Keating, Son Guilty of Federal Charges : S&Ls;: Verdict in the government’s biggest thrift fraud case comes while former Lincoln chief is already serving state prison sentence.

Charles H. Keating Jr., who came to personify greed and arrogance in the nation’s savings and loan industry, was convicted Wednesday in federal court in Los Angeles on 73 counts of racketeering, conspiracy and fraud stemming from the collapse of Lincoln Savings & Loan.

The jury, which deliberated more than five days in the government’s biggest thrift fraud case, also convicted Keating’s son, Charles H. Keating III, on 64 counts covering most of the same crimes.

The conviction comes while Keating is already serving a prison sentence for state securities fraud and wraps up criminal prosecution efforts against the Keating family that began shortly after Irvine-based Lincoln Savings failed nearly four years ago.

The jury agreed with prosecutors that the elder Keating, an Arizona land developer who bought Lincoln Savings in 1984, looted the institution’s federally insured deposits by booking phony profits on sham land and securities transactions and fooled auditors and investors about the failing health of Lincoln and its parent company.

Keating, gaunt and grim-faced as the verdict was read, faces a maximum of 525 years in prison. He is serving a 10-year term in a California prison for his conviction on state charges 13 months ago.

Jurors said they simply did not believe Keating’s testimony that the complex deals he concocted with various buyers were legitimate.

“I don’t want to hurt his feelings, but we all felt we would have liked to have one of those fake expanding noses that grows longer and longer,” juror David Webb, a retired machinist from Los Angeles, told reporters after the court session. “We just didn’t think any of it was valid.”

The senior Keating, 69, made no statement. He was whisked away by U.S. marshals after talking briefly with his lawyer and giving his son a hug. Lawyers for both defendants said they will appeal the convictions.

“I think the whole story of Charlie Keating and his family continues to be the story of extreme litigation excess,” said Keating’s attorney, Stephen C. Neal, who contends that the verdicts are not supported by the evidence.

Neal insisted that his client is the innocent victim of vindictive regulators who didn’t understand Keating’s operation and didn’t like his outspokenness.

Keating’s son, who sat with his back to a courtroom packed mainly with lawyers, investigators and journalists, faces up to 475 years in prison. He was allowed to remain free on bail until he and his father are sentenced March 15.

“Surprisingly, I feel pretty good,” the 37-year-old son said afterward as he managed a weak smile. His lawyers quickly stopped him from saying more.

Federal officials, as well as small investors in Lincoln Savings’ parent company, American Continental Corp. in Phoenix, were happy with the verdicts. The investors, mostly elderly Lincoln customers who bought American Continental bonds, lost more than $285 million when the company went bankrupt.

“We are gratified that . . . we were able to decipher a very complicated scheme and bring the perpetrators to justice,” U.S. Atty. Terree Bowers said in Los Angeles.

“I say, thank God. Keating should be put away for the rest of his life,” said Costa Mesa resident Michael Wolpert, 80, who initially lost $35,000 but has retrieved $12,000 in the class-action lawsuit. “I would like to see all of my money back, but at least this (conviction) gives me some sense of relief.”

Blanche Goldin of Sherman Oaks, who lost $35,000 she invested in American Continental bonds, was ecstatic. “That’s great. I’m so excited,” she said after learning of the convictions. “The thing is now, where do we find his money?”

Keating has maintained that he is broke, his assets gone or encumbered by the government and creditors.

Nevertheless, Assistant U.S. Atty. Alice C. Hill said the government will seek to invoke provisions in the federal racketeering law to confiscate whatever assets are deemed to be the result of Keating’s illegal activities.

The government is seeking $265 million in assets and $18.3 million in fines from Keating, and $231 million in assets and $16 million in fines from his son, who has filed for bankruptcy.

The federal trial was somewhat anticlimactic, mainly because Keating had already been convicted. American Continental investors had also won $251 million in settlements and a jury award that a federal judge in Tucson reduced to $1.9 billion.

But the federal convictions represent the U.S. Justice Department’s most important victory in combatting the fraud that contributed greatly to the S&L; industry debacle of the 1980s. The Keating case caps more than 4,000 bank fraud prosecutions nationwide, the department said.

“Charles Keating, as much as any man, has come to symbolize the excesses which led to the collapse of the thrift industry,” U.S. Atty. Gen. William P. Barr said in a prepared statement.

Keating also came to symbolize the corruption of the political process after giving five U.S. senators more than $1.3 million in campaign donations and political contributions while at the same time asking them to persuade thrift regulators to halt their yearlong audit of Lincoln.

The Senate Ethics Committee later reprimanded Sen. Alan Cranston (D-Calif.), who retired at the end of December, and chastised the other four, providing a measure of vindication for Edwin J. Gray, the nation’s top regulator at the time.

“I could have never, in 1986 and 1987 when Keating was doing so much to try to undermine our efforts as regulators, imagined that this would ultimately befall him,” Gray said Wednesday. “But there’s no question in my mind that the man deserves everything that’s happened. I have not seen him show any repentance for what he did, and he never seemed to learn the lesson that crime doesn’t pay.”

The estimated taxpayer cost for covering insured deposits at failed thrifts over the last decade is $187 billion. The Lincoln failure is the industry’s costliest, requiring $2.6 billion in taxpayer funds.

The federal investigation was criticized by some as too long and complicated. But U.S. Atty. Bowers called the probe “the most comprehensive and difficult savings and loan fraud investigation ever undertaken.”

Charlie J. Parsons, special agent in charge of the FBI office in Los Angeles, said a task force of 24 investigators working full time on the case for 3 1/2 years interviewed more than 900 witnesses.

The task force consisted of the FBI, the Orange County district attorney’s office, the Internal Revenue Service and the Resolution Trust Corp., the federal agency that is liquidating Lincoln.

“It’s wonderful that the guy is probably going to spend the rest of his life in prison,” said Ronald Rus of Orange, an attorney who represented the bondholders in a class action suit, “but that doesn’t return the dignity to several thousand elderly Southern Californians whose lives were ruined.”