Appellate Judge Reinstates 20 State Securities Charges Against Lincoln’s Keating : Courts: Revival of the dropped counts appears to have no effect as he is under maximum sentence.

An appeals court judge has reinstated 20 state charges against Charles H. Keating Jr., the former Lincoln Savings & Loan head convicted of fraud in the nation’s costliest thrift failure.

Keating was convicted Dec. 4, 1991, on 17 counts of swindling investors who lost money on risky bonds issued by Lincoln’s parent company. Los Angeles Superior Court Judge Lance Ito sentenced him to 10 years in state prison.

Before the trial began, Ito had dismissed 20 counts of selling securities without qualification. Those charges accused Keating of violating conditions imposed by state regulators when the thrift approved, or qualified, the sale of the bonds to depositors.

Ito had ruled on narrow grounds that since permission had been given to sell the bonds, Keating couldn’t face criminal charges for selling them without permission.

On Tuesday, the 2nd District Court of Appeal in Los Angeles held that Ito was wrong to dismiss the counts.

Permission to sell the bonds was given on a number of conditions, which should have been complied with for the sales to be non-fraudulent, the appeals court ruled.

The conditions were intended to make clear to buyers that the bonds were issued by Lincoln’s parent company, American Continental Corp., not the thrift, and that they were uninsured, unlike certificates of deposit.

Sellers were supposed to be American Continental employees, not Lincoln tellers, and receive no bonuses for selling the bonds. They also had to provide prospectuses explaining the bonds’ risks before or during the sale.

The appeals court said that in every dismissed count, at least one violation occurred: The bond seller was a Lincoln employee, the seller received a bonus or prospectuses were not provided or were mailed only after the sale was made.

The reinstatement of the charges had no apparent practical effect. It would be possible to hold a new trial on the 20 counts, but Keating’s 10-year sentence was the maximum penalty possible under state law, no matter how many additional convictions were won.

His conviction, upheld by a state appeals court, is under review by the state Supreme Court. Even if it is overturned, he would remain imprisoned on a federal conviction on fraud and racketeering charges in connection with Lincoln’s failure, which cost taxpayers $3.4 billion.