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Savings and loan scandal figure Charles Keating dies at 90

PHOENIX — Charles H. Keating Jr., the notorious financier who served
prison time and was disgraced for his role in the costliest savings and loan
failure of the 1980s, has died. He was 90.

A person with direct knowledge of the death confirmed on Tuesday that Keating
had died but didn’t provide further details. The person wasn’t authorized to
release the information and spoke on condition of anonymity.

When Keating’s Phoenix-based home construction company, American Continental
Corp., bought Lincoln Savings & Loan in 1984, the multimillionaire elevated its
worth from $1.1 billion to $5.5 billion in a four-year period.

But his financial empire crumbled with state and federal convictions for
defrauding investors. Keating allegedly bilked Lincoln customers by selling them
$200 million of unsecured “junk” bonds. They became worthless when Keating’s
company became bankrupt.

The thrift’s collapse cost taxpayers $2.6 billion and tarnished the reputations
of five senators who became known as the “Keating Five.” One of them was
Republican U.S Sen. John McCain of Arizona, and the scandal re-entered the
spotlight during the 2008 presidential campaign.

As the public heard testimony of elderly bondholders who had lost their life
savings, Keating became a national poster boy for corporate greed. Keating was
convicted in both state and federal court, but the convictions were thrown out
and he agreed to a federal plea deal that freed him after nearly five years in

Though Keating insisted he was a symbol of the common man, he was known more
for an extravagant lifestyle. Keating received $19.4 million in salary, stock
purchases and other compensation over five years, ending in 1988.

His company
provided luxuries like the use of a $5 million refurbished Florida estate. The
corporation picked up the tab for lavish events like a 1986 Christmas party at
which nearly $2,000 was spent on Silly String alone.

American Continental also paid to maintain three corporate jets. Keating was
known to take long trips to Africa, Europe and elsewhere.

As the savings and loan institution’s profits rose, the Federal Home Loan Bank
in San Francisco began looking into investment activity in 1986. The examination
was the beginning of numerous conflicts between Keating and federal regulators.

By April 1989, American Continental filed for bankruptcy protection — one day
before federal regulators seized Lincoln for alleged bad business practice. The
government claimed Keating made land swap deals to fabricate real estate

Through a tax-sharing agreement, American Continental was then able to siphon
off $94 million of federally insured deposits in the form of deferred taxes
never actually paid to the Internal Revenue Service.

The financial fallout triggered investigations and multiple lawsuits from all

Keating filed a lawsuit, accusing the government of illegal seizure. In turn,
the government slapped Keating, as well as several family members and
associates, with a $1.1 billion fraud and racketeering civil lawsuit.

Several of the 23,000 investors who purchased junk bonds also filed suit
against Keating.

The scandal also shook the political world. Five senators who received campaign
donations from Keating — McCain, Democrat Alan Cranston of California, Democrat
John Glenn of Ohio, Democrat Donald W. Riegel Jr. of Michigan and Democrat
Dennis DeConcini of Arizona — were accused of impropriety for appealing to
regulators on Keating’s behalf in 1987.

In 1991, the Senate Ethics Committee formally reprimanded Cranston for
“improper and repugnant” dealings with Keating. DeConcini and Riegle received
rebukes from the committee but no further punishment for creating the appearance
of impropriety. Glenn and McCain were criticized less severely; the panel said
they “exercised poor judgment.”

McCain later called his involvement with Keating “the worst mistake of my
life” and said having his honor questioned was in some ways worse than the
torture he endured in Vietnam. During the 2008 presidential campaign, then-Sen.
Barack Obama revisited McCain’s role in the scandal in a campaign Web video.

McCain said in an emailed statement Tuesday, “My thoughts and prayers are with
the family of Charles Keating, a loving father and grandfather.”

Throughout Keating’s 1991 trial in California on state securities fraud
charges, he stuck to his claim that he was an innocent target of a power-hungry
federal government.

The four-month trial ended with a jury finding Keating guilty of 17 of 18
charges. Two years later, Keating and his son, Charles Keating III, were
convicted of multiple federal charges of racketeering, fraud, conspiracy and
transporting stolen property. He started serving a 12-year federal and 10-year
state prison sentence concurrently in 1993.

In all, Keating served nearly five years in prison. His state convictions were
overturned a second time in 1998 when a federal court judge ruled the trial
judge, Lance Ito, had not properly instructed the jury.

That same year, an appeals court judge threw out Keating’s federal securities
charges. The judge said jurors had improperly learned of his state convictions.
Keating then made a plea deal with federal prosecutors, pleading guilty to three
counts of wire fraud and one count of bankruptcy fraud in exchange for time
served, with no fines or restitution. Charges were also dismissed against his

State prosecutors decided in 2000 not to retry Keating.

“I had the honor to represent him over many years, and I got to see a side of
him many others did not,” Stephen C. Neal, chairman of Cooley LLP and Keating’s
longtime attorney, said in a statement Tuesday night. “Though his controversies
were many, he faced adversity with great dignity, wit and courage. Charlie never
wavered in his faith.”

Post-prison, Keating moved into his daughter’s home in the wealthy Phoenix
enclave of Paradise Valley. In 2006, he quietly began work as a business
consultant in Phoenix.

Born in 1923, in Cincinnati, Ohio, Keating had a middle class upbringing as the
son of Charles Sr., a dairy company worker, and Adele, a homemaker. His family
had financial difficulties when the senior Keating was diagnosed with
Parkinson’s disease.

Educated in Roman Catholic schools, Keating studied business at the University
of Cincinnati. After the first quarter, he enlisted in the Naval Air Corps and
trained to fly in combat. Keating was honorably discharged in 1945.

He later returned to the university, where he achieved an NCAA gold medal in
swimming. Keating then attended law school and joined a law firm in 1947.

He is survived by wife Mary Elaine, daughter Mary, son Charles and grandson
Gary Hall Jr., who was an Olympic swimming champion.


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