U.S. Now Seeks $130 Million From Keating, Aides : Recovery: Restitution demand in Lincoln S&L;’s failure is tripled by Office of Thrift Supervision. However, agency cuts its claim against Columbia S&L;’s chief.
The Office of Thrift Supervision said Wednesday that the agency has more than tripled to $130.9 million the amount of restitution it is seeking from Charles H. Keating Jr. and six associates linked to the failure of Irvine-based Lincoln Savings & Loan.
At the same time, federal regulators said they lowered by $3.2 million the amount of restitution sought from Thomas Spiegel, former chief executive of Columbia Savings & Loan in Beverly Hills, to $21.3 million.
The two cases are among a number of major administrative actions that OTS has filed against owners of failed thrifts who allegedly obtained funds from the institution through fraud or other improper activities.
OTS spokesman William Fulwider said the restitution sought in the Lincoln and Columbia cases was changed several months ago but was only made public recently, partly because the agency’s executive staff did not know that its lawyers had adjusted the numbers.
Lincoln, which was owned by a company controlled by Keating, failed in 1989 after risky real estate and junk bond investments soured. The collapse is expected to cost taxpayers $2.6 billion, making it the costliest S&L; failure to date.
The Lincoln restitution case is the largest the OTS is pursuing. In the next biggest cases, OTS is seeking $30 million from the former owners of CenTrust Savings in Miami and $25 million from Newport Beach businessman Michael Parker and two associates for allegedly defrauding Columbia in a leasing scheme.
In August, the agency filed a complaint against Keating seeking $40.9 million in restitution. The filing cited three deals that showed “blatant disregard for the safety and soundness of Lincoln” and caused the S&L; to lose money.
The agency increased the amount sought after amending its complaint to include allegations of an illegal tax-sharing plan between Lincoln and its parent company, American Continental Corp. in Phoenix. Under the plan, Lincoln forwarded more than $90 million to its parent for its share of income taxes, which the government says were not due.
Federal regulators suspect that Keating has hidden assets taken from Lincoln and have sought a court-ordered accounting of his finances. Keating, however, says he is broke. His personal accountant testified last September that Keating was $5.2 million in debt.
A hearing on the restitution case for Keating and his former aides--Judy J. Wischer, Robert J. Kielty, Charles H. Keating III, Robert J. Hubbard Jr., Andre A. Niebling and Robert M. Wurzelbacher Jr.--will be held in the Los Angeles County Courthouse on April 29.
Keating also is fighting a state securities fraud indictment and is the target of a federal grand jury probe. He has denied any wrongdoing.
In the case of Columbia’s Spiegel, OTS lawyers learned that some of the assets they had counted as losses were actually sold at a profit, forcing a change in the amount sought. Spiegel’s attorneys said they still have not been notified of the change.
