Keating Son-in-Law Gets Prison in Lincoln Fraud

A son-in-law of former Lincoln Savings & Loan operator Charles H. Keating Jr. was sentenced Tuesday to 40 months in federal prison for his guilty plea to three charges of misapplying $13.9 million of the failed Irvine thrift’s insured deposits.

Robert M. Wurzelbacher Jr., one of five Keating sons-in-law, will be eligible for parole immediately but will likely serve at least 26 months, said his lawyer, Mark E. Beck.

U.S. District Judge Mariana R. Pfaelzer also ordered that Wurzelbacher remain on probation for five years after his prison term. She did not order any restitution or civil penalties because he has already settled those civil issues with federal regulators.

The judge allowed him to remain free on $300,000 bail until Feb. 4, when he is to report to prison. She also agreed to recommend that Wurzelbacher serve his term at a federal prison in Las Vegas, which is closer to his Phoenix home than institutions in California.

Wurzelbacher’s sentence was significantly less than the six years sought by federal prosecutors, but U.S. Atty. David A. Sklansky called the sentence “reasonable” and said the government was satisfied with it. The defense had sought a term of probation and community service.

Wurzelbacher, 39, who was an executive vice president at Lincoln’s parent company, American Continental Corp. in Phoenix, pleaded guilty in May, 1992, to charges that he and other officers caused Lincoln to extend $13.9 million in loans to a partnership in which he, Keating and other insiders had an interest.

He admitted that the loans went to the Hotel Pontchartrain Limited Partnership in 1986 and 1987 even though he and others knew that the loans were not in Lincoln’s best interest and probably would not be repaid. The partnership had taken over ownership of the downtown Detroit hotel from Lincoln after regulators had criticized the S&L; for buying it.

Both Lincoln and American Continental collapsed in April, 1989, under the weight of Keating’s risky land and securities investments, as well as insider fraud.

Regulators said earlier this year that wrongdoing by Keating and his cohorts caused Lincoln to lose $962 million. That figure is part of the estimated $3.4-billion taxpayer cost to bail out the failed thrift.

Wurzelbacher is the third family member to be sent to prison over dealings involving Lincoln.

In July, Keating’s only son, Charles H. Keating III, was sentenced to eight years and one month in prison. The two Keatings were convicted in January of racketeering, fraud and conspiracy. Keating himself is serving 12 years and seven months on a federal sentence that runs concurrently with a 10-year term for a previous state court conviction for securities fraud.