Keating Entitled to New Federal Trial, Court Rules

In another victory for Charles Keating, an appeals court ruled Tuesday that the former savings and loan magnate is entitled to a new trial on federal securities charges because jurors improperly learned of his state convictions.

The ruling by the U.S. 9th Circuit Court of Appeals comes four months after a federal judge overturned Keating’s state securities convictions, finding errors in jury instructions.

Keating, who became a symbol of the 1980s S&L; scandals after the $3.4-billion collapse of his Lincoln Savings, had served about 4 1/2 years of a 12 1/2-year sentence when he was released on bail in October 1996. He could be retried in both the state and federal cases.

Tuesday’s 3-0 ruling upheld a 1996 decision by U.S. District Judge Mariana Pfaelzer of Los Angeles overturning Keating’s federal convictions and granting a new trial.

The court also agreed with Pfaelzer’s ruling to grant a retrial to Keating’s son, Charles Keating III, on similar charges, saying jurors could have been prejudiced against him after learning of his father’s convictions.

The Keatings were convicted of racketeering, fraud and conspiracy, based on charges that they looted Lincoln Savings and swindled thousands of investors by failing to tell them of the risks in the unsecured bonds they bought in Lincoln’s parent, American Continental Corp.

Lincoln’s failure made the bonds worthless and left investors with a $200-million loss.

Keating’s federal trial started about 10 months after a Los Angeles Superior Court jury convicted him of aiding and abetting in the fraudulent sale of the same bonds. His convictions and 10-year prison sentence in that case have been overturned twice by U.S. District Judge John Davies, most recently in February.