Keating’s Son Sentenced to 8 Years in Lincoln Case : Thrifts: Judge cites ‘staggering’ scope of fraud committed at the failed Irvine-based S&L.; He is also ordered to pay $97.3 million in restitution.

Charles H. Keating III, a one-time Olympic swimmer who labored in the long shadow of his domineering father, was sentenced in Los Angeles Thursday to eight years, one month in federal prison for his role in the 1989 collapse of Lincoln Savings & Loan.

The only son of Lincoln Savings operator Charles H. Keating Jr. also was ordered to pay $97.3 million in restitution and was banned from ever again working at banks, thrifts and other regulated financial institutions.

In handing out the stiff sentence, U.S. District Judge Mariana R. Pfaelzer said the 38-year-old Keating appeared to be “completely dominated” by his father, but was old enough to know what he was doing.

The judge justified the term by saying that federal sentencing guidelines “do not adequately reflect” the “staggering” scope of the fraud committed at the Irvine-based thrift. Lincoln lost more than $950 million from fraud and other wrongdoing by the Keatings and top executives, law enforcement officials say.

The collapse of Lincoln Savings is one of the costliest thrift failures ever, leaving taxpayers with a $2.6-billion cleanup bill. The Keatings were convicted in January of racketeering, conspiracy and fraud, and Pfaelzer sentenced the father earlier this month to 12 years, seven months in prison.

The son was an executive vice president at Lincoln’s parent company, American Continental Corp., and president of the thrift’s development company, AMCOR Investments. Evidence showed that he signed documents helping to create and continue frauds on the S&L; and American Continental’s investors.

“He didn’t just look the other way,” Assistant U.S. Atty. David A. Sklansky said. “He signed documents that he knew were false.”

Known as C3, Keating stood with head high and hands clasped behind his back during the sentencing. He showed little emotion, though his brother-in-law, Robert M. Wurzelbacher Jr., grimaced. Wurzelbacher, the only relative present, pleaded guilty last year and is awaiting sentencing with seven others this fall.

“We all were stunned with the sentence imposed,” said Dennis J. Landin, chief deputy federal public defender. Even American Continental bondholders who lost money in the failure had expected a term of only a few years.

“Mr. Keating maintains his innocence and certainly we don’t think there was any evidence to show he isn’t,” Landin said. Keating will appeal the sentence as well as the conviction, and Pfaelzer allowed him to remain free on bail pending appeal.

The sentence pleased Sklansky, who helped to prosecute the case. “It was what we recommended,” he said.

The younger Keating, who was divorced and went bankrupt after Lincoln’s collapse, never appeared to be much of a force in his father’s company. As the only son among six children, he was often treated more harshly by his father. At one meeting he fell asleep, and his father tried to pitch paper clips into his open mouth.

His father also berated him in front of others, and often treated Wurzelbacher, as some in the company put it, as the “son he never had.”

Keating loved the outdoors, whether handling horses at a ranch or looking for farmland for his father to buy and develop. But he was never quite ready for the wheeling and dealing of his father’s world.

In her testimony, Judy Wischer said she was made president of American Continental mainly because the elder Keating recognized that his son wasn’t ready to move up.

Keating excelled in one area over his father. He made the 1976 Olympic swimming team and placed fifth in the 200-meter breast stroke. His father was a national collegiate swimming champion, but never went to the Olympics.

Though he never finished college, C3 joined American Continental when it was a home-building company and quickly rose through the ranks. Like other top executives, he reaped the rewards once the company bought Lincoln in 1984. Those rewards included $4.3 million in total compensation over the five years American Continental owned the thrift. The father received $19.5 million in salary, bonuses and stock sales.