Phoenix Offers Keating No Refuge From Ill Feelings

The rumor swirled like a sandstorm through this sun-baked city: Charles H. Keating, 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 now under indictment for fraud relating to the failure of 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 everyone 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 insiders say he is 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 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.

Jim Clark, who attends the same church as Keating, said that Keating, a devout Catholic, attended church Sunday. “Dozens of people came up, shook hands and congratulated him for the fight he is putting up and the cross he is bearing in this mess,” Clark said.

But 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, which is 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, and that he was let down by “faithless associates” who didn’t carry out his orders.

“Most people I know in the building business feel (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 that the bonds, which are now worthless, were safe and insured by the federal government. Keating and the others have pleaded not guilty.

While Keating is best known in California for his ties to Lincoln, real estate development was the focus of his efforts in Arizona. He used the thrift to fund most of his high-profile projects, which have produced a mix of successes and failures.

In Phoenix, residents scoff at Keating’s most ambitious project, a massive planned community more than half an hour’s drive west of the city in the desert off the interstate. Named after the mountain range it nestles under, the Estrella development was supposed to eventually blossom into a city of 250,000 residents. Some of the streets were graded and paved, but the development never panned out. Today the land “is a fruitful area for quail, horned toads and lizards,” joked Goddard.

But there were projects that even Keating’s staunchest foes admit are exquisite in every detail. Chief among them is the Phoenician hotel, a palm-studded, 130-acre resort featuring a 474-room hotel, 131 cottages, six restaurants, a golf course, an acre of swimming pools and a 22,000-square-foot ballroom.

Keating spared no expense while developing the opulent property, which has become emblematic of the conspicuous consumption practiced by principals in the savings and loan fiasco. The family stamp is all over the grounds. Keating closely supervised construction. His wife, Mary Elaine, fashioned the hotel’s innards after several professional interior designers were fired. One restaurant is named Mary Elaine’s, and a nightclub is dubbed Charlie Charlie’s.

Today the Phoenician is being run by a new management team hired by the federal government, which seized control of the hotel in November, 1989. But the ghost of Charlie Keating still rattles about the marble-floored lobby of the hotel, which some Phoenix residents have taken to calling “Club Fed.”

“When he was in jail, we’d have some of the locals come in and joke about how they were finally eating better than Charlie,” said one of the hotel’s new managers, who asked that his name not be used.

“People ask about him all the time,” said a hotel bartender. “They’re curious. Personally, I think he’s a crook. He got what he deserved. But he built a real nice hotel.”

Officials at the Phoenician for a time considered renaming Charlie Charlie’s, but figured the moniker would become less an issue with the passage of time. They also said it wasn’t worth the “monumental cost” of changing signs on the property, paper goods and advertising.

Elsewhere in the Valley of the Sun, some Phoenix residents are turning their backs on the Keating affair.

“Nobody I know really talks about it that much anymore,” said Janet Lee, president of an investment marketing firm. “People figure, yeah, he was a bum and got caught. Now let’s move on.”

But others contend that Keating won’t be off the Arizona agenda until his fate is sealed.

“There’s no sympathy in Phoenix, Ariz., for Charles Keating,” City Councilman Skip Rimza said. “He gambled with other people’s money and lost. He’s gone from being a player to being the black plague.”

James Wuensche, an accountant in the suburb of Scottsdale, fears 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.”