BANKING/FINANCE : OTS Rules of Conduct Anger Attorney in Lincoln S&L; Case

Lawyers for Charles H. Keating Jr. and six other former Lincoln Savings & Loan owners and operators may still be smarting from the criticism they engendered for their behavior during an administrative hearing last July.

Keating’s attorney, Stephen C. Neal, and other lawyers took notice of new rules adopted by the Office of Thrift Supervision in August for hearings in administrative courts. Of particular interest was a provision for sanctions. It reads:

“Dilatory, obstructionist, egregious, contemptuous or contumacious conduct at any phase of any adjudicatory proceeding may be grounds for exclusion or suspension of counsel from the proceeding.”

The rule, as it might apply to last July’s hearing, amuses and angers Abbe David Lowell, attorney for Judy J. Wischer, a former top Lincoln executive who is awaiting trial on criminal fraud charges and is one of the seven OTS targets.

But he called the sanctions provision “obviously unconstitutional.” “I object to any notion that we were dilatory, obstructionist or egregious,” Lowell said. “Only in the mind of the OTS or the Queen of Hearts could you be accused of being that simply by representing your client vigorously. In most other people’s minds--Washington, Jefferson and our founders--it was the stuff of the Bill of Rights.”

At the hearing, the testimony of a handful of 45 prospective OTS witnesses seemed lost amid the sarcastic comments, long-winded arguments and objections by lawyers on both sides. At various points, Lowell and other defense attorneys said they were too busy with other matters to attend, leaving their clients without representation.

Neal often flipped his pen in the air, distracting opposing lawyers. And even the agency’s lead attorney, Bruce Rinaldi, insisted, despite objections, on putting a Keating associate on the witness stand, then conceded that he wasn’t prepared to question the witness.

In its biggest enforcement case ever, the OTS is seeking $130.5 million in restitution for losses on four Lincoln transactions. It also seeks to ban the defendants from the industry for life.