Restitution Is Waived for Key Witness in Keating Case : Court: Judith J. Wischer, ex-president of Lincoln Savings & Loan’s parent company, had been ordered as part of her sentence for fraud to repay $3.5 million.

The star prosecution witness in the federal fraud trial of former Lincoln Savings & Loan operator Charles H. Keating Jr. won a court order Monday that frees her from repaying the government $3.5 million.

Judith J. Wischer, an accountant who became president of the Irvine thrift’s parent company, American Continental Corp. in Phoenix, had been ordered to pay the restitution as part of her sentence after pleading guilty to bank and securities fraud in a plea bargain.

The plea agreement called for her to testify against Keating and his son, Charles H. Keating III, at their 1993 federal racketeering, conspiracy and fraud trial. In the culmination of the most notorious thrift failure in U.S. history, the Keatings were convicted and sent to prison.

In a brief hearing Monday, Wischer told U.S. District Judge Mariana R. Pfaelzer that she has no money and asked to be relieved from the restitution requirement. The Resolution Trust Corp., the federal agency owed the money, took no position on her dismissal motion.

Wischer appeared less tired than in past court appearances and clearly relieved during the one-minute hearing.

Outside court, she kissed her lawyer, Donald Randolph, then thanked Alice Hill, one of the prosecutors with whom she had met nearly 60 times to help untangle Keating’s web of fraud.

Wischer, who was put on probation by Pfaelzer last October, said she would continue her new course of life, raising two teen-age daughters, keeping the books at a family-owned manufacturing business and doing some consulting work.