Keating Controlled Decisions, Ex-S&L; Chief Says : Trial: Witness who headed Lincoln testifies fraud defendant hired graduates not skilled in business for Irvine thrift.

Lincoln Savings & Loan wanted to become the Nordstrom of banking and hired college graduates not schooled in business programs to provide the Irvine thrift with the kind of customer service associated with the upscale department store, a former president testified Monday in the securities fraud trial of Charles H. Keating Jr.

Raymond C. Fidel, who headed Lincoln through its final years, said he implemented a management strategy aimed at giving mainly liberal arts graduates some early management training and avoiding the titles, structure and “slow steps to the top” inherent in the industry.

Fidel, 34, of Newport Beach, was a major player in the extensive make-over at Lincoln after Keating’s American Continental Corp. in Phoenix bought it in early 1984. He said Keating and other top corporate executives were aware of his efforts, in part because Keating controlled all “critical decisions” at Lincoln.

As chairman, Keating was a “very hands-on” manager who didn’t believe in “a lot of titles” or procedures, he said.

Fidel’s testimony, which began late Monday and is expected to continue into Wednesday, will nearly wrap up the prosecution’s case against Keating. Only one small investor who bought bonds issued by American Continental remains to testify.

The prosecution is expected to rest its case this week after more than 30 days of testimony spread over the past two months.

Keating, American Continental’s former chairman, is accused in 20 counts of defrauding 22 bondholders in selling the company’s risky bonds at Lincoln branches for three years. He faces a maximum 10 years in prison if convicted on any six counts.

Two counts will likely be dismissed because the two bondholders named in those counts are too sick to testify, said William Hodgman, the lead deputy Los Angeles County district attorney prosecuting the case.

Fidel, who holds a master’s degree in business administration, was the key overseer of the bond sales program and is expected to provide the prosecution with key links to Keating’s alleged failure to disclose to prospective customers how seriously troubled the company was.

Thousands of mainly elderly Southern Californians lost more than $250 million after American Continental filed for bankruptcy and regulators seized Lincoln in April, 1989. The S&L;’s collapse is expected to cost taxpayers $2.6 billion, making it the biggest thrift failure to date.

It was primarily young Lincoln employees who were transferred to American Continental’s payroll to sell the bonds at Lincoln branches.

Numerous bond sellers have been testifying over the past few weeks about their sales techniques and the information that the company provided them. Some had a little familiarity with securities but most knew nothing about the products they were selling. Many said they were not trained well enough by the company to sell the bonds.

But the sales people denied that they ever knowingly lied to customers. They contradicted the testimony of small investors who said, for instance, that they didn’t receive prospectuses or that they were told that the bonds were insured.

Beverly Figeira, an assistant branch manager who said she was forced into becoming a bond sales representative to avoid dismissal, testified Monday that she knew nothing about securities and didn’t receive any formal training before selling American Continental bonds. She said that because the bonds were not insured, she never told customers that the bonds were safe. She simply referred to them as “good investments.”

When the company posted a $36-million loss for the third quarter of 1988, she said, company executives explained the red ink in a way that made her feel comfortable about continuing to sell the bonds.

Typically, bond sellers didn’t mention the loss in selling the securities unless they were asked. And they testified that they never knew much about the longstanding feud between Lincoln and federal thrift regulators.

They said they never knew--and therefore never passed along to customers--information about such matters as regulatory orders to increase capital or to halt unsafe and unsound practices.

One bond seller, Douglas J. Lagerstrom, said that whenever the sales force began to feel unsure about the product--usually after negative press stories in the six months or so before the thrift’s collapse--executives would gather the sellers at Lincoln headquarters to allay their fears.

In January, 1989, a month before the bond sales ended, Keating called the bond sellers to the Irvine office to tell them about the proposed sale of Lincoln. Keating, he said, told them he was frustrated with regulators.

He quoted Keating as saying: “There is some 22-year-old, snot-nosed kid who doesn’t know dirt from concrete trying to tell me what my land is worth.”

Fidel, who worked at a securities firm for 15 months while completing his MBA at the University of New Mexico, was hired by American Continental in early 1983, shortly after obtaining his graduate degree. He worked in a small Phoenix securities firm, Continental American Securities, that the company had purchased.

But when the company decided later that year to buy a thrift, it had to sell the securities firm because regulations prohibited it from owning both. Fidel stayed with American Continental and eventually, at the age of 27, became vice president in charge of Lincoln’s branch operations.

At the same time, American Continental was transforming itself from one of the nation’s larger home builders into a land development firm. The acquisition of Lincoln was aimed at spurring that transformation, he said.