles County Superior Court Judge Gary Klausner. Davies said some of Klausner’s findings in setting the $5-million bail were “unsupported and irrational,” ruling that he had set it arbitrarily.

Keating--who has become a lightning rod for those who want owners of failed thrifts to be severely punished--had been in the county jail since Sept. 18, when an indictment charging him with 42 counts of fraud was unsealed. He has pleaded not guilty.

Keating’s lawyers were pleased by the decision. Keating, 66, did not attend the hearing. Two sons-in-law who did--Robert Wurzelbacher and Bradley Boland--were elated but held their emotions in check. Keating’s personal secretary wiped away tears.

Any appeal by prosecutors is unlikely, even though they disagree with the ruling, said Paul Turley, a deputy Los Angeles County district attorney.

Keating’s lawyers had asked Klausner to lower bail to $500,000, saying that Keating’s family could cover that amount. Keating had stated that he has a negative net worth of $5.2 million.

Keating’s family posted bond Thursday by putting up as collateral the equity in the homes of at least two of Keating’s six children. They also paid $30,000 in cash to a bail bondsman, although they did not say where that came from.

Clean-shaven and wearing a beige shirt and brown slacks, Keating walked briskly through a sea of reporters and photographers upon his release, refusing to answer questions or disclose where he was going. Family members said he would soon return to his Phoenix home to prepare his defense.

Keating, the former chairman of Phoenix-based American Continental Corp., which owned Lincoln, was indicted with three others for fraud in the sale of nearly $200 million in bonds to more than 17,000 investors. Many of the bonds were sold through Lincoln branches to elderly investors. Investors allege that they were led to believe that the bonds were safe and, in some cases, insured by the federal government.

American Continental, however, filed for bankruptcy in April, 1989, and the bonds are now worthless. Lincoln was seized by federal regulators the next day. The thrift’s failure is expected to cost taxpayers more than $2 billion.

Keating has battled federal regulators since 1984 over the operation of Lincoln. He is also the subject of numerous civil lawsuits seeking billions of dollars in damages and is the target of several criminal probes.

The Senate Ethics Committee also is investigating whether five senators who received campaign contributions from Keating improperly intervened with banking regulators on Lincoln’s behalf.

Keating has become “the most nationally vilified man since Richard Nixon,” said John Quinn, a former Keating attorney, in testimony before Davies. He said it was important that Keating be freed to defend himself.

In setting the $5-million bail, Klausner had cited the seriousness of the charges and said that Keating was a flight risk because of the multitude of legal actions facing him. The state Court of Appeals and state Supreme Court both declined petitions to lower bail.

Davies said the bail issue had an interesting history. He pointed out that prosecutors did not even make a recommendation on bail at first and did not object to the defendants’ being released without bail. The next day, they recommended a $1-million bail and, after a bail hearing before Klausner, finally backed the judge’s original amount.

The other three defendants, however, won reductions in bail from Klausner. He set bail at $200,000 on Judy J. Wischer, former American Continental president, and $100,000 each on Robin S. Symes and Ray C. Fidel, both former Lincoln presidents.

Keating’s lawyers charged that Klausner’s refusal to reduce bail for their client was not supported by the evidence at the bail hearing and that it violated the 8th Amendment of the U.S. Constitution, which prohibits the setting of excessive bail. They also contended that he should not be treated so vastly different from his co-defendants.

Davies agreed, pointing out that the purpose of bail is to “protect the right to freedom” before trial and to “prohibit punishment before conviction.” Bail in excess of the amount needed to assure a defendant’s appearance at trial is excessive, he said.

Davies found that Klausner acted arbitrarily in several areas.

“I can see no rational reason whatsoever . . . for this disparate treatment among defendants,” said Davies, referring to the difference in bail amounts.

He also found that Klausner’s statement that the bail amount was only 2% of the $250 million allegedly lost by all bondholders--including those who bought bonds through brokers, not through Lincoln--was “rationally insupportable.”

And just because Keating once had the access to that huge amount of money, Davies said, did not give Klausner reason to suspect Keating could raise that kind of money again and flee. Such “very vague findings” were “unsupported and irrational,” Davies said.

In setting the new bail, the judge also ordered that Keating surrender his passport, call Los Angeles County authorities every week and give those authorities details about any trips he takes. Davies also limited travel to the 48 contiguous states.

Staff writer George White contributed to this story.