Some Knew Risks of Lincoln’s Bonds, Testimony Shows : Thrift: Other investors did not take the time to read material provided by now-bankrupt American Continental Corp., the grand jury learned.

There is no doubt that small investors in now-bankrupt American Continental Corp. were badly hurt and that many believe they were badly fooled.

But grand jury testimony released Friday indicates that some people who bought some of the nearly $200 million in bonds sold at the company’s Lincoln Savings & Loan branches knew full well the risks of investing. And others simply did not take the time to read material provided.

Those bonds now are among the worthless securities and other debris left over from the April, 1989, collapse of the real estate and financial empire created by American Continental’s former chairman, Charles H. Keating Jr.

The California Grand Jury, which indicted Keating and three others in September on state securities fraud charges in the sale of the bonds, took testimony over five months from 94 witnesses, most of them bondholders.

Most of the small investors were elderly Southern Californians persuaded by a high-pressure sales force to buy American Continental bonds. The investors, many unsophisticated in investment decisions, allege in civil litigation that they were misled into believing that the bonds were insured or safe, as their savings deposits had been.

To be sure, most of the grand jury testimony by several dozen bondholders paints exactly that picture.

But defense attorneys challenge the popular notion, for instance, that bondholders were told that the bonds were insured.

Abbe David Lowell, attorney for co-defendant and former American Continental President Judy J. Wischer, even contends that the grand jury transcripts show that “witness after witness specifically said they were told the bonds were not insured.”

The testimony, however, shows that some salespeople used such euphemisms as “100% secure,” “as safe as the United States of America” or “comparable to a certificate of deposit.”

One salesman at the S&L;’s Lakewood branch nodded toward an emblem that indicated that Lincoln’s deposits were federally insured and said the government was backing up the bonds, Long Beach bondholder Henry J. Adams, 67, testified.

The testimony from dozens of bondholders shows that many were won over by high-pressure sales techniques and misleading statements. Many said they never received documents that they later learned were required by law to be given to them.

The primary document--the prospectus--is supposed to reveal the risks of buying the securities, indicating how safe the bonds are. But prosecutors said important information, such as the regulatory pressure on Lincoln, was left out of American Continental’s prospectus.

But regardless of the painstakingly long and complex prospectus, a few investors simply assumed that the bonds were safe, according to grand jury testimony.

Acting on her husband’s advice to buy the bonds, Grace Marie Young, 73, of Burbank testified that she never asked about the safety of the bonds, nor did anyone at Lincoln’s Burbank branch volunteer any such information.

She also said American Continental sent her a prospectus, but she acknowledged that she did not read it as carefully as she should have.

“Because I had complete faith in Lincoln . . . and anything that transpired behind their doors, I just figured it was safe,” Young testified.

Some investors were wiser about the ways of stocks and bonds than others.

Mary Eckerson, 71, of Granada Hills, for instance, had invested in mutual funds previously. She attended a slick American Continental seminar on its bond issue before buying the first of four bonds.

Nancy Beebe, 56, of Oakhurst, Madera County, had her stockbroker to lean on when she saw the first “red flag” go up--American Continental’s third-quarter loss in 1988. Following his advice, she persuaded the company to return her $20,000 investment in full.

Many investors also were nearly sold on the idea of buying bonds before they ever entered Lincoln branches.

Some relied on advertising, which prosecutors maintain was misleading mainly because it failed to point out that the bonds were not insured. But others relied as much on outside factors as on anything that salespeople could tell them.

For instance, Dorothy Archer, 69, of Rancho Palos Verdes was influenced by her brother-in-law, who was a bondholder.

“He was so impressed with receiving his check on the 28th of every month, you know,” she testified. “So I was more or less talked into it by him.”

And Harriet S. Chappuis, 65, of Los Angeles, said a 1988 Forbes magazine story saying American Continental was stable and its bonds good was as much a factor in her bond purchase as the insistence by salespeople that the bonds were safe.

The bondholders’ testimony is only part of the jigsaw puzzle that prosecutors must put together for a jury at trial. Their main effort will be to link any false or misleading statements or improper omissions with Keating, Wischer and the other two defendants, Ray C. Fidel and Robin S. Symes, both of whom were Lincoln presidents.