Keating Defense May Seek Immunity for Witnesses : Courts: Attorneys want former executives of Lincoln S&L;’s parent company to testify in his behalf in state trial.

Attorneys for Charles H. Keating Jr. may seek immunity for some former executives of the parent company of failed Lincoln Savings & Loan to allow them to testify on behalf of Keating and a top associate in an upcoming securities fraud trial.

Attorneys for Keating and former top associate Judy J. Wischer told a Superior Court judge Wednesday that the witnesses would be part of the defense against a state court indictment charging Keating and others with violating California securities laws.

In order to testify, however, the executives would want protection from prosecution, the attorneys said.

“That should make the federal people dizzy with delight,” Judge Lance A. Ito. quipped.

If defense witnesses are granted immunity in the state court trial, it could make it more difficult for federal prosecutors to bring charges against them over the 1989 collapse of Irvine-based Lincoln and its parent company, American Continental Corp. in Phoenix.

Keating and former aides are targets in federal grand jury investigations. Federal indictments have been expected for at least the last six months.

Whether defense attorneys can seek immunity for witnesses is unclear. Prosecutors in the state case say they are the only ones who can seek immunity for witnesses.

The comments by Stephen C. Neal, attorney for Keating, and Abbe David Lowell, Wischer’s attorney, came in a pretrial conference before an Aug. 2 trial in which Keating and some associates are charged in a 21-count state securities fraud indictment.

The document accuses Keating and three others of misleading small investors about the safety of American Continental bonds and the strength of the company and its S&L; unit. The bondholders, many of whom are elderly and were Lincoln depositors, lost more than $250 million in the company’s bankruptcy and the thrift’s failure.

Besides Keating, American Continental’s former chairman, others accused in the indictment are Wischer, the company’s former president, and two former Lincoln presidents, Ray C. Fidel and Robin S. Symes. Fidel has pleaded guilty to six counts and is expected to testify against the other defendants.

In Wednesday’s hearing, the Los Angeles County district attorney’s office revealed two ways in which it may try to prove its case.

William W. Hodgman, the deputy district attorney heading the prosecution, said he will seek to show that the defendants made misleading offers to sell bonds or that they “aided and abetted” other employees who sold bonds with false sales pitches.

The prosecution’s previous strategy was blocked by Ito, who ruled that prosecutors could not prove the Keating group guilty simply by showing that their employees misled bond buyers. The judge required that prosecutors show that defendants had some intent or acted willfully in defrauding investors. Ito also dismissed 25 other counts in the indictment.

The judge did not rule Wednesday on any issues, including a motion by the defense to sever their cases and hold three separate trials or to impanel up to three juries to hear the case simultaneously.

Lowell argued that publicity, among other things, has made it impossible for Wischer to get a fair trial.

“No matter what I say in court, this is the Keating case,” he said. “Ms. Wischer will get swamped in the Keating wake.”

Ito said he was inclined to deny the defense request to split up the case, but he acknowledged that there are other issues.

The situation, he said, raises “the frightening specter of a change of venue,” which would force him to move the trial out of the Southland.