No Witnesses for Keating to Be Called : Trial: In an unusual move, the ex-Lincoln S&L; chief’s attorney says he’s relying on prosecution evidence favorable to his client. Federal grand jury indictment may come soon.

Charles H. Keating Jr.’s lawyer, confident that prosecutors never proved that Keating defrauded investors at Lincoln Savings & Loan, will rest his case today without calling any witnesses.

In taking the unusual step of forgoing a defense, Stephen C. Neal said Wednesday that he also is relying on prosecution evidence favorable to Keating, former chairman of the company that owned Irvine-based Lincoln.

“The prosecution totally failed to prove the charges against Mr. Keating,” Neal said. “They have the burden; they haven’t met it. Therefore, in my view, there is no reason to go forward.”

Prosecutors, however, said they believe there is sufficient evidence to convict Keating of securities fraud. They said they doubted that Neal’s decision was solely motivated by possible flaws in their case.

“I think there are a lot of tactical considerations, and they’re not all necessarily connected with evidence in the case,” said William Hodgman, the deputy Los Angeles district attorney leading the prosecution. He declined to elaborate.

Sources have said that a long-expected federal grand jury indictment of Keating and his associates may come soon. They also have said that Keating’s top aide, Judy J. Wischer, has been considering pleading guilty and testifying against Keating. Wisher’s lawyer, Abbe David Lowell, has denied that.

Neal’s decision not to call defense witnesses in the state criminal case came a day after Superior Court Judge Lance A. Ito declined to dismiss the charges, saying there was at least minimal evidence linking Keating to 18 counts remaining against him.

If convicted, Keating faces a maximum penalty of 10 years in prison and a $250,000 fine.

Jurors must base a guilty verdict on proof beyond a reasonable doubt, a much tougher standard than the one Ito used to determine whether the case should go forward.

Keating, former chairman of Lincoln’s parent company, American Continental Corp. in Phoenix, is accused of defrauding mostly elderly investors who bought American Continental bonds at Lincoln’s Southern California branches. Ito dismissed two counts Tuesday because investors named in those counts were too ill to testify.

The 20 bondholders named in the 18 counts are among thousands of small investors who lost more than $250 million after Lincoln’s collapse in April, 1989. Lincoln’s failure is expected to cost taxpayers $2.6 billion, making it the biggest thrift failure to date.

But the impact of the bond sales program is not the case before the jury, Neal has insisted.

“What the case is about is whether Charles Keating knowingly brought about the misrepresentations or omissions of material information on these 18 particular sales,” Neal said. To be found guilty, he said, Keating “had to do that knowingly and intentionally.”

There’s “not a shred of evidence” to support that conclusion, he maintained. Neal also contended that Keating used the best legal and accounting talent to develop and oversee the bond program.

Prosecutors saw the case differently.

“We staunchly believe there is a cumulative power to the totality of our evidence that should be more than sufficient to provide a basis for a conviction,” Hodgman said.

Under the prosecution’s broader view, the 18 counts simply represent what happened to the thousands of American Continental bondholders.

At trial, bondholders testified that they were fed false information by bond sellers. But the sellers denied that, thus bolstering Keating’s defense.

Hodgman and his co-counsel, Deputy Dist. Atty. Paul Turley, instead focused on Keating’s alleged failure to disclose material information, primarily regulators’ concerns about the deteriorating financial condition of American Continental and Lincoln at the time the bond sale program began in December, 1986.

Ray C. Fidel, a former Lincoln president, provided the most damaging evidence against Keating. He testified that in late 1988, he felt the bonds were riskier than what was described in the prospectus, the document designed to disclose material information about the company.

Ironically, Fidel also provided some of the most favorable testimony for his former boss when he said that he followed the dictates of lawyers and accountants--not Keating--in overseeing the bond sales.

After the prosecution formally rests its case before the jury today, the defense will rest. Closing arguments are scheduled to begin Tuesday morning.