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New Keating Indictment Expected Today : Securities: Federal charges will be handed down against the ex-Lincoln S&L; chief, sources say.

TIMES STAFF WRITER

Charles H. Keating Jr. and four others are expected to be indicted today on federal racketeering, bank fraud and other charges stemming from the collapse of Lincoln Savings & Loan, sources close to the investigation said Wednesday.

The charges are included in a sealed indictment issued recently by a federal grand jury in Los Angeles. They stem from a 2 1/2-year investigation of Lincoln, which became the nation’s largest thrift failure when it collapsed in April, 1989.

Federal officials would not comment on the expected indictments. But Keating’s lawyer, Stephen C. Neal, said his client expected charges to be filed today and was prepared to surrender to a U.S. magistrate in Los Angeles for bail to be set.

The indictment is expected to allege that the defendants used Irvine-based Lincoln and its parent company, American Continental Corp. in Phoenix, as a criminal enterprise designed to suck money out of the thrift for their own use.

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Sources said the charges will seek to outline a pattern of criminal behavior necessary to prove racketeering. The five alleged criminal schemes include the sale of risky American Continental bonds, several Arizona land transactions and a tax-sharing agreement between the S&L; and its parent company, the sources said.

Keating, the former chairman of American Continental who has become a national symbol of excess and arrogance in the S&L; industry, was convicted in state court last week of 17 counts of securities fraud in connection with the sale of his company’s risky bonds, mainly to elderly Lincoln customers. He faces a maximum sentence of 10 years in prison and a $250,000 fine. Neal said Keating will appeal the conviction.

Thousands of Southern Californians have sued Keating, his executives, their lawyers and accountants for the loss of more than $250 million in corporate bonds after the real estate and thrift empire collapsed. The civil cases are scheduled to go to trial in a consolidated proceeding before a federal judge in Tucson in late February.

The federal criminal charges are expected to be drawn up in a manner to hold former executives accountable for losses at Lincoln, which thrift regulators estimate will cost taxpayers $2.6 billion to clean up. Sources said the federal indictment will be broader than the state securities fraud charges that focused on sales of American Continental bonds.

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Those expected to be indicted with Keating are his son, Charles H. Keating III; a son-in-law, Robert M. Wurzelbacher Jr.; former American Continental President Judy J. Wischer, and Andrew F. Ligget, the company’s chief financial officer. Wischer is also awaiting trial on the same state court charges that Keating faced.

Neal declined to comment on specific charges Keating might face, saying he did not know what they are. He said Keating, a resident of Paradise Valley, Ariz., was in Los Angeles on Wednesday awaiting issuance of the indictment.

“We’re waiting to see what’s in it, and we’ll proceed accordingly,” the defense lawyer said.

Sources also said that federal prosecutors will deviate from their usual policy of seeking court orders halting related civil lawsuits once an indictment is issued. Bondholders suing Keating are concerned that the criminal charges could delay efforts to recover their losses in civil actions.

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Sen. John F. Seymour (R-Calif.) intervened late last week after elderly bondholders picketed his West Los Angeles office to ask U.S. Atty. Gen. William Barr not to seek a stay in the civil cases.

Terree A. Bowers, first deputy U.S. attorney in Los Angeles, confirmed that “if and when additional charges are filed, we presently do not intend to seek a stay of the bondholders’ civil suits.”

The effect of the decision is to allow the civil trial to continue at least against defendants other than Keating and the others facing criminal charges. That would put additional pressure on the primary civil defendants--lawyers and accountants used by American Continental--to settle before trial.


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