Few in Phoenix Welcome Keating as Prodigal Son

The rumor swirled like a sandstorm through this sun-baked city: Charles H. Keating Jr., the former thrift kingpin and real estate developer, was so behind on bills this summer that the electric company was threatening to cut off power to his luxurious Paradise Valley home.

Sensing the juicy irony of Keating’s plight, local talk radio station KFYI-AM staged an on-air fund-raising drive, replete with a tote board to tally the bounty.

Calls poured in. Everyone in Phoenix, it seemed, wanted a crack at their most infamous resident, who was once part of the city’s wealthy power elite. But few were willing to spare a dime for Keating. A grand total of $4 was pledged but never mailed in, station officials said.

So it goes these days for Keating, who is under indictment for fraud relating to actions involving Irvine-based Lincoln Savings & Loan. So sullied is Keating’s image that a friend and former attorney recently labeled him “the most nationally vilified man since Richard Nixon.”

And the feeling is no different in Phoenix, the desert town Keating migrated to in 1976 from the Midwest. When he was released from Los Angeles County Jail after a monthlong stay last week, there were no Welcome Home Charlie parties, no defense-fund rallies.

Instead, the former chairman of American Continental Corp. and onetime owner of Lincoln appears firmly affixed on the emotional dart boards of residents scattered across the sprawling Arizona city.

In the wake of his quiet return, many Phoenix residents expressed anger at the man who has gained national prominence as a prime-time villain in the thrift crisis. Some argue that Keating has inflicted a black eye on the city and state, becoming an unsavory successor to such past Arizona embarrassments as unseated former Gov. Evan Mecham.

“I think people are kind of numb,” said Terry Goddard, former Phoenix mayor and the Democratic Party candidate for governor of Arizona. “There’s no question he’s become sort of the poster child for the nation’s savings and loan problems. And of course none of that does Arizona any good.”

Many rank-and-file Phoenicians agree and are quick to bemoan the region’s identification with the formerly high-flying developer and financier.

“The only thing I have to say is they shouldn’t have let him out of jail. Keep him in California,” said Vanessa Smith, a clerk at a Circle-K market in south Phoenix. “I’m a working person. If he ripped off people like that I don’t have any sympathy for him.”

Whether Keating is cognizant of such unrelenting hostility remains a mystery. Since he was released from jail Oct. 18, Keating has remained bunkered on his sprawling estate in Paradise Valley, a high-brow bedroom community hugging the craggy Camelback Mountains on Phoenix’s eastern edge. Inhabited by an eclectic mix of high-rollers, Paradise Valley is a place where everybody pretty much keeps to themselves. Barry Goldwater lives a block or so from Keating. Rock star Alice Cooper’s home is nearby.

There is little news these days from the Keating inner sanctum, but he is believed to be holed up plotting his legal defense with attorneys. While in jail--held on $5 million bail before it was lowered to $300,000--he spent hours each day reviewing defense tactics with his lawyers, who argued in court that his release was necessary to prepare a proper defense.

Although the greater Phoenix area is rife with newly sprouted Keating haters, there remains a dogged underground of sympathizers. Friends of the embattled former thrift executive reportedly came to the rescue when a bank was preparing to foreclose on his house, putting up nearly $137,000 for delinquent mortgage payments just two days before a trustee’s sale in August.

“In spite of what we read and hear, there are a lot of people who want to help him,” Bradley Boland, a Keating son-in-law and spokesman, told the local papers after the August donation.

But these days, most of Keating’s friends and acquaintances seem to be avoiding overt public demonstrations of sympathy, as are his former subordinates at American Continental, the bankrupt Phoenix development firm, and Lincoln, now run by federal regulators. Many of the area’s moneyed upper crust, themselves hurt by the state’s severe recession, are also mum.

“They’re a little tender about the subject,” said former Arizona Gov. Bruce Babbitt, a Phoenix attorney. “The leadership elite of this town has been destroyed in the last few years. The two largest savings and loans in the state now have Bank of America signs on them. The utility company collapsed. There aren’t many familiar faces around the country club anymore.”

Babbitt said he typically hears two arguments from the cadre of Keating supporters: that Keating was the victim of vengeful government regulators out to get him at any cost or that Keating was let down by “faithless associates” who didn’t carry out his orders.

“Most people I know in the building business feel it (the charges) should be proven in court,” said Von E. Dix, president of A-M Homes Arizona. “If that’s the way it is, then proper punishment is in order. But not a lynch mob.”

Keating and three associates have been charged with 42 counts of fraud in the sale of more than $200 million in American Continental bonds, mostly through Lincoln’s 29 branches. The buyers were mostly elderly investors who claim they were led to believe the now-worthless bonds were safe and insured by the federal government. Keating and the others have pleaded not guilty.

James Wuensche, an accountant in the suburb of Scottsdale, fears that there could be local fallout for months to come from the Keating scandal.

“He’s going to be what Mecham was to Arizona: a black eye,” Wuensche said, referring to the former governor who was removed from office in 1988 on charges that he misused state money and tried to obstruct an investigation. “There’s been a lot of boats that have sunk over history, but only one Lusitania. That’s Charlie Keating.”

Other locals are a bit more sanguine about the Keating imbroglio, suggesting that the state has managed to skirt any close association with the embattled thrift magnate.

“He’s become a national kind of symbol,” said Babbitt, an unsuccessful contender for the Democratic presidential nomination in 1988. “If you asked the average person where he’s from, they’d say he’s out there West somewhere.”

Some go further, arguing that the Keating scandal is California’s burden.

“I don’t think it’s as important to us as it might be for folks in California, where he was purported to do his financial shenanigans,” said Terry Trost, the Phoenix Chamber of Commerce’s chief economist. “He apparently did his dirty work in California. He’s your villain.”