U.S. Alleges Keating ‘Trickery’ as Trial Opens : Courts: Former executive and son face charges stemming from 1989 collapse of Lincoln S&L;, the nation’s biggest thrift failure.

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 against Keating 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-based 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’s 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.

The younger Keating “put integrity before making a profit,” said his lawyer, Paul L. Abrams, deputy federal public defender, in opening remarks.

“Charlie believed in the company; he believed in his father; he believed in the people he worked with; and he believed in the system,” Abrams said.

One of the elder Keating’s top two aides, former American Continental President Judy J. Wischer, is expected to start her testimony today. She has pleaded guilty to several charges and will testify against Keating in return for what she hopes will be a lighter sentence.

U.S. District Judge Mariana R. Pfaelzer told lawyers after the jury left that she wanted to make sure that Neal, during his cross-examination of Wischer, would not violate any confidences he gained at a time when Wischer and Keating were joint defendants.

The jury has five women, seven men and six alternates. The trial is expected to last up to six months.

Keating has become a symbol of the troubled thrift industry. He is now serving a 10-year prison term for his conviction last year on state securities fraud charges. He is appealing the conviction.