Trish!" a dapper Charles H. Keating Jr. shouted out to a former employee he recognized recently at Phoenix Sky Harbor International Airport.
A startled Patricia Johnson, the one-time aide whom he had unceremoniously fired a year earlier, looked up and saw her former boss. She shook hands with him, but not a word was spoken, not a smile flashed on either face.
With the greeting made, she turned and walked away.
The chance meeting nearly a year after the collapse of Keating's American Continental Corp. and its Lincoln Savings & Loan unit brought a rush of ambivalent memories to Johnson. She liked Keating, she said, but the thrift's seizure last April 14 has made her life hell.
It is a hell shared by other former employees, by Keating himself and his remaining aides, by thrift regulators and former regulators and, perhaps most strikingly, by thousands of small investors who lost more than $200 million in the collapse.
Irvine-based Lincoln, which lost $1 billion last year, is expected to become one of the costliest thrift failures in history, costing taxpayers more than $2 billion.
Keating, chairman of American Continental, used his Phoenix home-building company to buy Lincoln in early 1984 for $51 million. The S&L grew to a $5.4-billion enterprise with much of its deposits invested in real estate developments and high-yield, high-risk junk bonds.
The collapse of Keating's empire has hurt a wide range of people.
Nearly 22,000 small investors, who bought what many believed were federally insured American Continental bonds sold in Lincoln branches, have filed 17 lawsuits in state and federal courts against Keating, his aides and the lawyers and accountants who advised him. The investors now hold worthless paper.
The political careers of five U.S. senators, including Alan Cranston (D-Calif.), are in jeopardy because they helped Lincoln while they were getting more than $1.3 million in campaign contributions and donations to pet projects from Keating and some 75 family members, associates and employees. The bulk of the money, nearly $900,000, went to Cranston and three nonpartisan voter-registration groups he supported.
While former American Continental and Lincoln employees have found it tough getting work, some of those who sold bonds at Lincoln branches are still working there and must face the anguish of the elderly bondholders who come in daily. Some Lincoln borrowers also were dragged down, forced into bankruptcy from a combination of debt, canceled deals with Lincoln and Arizona's depressed real estate market.
Lincoln's collapse has taken a toll on regulators. Last fall, federal regulators in Washington and San Francisco went to war against each other as the West Coast officials charged in House Banking Committee hearings that the headquarters office dragged its feet for two years on recommendations to seize Lincoln. In December, beleaguered M. Danny Wall, the nation's top thrift regulator, announced he was resigning. He left last month.
Keating himself has become the lightning rod for criticism of all the ills in the thrift industry. Arrogant and defiant in his battles, he has been a convenient whipping boy of regulators and legislators who berate the abuses they see of industry deregulation, which they brought to life in 1982. Last fall, regulators filed a $1.1-billion civil racketeering action against him and his top aides. He could eventually face criminal charges from pending state and federal probes.
The stories of eight people whose lives were touched by the Lincoln scandal give a glimpse of the past year in turmoil.
The Publicist
Patricia Johnson was Arizona's "Outstanding Young Democrat" in 1985 and, she thought, her liberal bent was the antithesis of Keating and his politics. She surprised herself in accepting Keating's offer of a job to handle American Continental's public relations.
"Charlie was personable, charming, passionate about his company," she said, in explaining why she joined his firm. She said he was "well-centered politically," even though he often is wrongly characterized as a conservative.
Last April, a few days before American Continental's bankruptcy, Keating told her he had to let her go--no vacation or severance pay, though others had received generous parachutes. Her dismissal, she thought then, was dictated by regulators. It wasn't, she learned later.
"A little panic set in," Johnson said. "How was I going to pay for groceries? I had just spent $400 over the weekend on flowers, plants, grass seed, fertilizer for the repossessed house I had bought. I wondered if I could take the flowers and grass back."
Carrying a letter of recommendation that she wrote and Keating signed, she started an immediate job hunt. A well-known figure locally, Johnson found that doors normally open to her were now closed.
When she did get in, she didn't get far. One banker ripped up the Keating letter in front of her and advised her not to show it to other prospective employers, she said.
