U.S. Plans New Trial for Keating and Son

Former Lincoln Savings & Loan chief Charles H. Keating Jr. will be tried again on charges that he defrauded customers by selling them millions of dollars in worthless bonds, a federal prosecutor said Monday.

The case of Keating and his son, Charles Keating III, was returned to U.S. District Court in Los Angeles after an appellate court threw out their federal convictions and said they deserved a new trial.

During a brief hearing, Assistant U.S. Atty. Brad Sonnenberg told Judge Mariana Pfaelzer that the government intended to retry the Keatings.

In a conference afterward, Sonnenberg and the Keatings’ attorneys tentatively agreed on a Sept. 14 trial date, which the judge still must approve.

Sonnenberg declined to comment on the case.

Known for lavish spending and big salaries during his days as chairman of American Continental Corp., Keating became a symbol of the savings and loan crisis of the 1980s. He was convicted in federal and state court on charges stemming from the $3.4-billion collapse of Irvine-based Lincoln Savings, which American Continental owned.

Charles Keating III also was convicted during the federal trial.

The federal convictions were overturned on grounds that jurors learned of the elder Keating’s state conviction and discussed it in the jury room.

That state conviction also was thrown out after an appeals court determined that the trial judge issued improper instructions to the jury.

Stephen Neal, attorney for the elder Keating, said prosecutors should give up. Both the state and federal convictions were constitutionally flawed, he said.

“I think it’s a waste of time and money, but I wasn’t surprised” by the decision to retry the case, he said.

In a third trial, Keating’s defense probably will include evidence to show that the investments he made have proved to be “very, very sound, economically valuable transactions,” Neal said.

Keating, 75, appeared at the hearing but declined to comment. His son also did not comment.

The father was sentenced to 10 years in prison on the state conviction and received a 12-year concurrent sentence in federal court. He served nearly five years before being freed in 1996. He returned to jail for five days in March after Pfaelzer ruled that he violated the terms of his probation by applying for a passport.