Keating and Me

The last time I saw Charles H. Keating, he was naked except for a skimpy white towel that hung from his waist. His pink flesh stretched tight over his gaunt frame, and his wrists were cuffed in front as he was escorted back from the showers at the Metropolitan Detention Center in downtown Los Angeles.

Several men pounded on their cell doors as the former savings and loan magnate passed. They whistled at him or hummed strip-dance melodies, begging him to give us a show. He held himself erect, staring straight ahead. Before his arrest on fraud, conspiracy and racketeering charges, his money had protected him behind walls and gates from desperate men like us. Now his smile was frozen. He had big teeth and pink gums and looked acutely nervous. But he also seemed curiously arrogant. And why not? His high-stakes crimes made my bank robberies seem like petty theft.

Guys like Keating and Ivan F. Boesky and Michael Milken rarely ended up in the prisons where guys like me did our time. They were housed at “Club Feds,” fenceless facilities where crooked senators, Wall Street hucksters and bad law enforcement officials live in dorms, protected from violent prisoners who would resent their privilege. But Keating was at Metropolitan for a time in 1992 because he was still fighting his case in federal court here. His lawyers were arguing that he should be released on bail, that conditions in the prison put him “in danger of serious, serious deterioration of his health.” We didn’t know that then. If we had, we probably would have made his life even more miserable.

A few days after Keating’s shower parade, I was sent to the federal penitentiary at Lewisburg, Pa., and our paths never crossed again. Today, when I tell the Keating story to friends, they feel sympathy for him. And this, I think, is telling.

Middle-class Americans have traditionally been disinclined to send crooked CEOs and bank executives to real prisons to do hard time. Now, in the wake of Enron and WorldCom and Adelphia, people say things will be different. Even President Bush is crying for blood: “No more easy money for corporate criminals,” he railed recently from the White House. “Just hard time.”

I, for one, have doubts about whether it will happen, whether middle-class Americans can disassociate themselves from the ambition of the wealthy long enough to crack down on them or give them stiff prison sentences.

In 1986, Boesky, the infamous Wall Street arbitrageur, pleaded guilty to a single count of securities fraud--despite admitting he earned an estimated $100 million by using insider information. In 1990, Milken pleaded guilty to securities fraud and related charges. He was fined more than $1 billion and sentenced to prison for 10 years.

In the end, Boesky was allowed to keep secret foreign bank and brokerage accounts. He served two years in prison and paid $100 million to settle federal civil charges. Milken, who reportedly earned $1.8 billion with Drexel Burnham Lambert during his criminal heyday, served only 22 months. He was permitted to keep at least $125 million. His brother, wife and children were also allowed to keep $300 million to $400 million. He is now a revered Los Angeles philanthropist. Keating spent nearly five years in prison in Arizona on federal fraud charges, some of which were later thrown out.

Middle-class Americans say they want to see greedy, dishonest CEOs punished. But in truth, middle-class Americans are more afraid of boys from the housing projects holding them up in an alley for 20 bucks than they are of Wall Street scoundrels gutting their pensions and portfolios.

Boesky, Milken and Keating collectively swindled Wall Street out of more than $500 million. Yet the three of them together served less than 10 years. I know a man serving 20 years for an $800 heist.

Why? I think it is because the middle-class jurors and judges see something of themselves in the fallen rich. The fallen poor are something else entirely. Is it really so bad, after all, to leave the slums of Houston for Lewisburg Penitentiary? The fall from River Oaks to Lewisburg, on the other hand, seems unthinkable.

Men like Keating and Milken and former Enron CEO Kenneth Lay reflect the deepest dream of the middle-class--wealth. Average Americans would emulate them if they could. Main Street finds Wall Street highly seductive.

The average prisoner understands this instinctively, which is why the men at the Metropolitan Detention Center delighted in intimidating Keating. But there, he was well protected in a high-security ward. It would have been harder on him if he had ended up in a prison like Lewisburg, with prisoners who have been told most of their lives by TV programs like “Cops” and “America’s Most Wanted” that they are the “real” criminals.

The moral panic about corporate America will subside. The average American will finally notice that the CEOs don’t resemble the drug pushers, child abductors or terrorists on the nightly news. And just that quickly, CEOs will be fined nominally, given a year or two in Club Fed and allowed to keep their fortunes.

And some of them may even become famous philanthropists one day.