Keating Jurors Asked to Send a Message

A lawyer for small investors in now-defunct American Continental Corp. asked jurors Friday to send a message to corporate boardrooms everywhere that citizens will no longer tolerate the sort of fraud that Charles H. Keating Jr. worked on thousands who invested in his company.

In closing arguments in the civil fraud and racketeering trial, Joseph W. Cotchett Jr. urged the jury to award a verdict that will ring loud and clear and not leave people wondering whatever happened to the case against the former owner of scandal-ridden Lincoln Savings & Loan.

“You’ve got to tell America that you’re not going to let the petrodollars of the world or the Wall Street dollars, whatever it is, feed upon those people,” Cotchett said, pointing to about a dozen elderly investors sitting in the courtroom.

More than 23,000 people, most of them Southern California customers of Irvine-based Lincoln, lost more than $285 million in the collapse of Keating’s financial empire three years ago. Lincoln has become the nation’s biggest thrift failure, projected to cost taxpayers $2.6 billion.

Cotchett is looking for a verdict that, including treble damages, could reach $1.2 billion and would provide a fitting end to what he called a “monumental piece of history in this country.”

The 15 state and federal class-action lawsuits that have been consolidated for trial in U.S. District Court here have taken aim not only at Keating and other American Continental and Lincoln insiders, but also at the professionals--lawyers, accountants, investment bankers, appraisers and consultants--who enabled Keating to perpetrate the fraud.

The greed of the professionals, Cotchett has said, is symptomatic of the reckless, unethical mores that drove much of corporate America during the 1980s.

Most of the 99 defendants named have settled for a tentative total of about $251 million. Only Keating and three others remained at closing arguments, and only one of the defendants, Saudi European Investment Corp., is solvent.

Keating, serving a 10-year prison term for his conviction last fall on state securities fraud charges, claims to be broke and did not defend himself at the civil trial.

Tempe, Ariz., developer Conley Wolfswinkel and Continental Southern Inc., an Atlanta developer, are bankrupt and also did not defend themselves at trial, although a lawyer for Wolfswinkel argued Friday that the investors did not prove their case against his client.

U.S. District Judge Richard M. Bilby took the case against Keating out of the jury’s hands, telling the jurors that he had ruled as a matter of law that Keating and other directors and officers had engaged in fraud, conspiracy and racketeering, as the investors had charged.

Bilby left it to jurors, however, to determine how much compensatory and punitive damages should be awarded against Keating. Bilby also decided that the investors could not get punitive damages from the remaining defendants.

While Cotchett waxed eloquent in his final arguments of the 3 1/2-month trial, lawyers for Wolfswinkel and Saudi European Investment maintained that their clients did not aid Keating in his fraud or join in any conspiracy with him.

Saudi European Investment, an offshore company of which Lincoln owned 10%, was simply looking to make money in the United States, said Terry Adamson, the company’s lawyer.

Adamson urged jurors to “look through the smoke and mirrors” and agree with him that his client didn’t know about Keating’s schemes.