A former Lincoln Savings & Loan president said Wednesday that he followed the dictates of lawyers and accountants--not Charles H. Keating Jr.--in determining what information could be given to small investors who bought bonds issued by Lincoln’s parent company.
Raymond C. Fidel also testified during Keating’s securities fraud trial that he personally gave bond sellers negative information about Lincoln’s parent company, American Continental Corp.
He testified on cross-examination that he gave bond sellers copies of a 1988 Forbes magazine story that harshly criticized the company’s bond program. He said he provided the company’s response to the story if customers asked about it.
Fidel, who was in charge of bond sales, blamed himself for not providing information about the deteriorating financial state of Lincoln and American Continental to bond sellers in late 1988 and early 1989.
“Our (sales) program never changed, but the company’s condition changed. And we did not change our verbal presentations to reflect that,” he said. But the bond packages containing written information often changed, he said.
While the lawyers determined what written materials were to be provided to customers, Fidel said he sometimes decided himself what information to give bond sellers.
Fidel’s testimony tended to blunt some of the damaging evidence he provided to the Los Angeles County Superior Court jury under questioning Tuesday by prosecutors. His testimony the previous day painted a picture of Keating as a man who controlled Lincoln and recklessly pushed the bond sales in spite of mounting evidence that the company was in trouble.
His testimony Wednesday also seemed to bolster the defense contention that Keating, American Continental’s chairman, used top lawyers and accountants to develop and oversee the bond sales program.
Thousands of small investors lost more than $250 million after the Phoenix-based company went bankrupt and federal thrift regulators seized the Irvine thrift in April, 1989. Regulators say the S&L;'s failure will cost taxpayers $2.6 billion, the most costly thrift failure to date.
Keating is accused in 20 counts of defrauding 22 small investors. As part of a plea bargain last March, Fidel pleaded guilty to six counts of securities fraud. He also pleaded guilty to two federal securities fraud charges and agreed to help federal prosecutors in their continuing investigation of Lincoln’s collapse.
Fidel, who was involved with the bond program from its start in late 1986, said he began to feel uncomfortable with it by Oct. 1, 1988, when he learned that the company might take a substantial loss. Bond sellers weren’t aware of the quarterly results until the company announced a $36-million loss six weeks later.