Epitome of Success, Keating Became Symbol of Disaster : Judgment: Assertive S&L; chief who once basked in publicity, found himself jailed, derided--even assaulted and slapped with a wig.
“Notorious!” Charles H. Keating Jr. exclaimed over the telephone from his Phoenix office in late March.
How, he wondered, could some headline describe him and others who ran Irvine-based Lincoln Savings & Loan as “notorious.” He said he and his former associates had done nothing wrong.
Notoriety , he was told, simply means being widely and perhaps unfavorably known. And no one could really dispute that the April, 1989, collapse of Lincoln and its parent company had gained him negative publicity nationwide.
Keating grumbled. He still didn’t like it.
At another time, he may have laughed at the word--had he noticed it at all. Keating is typically upbeat, direct and assertive. And he is headstrong and arrogant. After his conviction Wednesday on state securities fraud charges, he also is a felon.
Long before his conviction, Keating had basked in the public spotlight, courting publicity whenever he could turn it to his advantage. He was the epitome of the American businessman: successful, assertive and wealthy.
Whether squiring Mother Teresa around the country to raise money for her mission or stalking the halls of Congress to lobby on issues as diverse as pornography and thrift deregulation, Keating was a force to be reckoned with.
It is little wonder that his battles with thrift regulators, his influence with lawmakers he supported financially and his outspoken advocacy of thrift deregulation have made him a symbol of excess and disaster in the thrift industry--especially after his own empire fell apart.
Since his indictment 16 months ago, life has turned mean for the former chairman of Lincoln’s parent company, American Continental Corp.:
* Unable to post $5 million bail at his arraignment on the indictment, Keating spent 33 days in the Los Angeles County Jail--an unseemly place for a once upstanding citizen who felt as civilized and innocent as he did. A federal judge finally reduced his bail to $300,000, which he posted.
* At about the same time, federal authorities told him that he was a target in their wide-ranging investigation into the nation’s biggest thrift failure, which will cost taxpayers $2.6 billion. Still, a federal indictment, which usually follows soon after the so-called target letter is sent, has not yet been returned.
* The Office of Thrift Supervision insisted on squeezing in the start of its $140-million enforcement action against Keating a month before the criminal trial was scheduled to start, resulting in time lost in preparing a criminal defense.
* On the first day of trial, an elderly female bondholder--one of thousands who lost more than $250 million after the company’s collapse--grabbed Keating’s lapels and screamed at him to return her money. Weeks later, in the hallway outside the courtroom, an elderly Hollywood comedian slapped Keating twice with a powdered blond wig.
* During the trial, reports surfaced that Keating spent $5.7 million in four years on travel, entertainment and miscellaneous expenses, including nearly $2,000 for hundreds of aerosol cans of Silly String for one party. It also was learned that he spent more than $100,000 for a screenplay about a Soviet plot to assassinate the Pope.
“I’m ashamed that I’m spending my final productive years doing this,” the 68-year-old Keating said two months ago in a rare public comment. In May, he also removed the muzzle his lawyer has had on him to say that he sympathizes with the “agony” of the bondholders and that their plight “drives me crazy.”
Keating said he is not the one who has hurt the bondholders. In his view, federal thrift regulators hindered his operations, forced his company into bankruptcy and then seized Lincoln--all of which meant he couldn’t repay investors.
Regulators and criminal authorities don’t see it that way.
Throughout the last year, Keating watched as several top aides and associates turned against him, pleading guilty in bargains with state and federal prosecutors who wanted their testimony to seal a criminal case against their former boss.
Each guilty plea got closer to Keating. And each one made him more nervous.
“It’s been rough on Charlie,” said one family member, who spoke without expecting any public sympathy.
Keating, known for his combative style, has said previously that he is willing to step into the ring and take the government’s best shot--to take on all comers. He has maintained his innocence and his eagerness to get into court to prove the authorities wrong.
How much fight is left in him, though, is unclear, especially since he was convicted on the state charges and professes to be more than $5 million in debt.
But if previous battles are any indication, he’ll go the distance to try to clear his name.
The war Keating has waged against pornography over the years, for instance, shows the tenacity--or obsession--the Arizona businessman can apply to a cause.
As a lawyer in Cincinnati in 1956, he founded Citizens for Decent Literature, later called Citizens for Decency Through Law, and became an effective, if not strident, leader of the anti-pornography battles of the 1960s and 1970s.
He was one of the primary people responsible for ridding Cincinnati of hard-core pornography, making it the likely location for last year’s failed prosecution against the local museum displaying an exhibit of Robert Mapplethorpe’s photographs, which included photos of nudes.
Keating also paced the halls of Congress, as well as state and local legislative bodies, trying to persuade lawmakers to tighten the laws against pornography. His zeal earned him an appointment to the Presidential Commission on Obscenity and Pornography in 1969.
But the commission’s 1970 recommendations that adults have legal access to pornographic materials and that sex education become a national goal enraged him. The commission would create “a pagan, animalistic and base” society, Keating said, and he successfully sued to get his dissent printed in the official report.
By 1970, Keating was an executive in Cincinnati financier Carl Lindner’s American Financial Corp. and was managing the successful political campaign of his brother, William Keating, for a seat in the U.S. House of Representatives.
He moved to Phoenix in 1976 to take over AFC’s ailing Continental Homes residential home-building unit. The unit was later spun off to shareholders and Keating gained control, renaming it American Continental Corp. He revitalized the company, making it one of the nation’s bigger home builders.
At the same time, though, the Securities and Exchange Commission filed a complaint accusing him, Lindner and a former Keating law partner of profiting from illegal insider loans while at American Financial. Keating, without admitting any wrongdoing, consented to an order barring him from violating securities laws.
Barely missing a beat, he briefly managed the short-lived 1980 presidential campaign of former Texas Gov. John B. Connally, leaving before Connally left the race.
By the early 1980s, Keating turned his energy toward the savings and loan industry, which was being deregulated to allow investments in a wide variety of ventures. It was his chance to use a vast amount of depositor money to make his revamped real estate development firm grow and, regulators and authorities charge, line his own pockets.
American Continental bought Lincoln Savings in February, 1984, for $51 million and transformed it into a deregulation dynamo, investing several billion dollars in Arizona desert land, junk bonds and other ventures previously barred to thrifts.
When the regulators tried to stop him and adopted more restrictive rules, Keating challenged the rules and the regulators and willingly took on the role he saw as the entrepreneur’s white knight against mounting re-regulation of the thrift industry.
He testified in Congress against new regulations that impeded his plans, and he hired some of the nation’s top talent to argue his case. One of those to come to his aid was Alan Greenspan, then a private economist and now chairman of the Federal Reserve Board.
He also began contributing to political campaigns and acting as a small fund-raiser for key legislators--primarily those on the Senate and House banking committees. And he often met with or telephoned the lawmakers to argue for broader thrift powers and for help with Lincoln.
Among those who benefited the most from his largess were five senators, including Alan Cranston (D-Calif.). They received a total of more than $1.3 million from Keating and his family and associates at the same time Keating was seeking their help on Lincoln matters.
The Senate Ethics Committee reprimanded four of the senators in February and singled out Cranston for harsher punishment. But on Nov. 20, it simply reprimanded him, too.
While Keating maintains that he did nothing wrong in selling American Continental bonds, operating Lincoln Savings or contributing to political campaigns, he admits to but one regret--buying the thrift in the first place.
