Keating Aide Gets Probation, $3-Million Fine : SAVING & LOAN : Courts: Judy Wischer’s lenient sentence is the result of her cooperation with authorities in the investigation of the collapse of Lincoln Savings & Loan.
Judy J. Wischer, once the top aide to former Lincoln Savings & Loan operator Charles H. Keating Jr., was put on probation Monday for three years and ordered to pay $3.5 million in restitution for her role in the 1989 collapse of the Irvine thrift.
Wischer’s sentencing--lenient because of her cooperation with authorities--ends the long investigation and the trial court proceedings against those responsible for the thrift industry’s most notorious failure. Lincoln’s collapse is expected to cost taxpayers $3.4 billion, making it the nation’s second-biggest savings and loan bailout.
In addition, the bankruptcy of the S&L;’s parent company, American Continental Corp. in Phoenix, wiped out nearly 22,000 investors, most of them elderly Southern Californians. The investors lost a total of more than $285 million, though they eventually recovered about 70% of that by filing civil lawsuits.
In a brief statement Monday to U.S. District Judge Mariana R. Pfaelzer, Wischer apologized for hurting others, particularly the small investors who bought risky American Continental bonds.
“First, I’d like to say I’m very sorry,” she said, her voice trembling. “I regret the losses, especially to the bondholders.”
Pfaelzer praised Wischer for cooperating with federal prosecutors and the FBI and said that her testimony at Keating’s federal trial two years ago was crucial to convicting the former Arizona businessman.
“I really don’t think the case could have been prosecuted without you,” said Pfaelzer, who presided over the trial. “I thought that when I was listening to the testimony.”
Wischer not only cooperated with federal prosecutors, she helped regulatory agencies in their effort to seek recoveries from others at American Continental and at thrifts in Colorado and Texas that did business with Lincoln.
The Resolution Trust Corp., the federal agency charged with liquidating failed thrifts, told Pfaelzer in a letter that Wischer’s cooperation was a “substantial factor” in recovering $80 million from lawyers, accountants and other professional who helped Keating.
In addition, she provided information on Lincoln’s deals with thrifts in Arizona, Colorado and Texas. Besides helping the RTC, she also traveled to Washington to help the Office of Thrift Supervision and the Securities and Exchange Commission in various investigations.
Michael C. Manning, a Phoenix lawyer who headed the RTC’s recovery efforts, said he had thought when Wischer, Keating and others were first indicted three years ago that Wischer had helped to design the frauds. But as he delved further into documents, he said, he realized that she did not plan any of the scams. It was a family fraud, Manning told reporters.
Much of Keating’s family worked at the company. His son and another family member also were convicted on related charges.
Both Assistant U.S. Atty. Alice C. Hill and defense attorney Donald C. Randolph had asked the court to put Wischer on probation. She had faced up to 15 years in prison for her 1992 guilty plea to two bank fraud charges and a securities fraud charge. As part of a plea bargain, she agreed to testify against Keating and to cooperate with authorities.
Getting information from Wischer took a long time because there were so many deals and because she didn’t realize herself what information was important, lawyers said.
“They were involved with so much that downloading information couldn’t be done efficiently,” said one lawyer involved with the process. “She didn’t even know she had such interesting and useful information. New matters would come to light, not because she had been withholding information but because nobody ever asked her about it.”
Wischer, though, was no help to state prosecutors. She did not plead to six counts of state securities fraud until after Keating was convicted in state court. Under her state plea bargain, she will be given an identical probation term to be served concurrently with her federal term.
Wischer, 46, who lives in Phoenix with her two daughters, would not talk publicly after the brief court hearing. Randolph said later that she was “pleased and relieved” about her sentence.
Keating, 70, whose arrogance and outspokenness made him the national symbol for greed and excess in the thrift industry, is serving concurrent sentences totaling 12 years, seven months for his racketeering, conspiracy and fraud convictions in state and federal courts.
Times wire services contributed to this report.
