The Securities and Exchange Commission is nearing the end of a lengthy investigation into the financial dealings of former thrift owner Charles H. Keating Jr. and has told him that it may soon take action against him in federal court.
Stephen C. Neal, Keating's lawyer, said Thursday that the SEC staff sent a formal letter to the onetime owner of Lincoln Savings & Loan warning him that it may recommend to the agency that it file a civil suit accusing him of violating federal securities laws.
In a Jan. 24 letter, the SEC said it might seek a federal court order barring Keating from serving as an officer or director of a public company and to make good the losses of investors in junk bonds issued by Lincoln's parent company, American Continental Corp in Phoenix.
The notice gave him until today to respond. SEC officials could not be reached for comment.
Neal said he sent a letter Thursday night to the SEC protesting that the notice provided little time to prepare a proper response and, more important, provided "no clue" about what the allegations are.
The attorney also criticized state and federal "overkill," saying at least seven agencies have suits, criminal actions or investigations pending against Keating.
"Not only is the time period short to respond, but there is no clue at all about what he did wrong," Neal said.
Keating has been indicted on state securities fraud charges and is the target of a federal grand jury probe that is expected to produce an indictment soon. State and federal agencies also have sued him, and federal thrift regulators are seeking restitution for several deals that cost Lincoln $40.9 million. Bondholders and other creditors also have sued Keating.
"This man has got more government prosecutors and investigators pursuing him than anybody in history and far more than necessary to figure out what went on and to adjudicate the matter," he said.
As early as 1986, the SEC was asked by federal thrift regulators to investigate Keating, then chairman of American Continental. The regulators said a federal audit showed the "possibility" that American Continental was selling securities based on "false and misleading" information.
It was at that time that American Continental began selling about $200 million in junk bonds at Lincoln's 29 Southern California offices. Most of the investors were elderly Lincoln customers who thought that they were putting their money into accounts as safe as their insured deposit accounts.
But the bonds were not safe, and many lost their life savings when American Continental filed for bankruptcy protection in April, 1989, and regulators seized Lincoln the next day.
The company now is being liquidated, and regulators are trying to sell the thrift. Lincoln is one of the nation's costliest failures and will need more than $2 billion in taxpayer money to bail out depositors.