Keating Put S&L; on Riskier Path, Ex-Aide Alleges


Charles H. Keating Jr. held such tight control over Lincoln Savings & Loan that he decided everything from the interest rates paid to depositors to what employees could hang on office walls, a former Lincoln executive testified Wednesday.

Robin S. Symes, a former Lincoln executive, said in Keating’s securities fraud trial in Los Angeles Superior Court that Keating closely oversaw the operations of the Irvine thrift even though he held no official position with the S&L.;

He also testified that Keating knew that thrift regulators, who were conducting a lengthy audit of Lincoln, were suspicious of the S&L;'s operations long before American Continental Corp. started to sell bonds at the thrift’s branches in late 1986.

Symes’ testimony is considered key to proving that Keating had a direct hand in the sale of his company’s bonds through Lincoln branches and that he was responsible for peddling the bonds as safe when he knew his company was in bad shape.


Thousands of investors, mainly elderly Lincoln depositors, lost more than $250 million after Lincoln and its Phoenix parent, American Continental, collapsed in April, 1989. The bondholders contend that they were misled into believing that the bonds were safe and federally insured.

Keating, 67, the former American Continental chairman who has become a national symbol of high-flying S&L; owners, was indicted a year ago on charges of making false statements and omitting material information in selling his company’s bonds at Lincoln branches.

Keating’s attorney asserts that the Arizona businessman hired the best legal and accounting professionals to structure the bond program and was not aware of any illegal activity by his sales force.

But Symes, who has pleaded guilty to six counts of securities fraud and has agreed to cooperate with prosecutors, testified that Keating had picked a new management team and directed the transformation of Lincoln into a fast-growing thrift even before American Continental bought the S&L; in early 1984.


Two weeks before the deal closed, Lincoln’s then-president, John Yonker, called Keating directly to get his opinion on a major loan the thrift wanted to make, Symes said. Yonker was dismissed after the acquisition.

He was not alone. Symes said Keating directed the firings of more than half the staff within a month of the takeover and had Symes sit in on the dismissal of two executives two days after gaining control.

“He wanted me to stay there and watch how it was done so I would know what to do with the rest” of the employees, said Symes, who became the S&L;'s managing officer in California.

By the time the S&L;'s headquarters had moved from Monterey Park to Irvine in August, 1984, fewer than 20 of the more than 150 original Lincoln employees remained, Symes said.


At the same time, Keating was taking the thrift out of its traditional home-lending role and putting its federally insured deposits to work in unconventional and risky areas that federal law had opened up to thrifts under 1982 deregulation laws, Symes said.

Upon taking control, Keating halted all traditional lending and began redirecting investments across the nation, funneling much of the money into loans for land development projects primarily in Arizona, Texas and the Southeast, Symes said. The average loan was about $10 million, he said. Only 11 home loans were made, and some of those went to Lincoln employees.

Keating also directed Lincoln funds into junk bonds and corporate raids, the latter of which proved profitable for Lincoln, Symes said.

Keating’s control was so far-reaching that only he or his wife could dictate how Lincoln offices were to be furnished.


“If you had wanted to put a photo of your wife on the wall of your office, could you do that of your own volition?” Deputy Dist. Atty. William Hodgman asked.

“No, I couldn’t,” Symes said.

Although he consulted with Symes and others, Keating also made the final decision on what interest rates would be offered to depositors, Symes said.