Investors Bring Tears, Smiles to Party : Lincoln Savings: About 150 bondholders meet in Van Nuys to cheer prosecutors in the conviction of Charles Keating Jr.
They have not gotten any money back yet, but it was a victory party nonetheless for the victims of Lincoln Savings & Loan, many of whom had waited three years for something to cheer about.
About 150 mostly elderly bondholders in the failed S & L assembled Tuesday at the gym of a Van Nuys park to give a standing ovation to the Los Angeles County prosecutor who last week won a 17-count fraud conviction against Charles H. Keating Jr.
They also applauded Dist. Atty. Ira Reiner’s pledge to seek the maximum 10-year sentence for the man “who has stolen more than every other thief in Los Angeles.”
“I think we’ll have a happy holiday knowing Keating was convicted!” declared Jeri Mellon, 66, of Sherman Oaks, one of a handful of area residents who began meeting in 1989 to explore ways to recoup their losses after buying bonds in Lincoln’s parent company, American Continental Corp.
“We started with a group of four or five victims. Then it grew to 10, 15, 20. . . . Now we have over 400,” said Alfred Golden, another leader of the Lincoln/ACC Bondholders Action Committee, whose members prefer the informal title Victims of Keating.
The first meetings, at a Sherman Oaks senior citizens’ center, were dominated by “depression, sadness,” Golden recalled. “People were afraid to divulge they were victims,” worried they would be viewed as “dopes, idiots, people who let themselves be swindled.”
The sessions “got a little more encouraging when they saw there were others in the same boat,” Golden said. Soon, the gatherings--held the second Tuesday of every month--had to be moved to the larger Van Nuys Recreation Center.
For this month’s meeting, several public officials were invited to celebrate Keating’s conviction. They included the chief prosecutor, Deputy Dist. Atty. William Hodgman, who argued at the trial that customers had been kept in the dark about Lincoln’s shaky financial situation.
The collapse of the S & L is expected to cost taxpayers $2.6 billion and has fueled a series of scandals with revelations that Keating made $1.3 million in contributions to five U.S. senators, including Alan Cranston (D-Calif.).
“If members of Congress would just come to one of these meetings . . . then maybe it would never happen again,” Lt. Gov. Leo McCarthy told the bondholders. “They should be thinking about people’s hearts instead of letting their pockets be emptied.”
Reiner told the group his main regret is that Keating faces only a 10-year prison sentence and $250,000 fine. “The maximum is vastly, vastly inadequate,” he said.
Reiner said his office will ask that Keating be jailed pending an appeal of his conviction in Los Angeles Superior Court.
“It’s quite clear what his strategy now will be . . . to delay the imposition of his sentence then come in with a note from his doctor that he is too ill” to go to jail, Reiner said.
Reiner urged the investors to attend Keating’s Feb. 7 sentencing, before Judge Lance A. Ito. Many said they need no prompting.
Two bondholders present were among the prosecution witnesses at Keating’s trial, and others were regulars in the audience. “We got to be known pretty well by the bailiff,” said Sam Epstein, 80, who bought $65,000 in bonds.
Adding insult to injury for investors such as Epstein is the anticipated plea for leniency by Keating’s attorneys based in part on his age. He turned 68 on the day of the verdict.
Bond salesmen at Lincoln branches allegedly targeted retired customers who had money in certificates of deposit. About 23,000 people eventually bought bonds.
Tears in her eyes, Barbara Canvasser told other bondholders that her 76-year-old mother, who lived in Downey, died of a heart attack last week, never having gotten over losing $117,000. “She got very depressed . . . she started deteriorating,” Canvasser said.
Leaders of the group said the woman was the 17th Southern California investor to die, seven by suicide, since the case began.
They expressed worry that others will join the list if an expected federal prosecution of Keating further delays a federal class-action suit in Tucson seeking the recovery of $250 million. The suit alleges fraud, misrepresentation and racketeering by Keating and other American Continental executives.
The bondholders got some support last week when Sen. John F. Seymour (R-Calif.) appealed to Atty. Gen. William Barr to “hold back on the indictments.”
Mellon, a former hospital administrator who invested $40,000, said the bondholders hope Keating’s conviction will persuade defendants in the civil case to agree to pay damages, realizing “they don’t stand a snowball’s chance in hell” at a trial.
“It’s more than symbolic,” she said of the verdict. “Once he’s a declared criminal, it has to have an impact.”
Reiner agreed that the bondholders should be allowed to collect damages before additional criminal trials are held.
“The delay is not something you can easily bear,” he told the group, looking out on rows of gray, white and balding heads. “After all, you’re not a bunch of spring chickens.”
Minutes later, several shook Reiner’s hand as he left.
“These people paid some very serious dues to get into this club--their life savings,” he said outside the gymnasium. “They’re entitled to stand up and cheer.”
