Prosecutors Seek Stiff Term for Keating

Federal prosecutors, accusing Charles H. Keating Jr. of lying repeatedly during his criminal trial, called Friday for a prison term of 25 to 30 years for the former Lincoln Savings & Loan operator.

Keating, who came to personify greed and arrogance in the thrift industry, perjured himself so extensively that he deserves extra punishment for obstruction of justice, Assistant U.S. Atty. Alice C. Hill said in her 29-page sentencing memorandum filed in U.S. District Court in Los Angeles.

Attorneys for Keating would not comment on the report.

Keating was convicted in January on 73 counts of racketeering, conspiracy and fraud stemming from the 1989 collapse of the Irvine thrift, one of the nation’s costliest failures. He faces a maximum of 525 years in prison and $18.75 million in fines when he is sentenced Thursday in U.S. District Court.

Keating, 69, is already serving a 10-year prison term for his 1991 state conviction for violating California securities laws.

The federal court sentencing will cap a four-year investigation and prosecution of Keating and others who were accused of looting Lincoln and causing its collapse.

The one-time Arizona land developer is one of the most vilified figures associated with the thrift-industry debacle and the Wall Street excesses of the past decade. Hill, in her report, charged that Keating “did more than any other person to weaken confidence in the entire savings and loan industry.”

Anyone who had trouble understanding the scandals in the thrift and securities industries found it much easier to comprehend Keating’s influence-peddling in Congress and his scheme to sell his company’s risky bonds to unwitting investors who banked at Lincoln.

He hobnobbed with barons of finance worldwide, from junk-bond trader Michael R. Milken to British financier Sir James Goldsmith. Two of them--Milken and Ivan F. Boesky--were convicted earlier of charges stemming from various insider-trading scandals. Both have completed their prison terms.

Milken raised $51 million to help Keating buy Lincoln in 1984 and then sold the S&L; more than $600 million worth of junk bonds. Boesky led attempts to take over various corporations, and Lincoln invested in his efforts.

Lincoln’s failure is one of the costliest in the nation, leaving taxpayers with a $2.6-billion cleanup bill. Keating’s own wrongdoing accounted for $962 million of that loss, federal regulators said in a May 13 letter to U.S. District Judge Mariana R. Pfaelzer.

In addition, thousands of Southern Californians, most of them elderly, lost more than $250 million when the thrift’s parent company, American Continental Corp., went bankrupt at the same time.

Listing his lies and other factors as reasons for a stiff sentence, Hill pointed out that Keating still displays an “absolute lack of remorse” for his conduct.

“Despite the findings of two criminal juries that he is guilty of fraud beyond a reasonable doubt, defendant Keating still refuses to shoulder any of the blame for the devastation his conduct caused,” she wrote. “Instead, he continues to blame everyone but himself.”

The allegation of perjury could provide a rationale to boost Keating’s sentence by only a year or two under mandatory federal sentencing guidelines. But a prison term could be increased dramatically by showing that his own fraudulent actions specifically caused higher losses at Lincoln.

Focusing on that issue, Hill noted that $122.4 million of the total loss caused by Keating was attributed just to the transactions proved at trial to be fraudulent and that he was actually responsible for causing $962 million in losses.

Hill’s memorandum indicated that the prosecution’s recommendation was greater than that of the U.S. probation office, which filed a confidential report with Pfaelzer. Hill did not reveal what the probation report suggested. Both Keating and his lawyers have said previously that the probation report’s recommended prison term was too long because it was calculated on inaccurate premises and incorrect financial information.

Hill also said Keating’s sentence should be longer because the overall losses were “astronomical,” the victims were numerous, many victims were injured psychologically as well as financially, and the fraud scheme was inordinately elaborate.

In addition, she said, “Keating led into crime a large group of young, talented individuals who otherwise may have led productive and unblemished careers.” She listed a number of former executives who have pleaded guilty to their roles in Lincoln’s collapse.

Hill’s language suggests that prosecutors may go much easier on those executives. They include Keating’s son, Charles H. Keating III, who was convicted with him in federal court. The younger Keating faces a maximum prison term of 475 years at his sentencing July 23.

Fallen Financiers

Federal prosecutors are recommending that Charles H. Keating Jr. be sentenced to as many as 30 years in prison for his role in the demise of Lincoln Savings & Loan. Here is a summary of the crimes and penalties of some other major figures in financial scandals in recent years:

* Michael R. Milken: Head of high-yield bond trading at Drexel Burnham Lambert pleaded guilty in April, 1990, to six counts of violating securities laws. Sentence: 10 years in prison, $600 million in fines and restitution.

* Ivan F. Boesky: Stock speculator pleaded guilty in 1986 to one count of lying to federal regulators. Sentence: three years in prison, $100 million in fines and restitution.

* Dennis B. Levine: Managing director at Drexel Burnham Lambert pleaded guilty in 1986 to four felony counts, including tax evasion and perjury. Sentence: two years in prison, $11.6 million in restitution.

* Martin A. Siegel: Head of mergers at Kidder, Peabody pleaded guilty in 1987 to illegal securities trading and tax evasion. Sentence: two months in prison, return of $9 million.

* Boyd L. Jefferies: Los Angeles stockbroker, linked to Boesky, pleaded guilty in 1987 to two felony counts. Sentence: $250,000 fine.

Source: Times reports