Keating Plea Bargain Puts Victims at a Loss Again

She calls herself one of the “losers,” one of the trusting, unsophisticated people who plowed their life savings into junk bonds sold in branches of Charles H. Keating Jr.’s savings and loan.

A widow with a ninth-grade education, who grew up poor in Arkansas and still sews her own clothes, Wanda Bean lost almost every nickel her husband left her to Keating’s infamous junk bond deal.

On Wednesday, a place deep inside her that hasn’t hurt for a while began to sting again. Bean learned that Keating had agreed to a federal plea bargain and was off the hook. Keating had beaten the system, Bean said.

It made her feel like dirt.

“It’s terrible,” she said. “That man should be so far back in jail he could never get out again. I can only hope that sometime, somehow, he will hurt as much as I have.”

Bean, 72 and living in a Sylmar trailer park, was among the thousands of Southern California investors who thought they were buying safe, insured investments from Lincoln Savings & Loan, the thrift Keating ran in the mid-1980s. But they were actually buying junk bonds--soon to be worthless--in the S&L;’s parent company, American Continental Corp. In the end, they became the human wreckage, as one defrauded investor put it, of one of the most notorious financial failures of recent times.

When Lincoln Savings and American Continental went belly up in 1989, many of these investors, who called themselves “The Losers,” banded together and held monthly meetings in Sherman Oaks. They worked as one to try to get their money back and consoled each other about their financial ruin.

Now, many are scattered and alone. Most are elderly; some have died. Some of the victims feel wronged, shortchanged, forgotten. Others are mystified at how such a well-documented scandal of enormous scale--with 23,000 investors and $285 million gone, ended with the culprit serving less than five years in prison and cleared of any fraud on the thrift and investors.

Keating’s guilty pleas Tuesday to four counts related only to bankruptcy fraud charges in Phoenix, where he and American Continental were based. Charges of racketeering, bank fraud, securities fraud and other wrongdoing were dismissed as part of the plea agreement, which also limited his punishment to time served.

“This was one of the clearest-cut cases of bank fraud in the annals of banking history,” said Tom Shelley, a former TV reporter who saw his $17,000 investment in a Lincoln Savings bond evaporate. “I feel tremendous disgust and let down by our justice system. Bond holders should have gotten full, full restitution, and Keating should not have been allowed to go free because of technicalities.”

Under the plea agreement, Keating, 75, was also not required to pay restitution. Prosecutors say he has no money to pay victims.

Shelley is convinced Keating has assets abroad and is furious that federal authorities weren’t more aggressive in searching for them.

The failure to go after those assets, Shelley said, is part of the cycle of broken promises that began with the syrupy bond salesman he met in Woodland Hills. It continued through the private attorneys who promised victims that they would recoup everything in a class-action suit and ended with the federal authorities who Shelley feels were so eager to close the Keating file that they went back on their word.

The plea bargain looks like it may be the finale to a decade-long court battle, which had many twists and turns. In 1991, Keating was convicted of securities fraud in state court. Keating argued, unsuccessfully, that investors eager for big returns were at fault.

The next year he was sent to prison. In 1993 he was convicted of fraud and racketeering in federal court. Both convictions were overturned on appeal, and Keating was released in 1996 after serving four years and eight months behind bars.

State prosecutors are appealing the reversal of the state conviction, but it is unlikely Keating will go back to prison for those charges because he had almost served out his sentence when the case was overturned.

Some of the scandal’s victims are upset this week that Keating never apologized, even at his plea-bargain hearing.

“That’s what was missing,” said Leah Kane, an elderly resident of Laguna Woods who got back through civil litigation about two-thirds of the $20,000 she invested in Keating’s junk bonds. “Yes, justice has been served, but he should have told all of us who lost money that he was sorry.”

Some, it should be said, lost more than money. Victims this week shared troubling accounts of marriages, college educations, homes and even lives that were sucked away by failed junk bonds.

Anthony Elliott, 89, of Burbank took a razor to his wrists and died in his bathtub in 1990 because he was distraught over losing $200,000--his life savings--in the banking collapse.

The pain from the scandal, the undeniable human cost, makes Bean want to tear her bond certificate into a million pieces. She’s kept the fancy-looking piece of paper ever since she bought it from Lincoln Savings more than 10 years ago.

“I don’t know why I hang on to that, because it makes me think of that man every time I look at it,” Bean said. “But it’s funny. The bond looks authentic, you know, like something you should be real proud of.”