Charles H. Keating Jr. once led an exemplary public life, but a Superior Court judge must decide this week if he should make a different sort of example out of the former operator of defunct Lincoln Savings & Loan.
Keating, 68, will be sentenced Friday for his conviction on 17 counts of state securities fraud. He faces a maximum penalty of 10 years in prison, a $250,000 fine and restitution.
The Arizona business executive, who has become a national symbol of greed and arrogance in the thrift industry, wants a suspended term--probation and community service. But prosecutors want him to serve the full 10 years in jail for swindling Lincoln customers who bought bonds issued by the Irvine thrift’s parent company, American Continental Corp.
Judge Lance A. Ito, who will be passing judgment on Keating, is getting ample advice in testimonials that have poured into his downtown courtroom, much the way that letters of support have swamped judges presiding over other high-profile white-collar cases.
More than 120 people--including Mother Teresa, former Texas Gov. John B. Connally and retired actress Loretta Young--wrote letters vouching for Keating’s integrity, recalling his goodness and pleading with the court to put him on probation, not in prison.
“I only know that he has always been kind and generous to God’s poor, and always ready to help whenever there was a need,” wrote Mother Teresa, the well-known missionary who received $1 million from Keating and red-carpet treatment from him whenever she visited the region.
But prosecutors and about three dozen other letter writers--including William J. Crawford, former commissioner of the state Department of Savings and Loan--want Keating sitting behind bars for 10 years.
“Stealing large sums of the public’s money and giving it to your friends and charities is not a virtue,” wrote Crawford, who was commissioner from 1985 to 1990.
Despite strict sentencing laws that courts must follow, Ito still has a great deal of discretion in determining whether to put Keating on probation or in prison.
Keating was convicted last December on 17 counts of fraud in failing to disclose the true state of American Continental’s shaky financial condition to bond buyers.
The counts are based on 17 separate Lincoln customers who bought American Continental bonds at the Irvine thrift’s Southern California branches. Those victims represent about 17,000 bondholders who lost $168 million, according to the most recent figures available, after Keating’s financial empire crumbled in April, 1989. The majority of the bondholders were elderly customers, and many lost their life savings.
Before Keating is sentenced, Ito must rule on a defense motion for a new trial. Defense lawyer Stephen C. Neal contends there were errors in certain jury instructions and other jury matters and there wasn’t enough evidence to support a guilty verdict. Neal also contends that the jury’s fairness was tainted by a bailiff’s improper remark to a juror and by the wounding of another juror in a drive-by shooting at his home.
Prosecutors argue that Keating got the jury instructions he wanted and that the evidence overwhelmingly shows Keating’s guilt. They also assert that the bailiff’s remark--that jurors knew what they wanted to do and were dragging out deliberations simply to avoid going back to work--only reached the foreman, who wasn’t affected by it. And the grazing wound another juror suffered occurred after jurors already had found Keating innocent on one count and guilty on many others.
The letters for and against the one-time Arizona real estate and thrift baron reveal the highly charged nature of the case.
The letters from family, friends, acquaintances, business associates and even some who never met Keating portray a man whose good deeds, honesty and integrity have been completely overshadowed by negative publicity and vindictive government bureaucrats.
They described his fights against poverty, homelessness and child pornography. They related previously untold stories of his personal efforts to help those in need by providing jobs, money or even home-cooked meals.
Many people simply can’t believe the Keating they know is the same one the news media has been describing.
“I don’t know one thing about Charles Keating’s business affairs, except what I have read in the newspapers,” wrote Loretta Young. “But I do know Charles Keating. And I honestly don’t believe there is a dishonest bone in his body.”
“He is devoted to his family, committed to his faith and is a loyal patriotic American who is willing to take a stand for his beliefs,” wrote Joe D. Richards, the sheriff of Coconino County, Ariz., which covers the Flagstaff area. “I have always believed Charles Keating to be a man of integrity and have never known him to use his position to coerce or improperly influence other people.”
Connally, whose 1980 presidential campaign was managed briefly by Keating, said he was “terribly distressed” over his friend’s conviction.
“Charlie Keating is a man who loves his fellow man, has a great sense of humor, has unbelievable capacity to inspire and lead people and to make friends,” Connally wrote.
Robert Mathewson, a Jesuit priest who is president of Brophy College Preparatory School in Phoenix, said he could not see Keating ever consciously or deliberately promoting bond sales that might hurt buyers, but he could see Keating “vigorously” promoting such sales “as safe and solid " in the face of contradictory facts.
“He simply could not see his ventures as ultimately failing,” Mathewson said. “He believed in himself and in his ultimate success. This may have been delusional; it could be described as arrogant; it did result in harm to others. However, it is radically different from a criminal attitude or intent.”
Prosecutors, however, take exception to those views.
“The first person a con man must con is himself,” said Paul Turley, deputy Los Angeles County district attorney who helped prosecute Keating.
Bondholders and other critics, many from out of state, called Keating an “out-and-out crook,” a “criminal mind of the worst kind,” a “dangerous, dishonest man,” a “vicious and vindictive individual,” a “snake and a viper,” the “worst form of life on this Earth” and a person who “truly epitomizes greed and evil and should receive the maximum sentence.”
Lacy E. Johnson Jr. of Scottsdale, Ariz., concurs with Keating that he should be placed on probation and required to serve the community, but after a jail term. The community service, Johnson said, should be “cleaning bed pans in some of the marginal nursing homes to which he has condemned many of his victims.”
Helen Dinning of Las Vegas said she was moved by Keating’s 7-year-old granddaughter’s plea not to destroy her “papa” and their family. But, Dinning asked, “does she realize how many granddaughters had their families destroyed by her grandfather?”
John D. Herbert, a marketing and economic research consultant in Phoenix, raised a particularly telling point that could help to dash Keating’s hope for probation.
“I see no remorse, no intent toward redeeming activity, no admission of wrongdoing,” Herbert wrote. “Instead, he remains defiant, blaming others.”
A showing of remorse is one of the key factors a judge considers in passing sentence.
In his own pre-sentencing statement, Keating adamantly maintains his innocence. But, he said, “that doesn’t reduce the sense of responsibility I feel to the bondholders who invested in my institution.” If he’s ever able to earn money, he said, he would repay any money that isn’t recovered by bondholders in pending civil lawsuits.
Turley and other prosecutors say that kind of statement doesn’t amount to remorse.
Prosecutors acknowledge that Keating is eligible for probation, but they argue that he isn’t suitable for lenient treatment.
Turley said the prosecution will argue for a 10-year prison term mainly to mete out punishment, which the law states is the purpose of a sentence, and to deter other would-be white-collar criminals from engaging in the same scheme Keating concocted.
Keating argues that he has been punished brutally by immense public ridicule and scorn. He pointed out that the media has called him an “economic pornographer,” “Charles Cheating Jr.,” the “No. 1 crook in the savings and loan scandal,” the “greediest man in America,” and an “open sewer that has polluted the political process and corrupted government.”
The deterrence argument is one that essentially raises the age-old battle over whether a judge should treat a high-profile defendant--such as a corporate executive, a police officer or anyone in a position of trust--differently than someone else who is guilty of the same charges.
It’s dangerous to predict what a judge might do facing that dilemma, said Laurie Levenson, a criminal law professor at Loyola Law School. The judge has more facts than anyone else and has sentencing experience that helps to put each case in context.
As an example, she pointed to Judge Joyce A. Karlin’s probation sentence last fall for a Korean-born grocer in South-Central Los Angeles who killed a 15-year-old black girl over a suspected theft of a can of orange juice. The sentence unleashed an intense community uproar that led to her reassignment to Juvenile Court and an investigation by the state Commission on Judicial Review, as well as an appeal of the sentence.
“On the other hand, I don’t think it’s irrelevant that (the Keating case) is a big impact case,” Levenson said. “If you have a big case and the world is watching, you send a message to other potential defendants. And with a real big defendant like Keating, you can send a real big message.”
If Keating were not a public figure, it’s doubtful he would go to prison, said Richard B. Lennon, a sentencing expert with the California Appellate Project in Los Angeles. But Keating is not the normal kind of defendant.
“There is such high publicity and so many who can argue they were damaged that anything could happen,” Lennon said. “I would guess that Ito could do whatever he wants and be pretty much assured that he won’t get reversed.”
Few outside observers believe Keating will be placed on probation if, for no other reason, state court judges must face, rightly or wrongly, the verdict of voters every six years. “It’s hard to believe the judge looking at this wouldn’t have in the back of his mind what happened to Joyce Karlin,” Lennon said.
Whatever sentence he receives Friday, Keating faces more legal problems. He has been indicted on federal fraud, conspiracy and racketeering charges, which carry a penalty of more than 500 years in prison. That criminal trial tentatively is scheduled to start Aug. 1.
And in a civil trial now underway in Tucson, he is a defendant in 15 class-action lawsuits that accuse him of fraud and racketeering in duping small investors in American Continental. The consolidated proceedings seek $1.2 billion in damages.
The Power of the Pen
How can a judge sentence a man to prison who has Mother Teresa in his corner? As he contemplates the punishment he will impose on convicted S&L; swindler Charles H. Keating Jr., Judge Lance A. Ito may well consider the plea from Bobel Prize-winning nun and about 120 other letters supporting Keating that the court has received. But how do they stack up against Michael Milken’s 600-plus letters or Leona Helmsley’s “thousands and thousands” of fan letters? Here’s how they rank in the sentencing sweepstakes:
Charles H. Keating Jr.
Conviction: Dec. 4, 1991, on 17 counts of violating state securities laws.
Maximum Sentence: 10 years in prison, $250,000 fine and restitution.
Support: More than 120 letters supporting Keating have been received by the court. They include pleas from Mother Teresa, former Texas Gov. John B. Connally, retired actress Loretta Young and the Vicar General emeritus of Pope John Paul II.
Opposition: More than three dozen letters urging the maximum term for Keating came mainly from citizens in California and Arizona, many of whom were not bondholders. William J. Crawford, former commissioner of the state Department of Savings and Loan, wrote: “Stealing large sums of the public’s money and giving it to your friends and charities is not a virtue.”
Michael R. Milken
Conviction: Pleaded guilty to securities, mail, wire and tax fraud, conspiracy, market manipulation and maintaining false records.
Sentence: In November, 1990, 10 years in prison, three years probation, 1,800 hours community service and $600 million in fines and penalties.
Support: An organized campaign produced more than 600 letters from relatives, friends and clients, including Los Angeles Police Chief Daryl Gates; the late head of CBS, Laurence Tisch; the late chairman of Occidental Petroleum Corp., Armand Hammer; television host Monty Hall; Israeli Deputy Foreign Minister Benjamin Netanyahu; Hall of Fame football players Rosey Grier and Fran Tarkenton, and Roman Catholic Cardinal Roger Mahony.
Opposition: The court also received letters from some of Milken’s detractors including one embittered individual who wrote: “My family and I . . . wish to express our desire to see him hung . . . until death.”
Ivan F. Boesky
Conviction: Securities fraud
Sentence: In December, 1987, three years in prison
Support: The court received “numerous” letters from a “diverse group of people” including Boesky’s wife, Seema, his mother, Helen, composers Sammy Cahn and Jule Styne and theater producer Joseph Papp, whose New York Shakespeare Festival was a beneficiary of Bomesky’s philanthropy.
Opposition: Boesky’s sister-in-law and former majority owner of the Beverly Hills Hotel Corp., Muriel Slatkin, insisted that “most of (Boesky’s) donations were out of my company’s coffers,” and not his personal assets. “He just raided us.”
Leona M. Helmsley
Conviction: Tax and mail fraud
Sentence: In March, 1992, four years in prison, 750 of hours community service and a $7.1-million fine plus $8 million in back taxes, interest and penalties.
Support: She keeps a folder that she says contains some of the “thousands and thousands and thousands” of her letters of support, including one from an inmate at Lompoc offering advice on how to fight tax charges.
Opposition: There was also plenty of opposition from embittered former employees and colleagues. Reportedly Donald Trump said of her conviction, “It couldn’t happen to a nicer person.”
Researched by DALLAS M. JACKSON / Los Angeles Times