Keating Trial Gets Underway

Former Lincoln Savings & Loan operator Charles H. Keating Jr. built a multibillion-dollar empire “financed by tricks and deception,” a prosecutor said Tuesday as the federal criminal fraud trial of the executive got underway in U.S. District Court in Los Angeles.

In opening statements, Assistant U.S. Atty. Alice C. Hill told jurors that Keating used “sham profits” from phony real estate sales to build his empire, deceive securities holders and enrich himself and his family.

But Keating’s lawyer, Stephen C. Neal, told the jury that the government is trying to “criminalize” a host of business decisions that may have shown bad judgment but didn’t amount to crimes.

“Now we’re looking back and saying, ‘Oooh, why did they make that deal?’ ” he said.

Keating, 68, is the former chairman of Lincoln’s parent company, American Continental Corp. He and his son, Charles H. Keating III, are facing charges stemming from the April, 1989, collapse of the Irvine thrift and the Phoenix company. Lincoln is the nation’s biggest thrift failure, costing taxpayers an estimated $2.6 billion.

Hill charged that Keating used business associates to act as straw buyers of raw desert land in a series of deals that essentially resulted in Lincoln paying for the down payments as well as financing the transactions. Lincoln then recorded gains when it shouldn’t have, she said.

But Neal likened the 73 counts of conspiracy, fraud and racketeering to an episode in Keating’s life. About 40 years ago, Keating was trying to fix a clogged sewage pipe in the basement of a seven-story apartment complex. The pipe broke and the sewage fell on him.

“The indictment is a seven-story pipe filled with accusations and with error, but not filled with facts,” Neal said.

Keating has become a nationwide symbol of the thrift crisis. He is now serving a 10-year prison term for state securities fraud. The conviction is on appeal.