His Victims Aren’t So Free
Charles H. Keating Jr., onetime chief of the defunct Lincoln Savings & Loan, is free. There will be no retrial. There will be no more restitution. There will be no justice for thousands of cheated investors, many of them retirees or widows.
After a mere 4 1/2 years in prison and three years out on bail, Keating has got his life back. A plea bargain--guilty to reduced charges--ended his court fight.
The convictions didn’t stick. Not in state court. Not in federal court. Juror irregularities and botched jury instructions gave Keating, the personification of the nationwide savings and loan scandal of the 1980s, another chance. Where were the second chances for the investors who traded their insured deposits with his Irvine-based company for uninsured, unsecured junk bonds?
The sales team targeted “the weak, meek and ignorant,” according to one infamous Lincoln memo. The sellers pitched worthless, high-risk investments to senior citizens who believed their pension money would be safe. More than 17,000 customers, primarily elderly Southern Californians, lost nearly $200 million in bonds. Most were ruined financially.
Some investors eventually received partial restitution, but there will be no more restitution despite a $1-billion civil judgment against Keating won by investors and a $3-billion judgment won by the federal government to offset the cost of bailing out Lincoln. Keating swears he is broke and has no hidden assets. Where did all that money go?
Although Congress and regulators have since stiffened securities laws, rules and procedures, there is a lesson here for today’s buyers who chase an exuberant market heated by Internet stocks: Let the investor beware.
