Keating Jurors May Miss Some of Juiciest Evidence

Some of the most inflammatory evidence in the criminal case against Charles H. Keating Jr. might not be presented to jurors once testimony begins in the next few weeks in the securities fraud trial of the former owner of Lincoln Savings & Loan.

Superior Court Judge Lance A. Ito issued tentative rulings Tuesday that would limit or prevent prosecutors from giving jurors such information as a federal judge’s opinion last year that actions by Keating and other executives “amounted to a looting of Lincoln.”

Ito termed much of the contested evidence irrelevant or redundant, though prosecutors might be allowed to use the evidence in court for other reasons.

One contested item of evidence that Ito said is relevant to the trial was a so-called “cheat sheet” of helpful hints that urged a securities sales force to target the “weak, meek and ignorant” in selling bonds issued by Lincoln’s parent company, American Continental Corp. But prosecutors would first have to establish that bond sellers used the document as a regular part of their sales pitches, he told lawyers.

Ito did not, however, make a final ruling on five items that Keating wants excluded from trial. The judge instead will rule during the trial as the evidence comes up.

Stephen C. Neal, Keating’s lawyer, said he would seek later this week to bar additional evidence in the case.

The 67-year-old Keating, former American Continental chairman, is accused in a 20-count indictment of violating state securities laws by making false statements or omitting material information in selling his company’s risky bonds through the Southern California branches of Irvine-based Lincoln. The charges carry a maximum punishment of 10 years in prison.

Thousands of small investors, mainly elderly Lincoln depositors, contend that they were duped into buying the bonds in part through assurances about the safety of the bonds and the financial health of the Phoenix company. They made up most of the 23,000 bondholders who lost more than $250 million after the company went bankrupt and federal regulators seized the S&L; in April, 1989.

In his tentative rulings, Ito said he would likely bar any testimony from bondholders who did not own one of the 20 bonds at issue in the indictment and from bond sellers who did not testify before the grand jury. He also said he was reluctant to admit into evidence a 1979 consent agreement Keating signed with the Securities and Exchange Commission over alleged violations of federal securities laws.

Ito also said he was reluctant “to turn the trial into a rehearing of the Keating Five” case, and therefore would want to keep out evidence of Keating’s meetings with politicians. The Keating Five refers to five U.S. senators, including Alan Cranston (D-Calif.), who accepted large political donations from Keating and his executives while intervening with regulators on Keating’s behalf in 1987. Four of the senators were reprimanded by the Senate Ethics Committee, which still hasn’t determined a harsher punishment for Cranston, whom it found more culpable than the others.

Prosecutors want especially to give the jury a year-old opinion by U.S. District Judge Stanley Sporkin, who ruled on American Continental’s challenge to the federal takeover of Lincoln. After hearing testimony from Keating and others, Sporkin rejected the company’s challenge in stinging language that rebuked Keating as well as his company’s lawyers and accountants, who Sporkin said should have stopped American Continental from ripping off Lincoln.