Four in Keating Case Agree to Huge Pay-Back : Thrifts: The record amount of restitution--$75 million--may never be collected, however, because they maintain that they are broke.
Two of Charles H. Keating Jr.’s sons-in-law and two other associates in Lincoln Savings & Loan have agreed to pay a record restitution of $75 million to settle civil charges relating to the thrift’s failure, regulators said Tuesday.
The money may never be collected, however, because the four say they’re broke. Any funds collected will go to the Resolution Trust Corp., the government’s S&L; cleanup agency, to partially compensate taxpayers for their losses in bailing out Lincoln.
The S&L;’s failure is the nation’s biggest to date, costing taxpayers $2.6 billion.
In their settlement with the Treasury Department’s Office of Thrift Supervision, the four do not admit liability. They agree, however, to be banned from the banking industry for life.
The consent agreements were signed by Judy J. Wischer, American Continental’s former president and Lincoln’s onetime chairman; Robert M. Wurzelbacher Jr., a former corporate senior vice president; Robert J. Hubbard Jr., a corporate vice president and onetime Lincoln president, and Andre A. Niebling, a former corporate senior vice president and onetime Lincoln chairman and chief executive. Wurzelbacher and Hubbard are two of Keating’s five sons-in-law.
The settlement does not require any of the four to turn over future earnings that are legitimate, said Carolyn Lieberman, the OTS’s senior deputy chief counsel.
“The settlement was set up this way because we were concerned that some large blocks of money might be transferred to them in the future,” Lieberman said. “If there is money secreted offshore, we could capture it. But based on our look of their financial capacity at this time, they don’t have the ability to pay the judgment.”
The OTS had accused them, along with Keating and others, of taking part in four illegal transactions in which Lincoln lost $130.5 million. The agency pursued two of the four charges against them in administrative hearings in Phoenix in April. None put up a defense.
Of the $75 million in restitution, Wurzelbacher agreed to pay $30 million, of which $133,000 was taken immediately from proceeds of the sale of a vacation home in Leland, Mich. Wischer agreed to pay $25 million, Hubbard $15 million and Niebling $5 million.
The four, who signed almost identical restitution agreements earlier this year with the RTC, will not be required to pay twice. The RTC agreement is being challenged in court, and the OTS agreement could fall apart if an appeals court reverses the RTC settlement, said Bruce J. Rinaldi, a senior OTS lawyer who prosecuted the administrative case.
Keating was convicted last fall of California securities fraud charges and is serving a 10-year term in the prison at San Luis Obispo. The OTS is also asking restitution from Keating, who says he is destitute.
OTS, as well as other state and federal agencies, have always believed that Keating and his colleagues hid assets offshore before the notorious 1989 collapse of Keating’s American Continental Corp. and its Lincoln Savings & Loan subsidiary.
Although investigators have never found any hidden assets, the OTS is using the settlement to make sure it collects any money that might be transferred to the four former executives, who held positions at the Irvine thrift, the Phoenix parent company or both.
For Wurzelbacher, the settlement ends all pending civil and criminal litigation against him. In May, he pleaded guilty to federal criminal charges of misapplying nearly $14 million of Lincoln’s federally insured deposits. He also has settled civil cases with the Securities and Exchange Commission, the RTC and small investors in American Continental Corp.
Hubbard and Niebling also have settled all civil litigation against them. They have not been charged in any criminal cases.
Wischer, who has pleaded guilty in federal court to bank and securities fraud, has settled all civil cases against her.
