Emigre, 94, Tells Jurors Lincoln Deceived Her : Trial: A retired garment worker testifies that salesman for Keating’s firm told her a bond was ‘better than insured.’ Six others also take the stand.

A 94-year-old Hollywood woman told jurors Friday how she was duped into investing $60,000 in the parent company of Lincoln Savings & Loan and ended up losing it all.

Responding to prosecutors’ questions in a strong voice, Rae Luft, a retired garment worker who emigrated from the former Soviet Union, said she visited a Lincoln branch in June, 1988, to renew a certificate of deposit but walked out instead with a receipt for a bond issued by American Continental Corp.

She said she asked the salesman whether the bond was insured.

“He said, ‘No, it’s better than insured. If the bank fails, it’s backed by billions and billions and billions at American Continental,’ ” she testified in the civil fraud and racketeering trial of former American Continental Chairman Charles H. Keating Jr. and the professional advisers who were retained for his company.

Luft, shown her bond certificate by a plaintiff’s attorney and asked what it is, said: “This is just a piece of paper. This is a piece of paper that’s worthless.”

Luft is one of thousands of American Continental investors who lost a total of $185 million after Keating’s financial empire fell apart three years ago. Lincoln is the nation’s biggest thrift failure, costing taxpayers $2.6 billion.

Stockholders and bondholders, mostly elderly customers who bought bonds at Lincoln’s Southern California branches, accuse Keating of swindling them out of their money.

They also allege that the accountants, attorneys, appraisers, investment bankers and other consultants either were negligent or conspired to keep a financially bankrupt company alive for several years after it should have been closed.

Keating, who is awaiting sentencing after his conviction on state securities fraud charges, has refused to testify in the civil case.

He is not defending himself because he says he lacks money to pay attorneys. He has said bondholders received their scheduled interest payments until the company went bankrupt and regulators seized the thrift. He maintains that overzealous federal regulators destroyed his operation.

The professional advisers have generally said they did not know about various fraudulent activities that Keating has been convicted of being involved in and that their opinions were based on information provided by American Continental executives.

Luft was one of seven bondholders who took the stand Friday to end the first week of testimony in a trial expected to last at least four more months.

Joseph W. Cotchett Jr., the investors’ chief trial lawyer, told jurors Friday that testimony so far has shown that Keating destroyed a traditional thrift when he bought it in 1984 and turned it into an illegal Ponzi scheme. Such schemes typically use money from investors to engage in illegal investments or for personal profit, while new investors are continually brought in to keep the scheme going.

U.S. District Judge Richard M. Bilby is allowing attorneys to give brief arguments periodically during the trial to help jurors understand the complex case.

Cotchett, in a short summation, asserted that under the Ponzi scheme money was siphoned from new investors--those who could least afford to lose it--and used to support Keating’s lavish lifestyle and to pay off prior investors.

“There’s no question that fraud occurred,” said M. Laurence Popofsky, chief trial attorney for one of the defendant accounting firms, Arthur Young & Co., now Ernst & Young. The auditors themselves were duped, he said.

The only evidence affecting accountants so far, Popofsky told the jurors, is from Raymond Todd Neilson, an expert accounting witness whose “credentials leave something to be desired.”

Noting that Neilson has never headed a corporate audit, Popofsky said Neilson was not well qualified to testify about what an auditor in charge of an examination should do.