Federal grand jury: The 2 1/2-year-long efforts of a joint task force, including the FBI, the U.S. attorney's office and the Orange County district attorney's office, have yet to produce a federal grand jury indictment. Rumors have persisted for a year that an indictment is imminent. The wide-ranging investigation has looked into allegations of general bank fraud, securities violations and illegal political contributions. In the last year, former Lincoln Chairman Robin S. Symes, former Lincoln President Ray C. Fidel, major Lincoln borrower Ernest C. Garcia II and former American Continental executive Mark S. Sauter pleaded guilty to various criminal charges in plea bargains that require them to testify against Keating and others.
Bondholder suits: About 23,000 holders of five different issues of American Continental's debt securities have filed more than 18 lawsuits in state and federal courts in California and elsewhere. They allege fraud, misrepresentation and racketeering against Keating and other American Continental executives as well as the company's attorneys and accountants. The biggest block of plaintiffs, nearly 22,000 bondholders, are mostly elderly Lincoln depositors who bought $192.8 million of the lowest-grade securities at the S&L's 29 Southern California branches. Cases are consolidated in Arizona before U.S. District Judge Richard M. Bilby, who has scheduled final pretrial motions for Feb. 27 in Tucson.
RTC racketeering suit: The Resolution Trust Corp., which manages failed savings and loans, filed suit accusing Keating and six other former executives of racketeering, and 27 directors, officers, spouses and professionals of fraud or malpractice. The suit seeks $2.7 billion in damages. It is pending before Bilby and will be tried with the bondholder litigation.
OTS action: The Office of Thrift Supervision, the primary federal thrift regulator, wants to bar Keating and six others from the industry for life and to recover $130.5 million for four allegedly fraudulent transactions that damaged Lincoln. An administrative hearing started July 1 in Los Angeles and ran eight days before being adjourned until after the criminal proceedings.
SEC threat: Lawyers for Keating and other former executives released letters from the Securities and Exchange Commission, stating that the SEC staff will recommend that the agency sue Keating and the others to prohibit their engaging in further securities transactions and to collect restitution for unspecified damages.
State agency suit: Christine W. Bender, who, as Department of Corporations commissioner approved the Lincoln bond sales, filed a $200-million state securities fraud suit seeking restitution for bondholders and an injunction against Keating and two other former American Continental executives to prevent further violations of state securities laws. The state has asked Bilby to grant its motion to award judgment to the state short of trial. The judge will hear arguments on the motion Dec. 9.
State attorney general suit: John K. Van de Kamp, California attorney general at the time, sued Keating, other American Continental executives and the Arthur Young & Co. accounting firm, now known as Ernst & Young, over alleged violations of business laws. Bilby first dismissed the key defendant--the accounting firm--from the action and later dismissed the remaining defendants. His decision is being appealed. The suit seeks, in part, $250 million in restitution to bondholders.
Keating and Lincoln: A Thumbnail Sketch
Almost from the start, Charles H. Keating Jr. battled regulators over his operation of Lincoln Savings & Loan. Here's a brief history of his stewardship of the Irvine-based thrift and its aftermath:
Feb. 22, 1984--Keating uses his American Continental Corp. real estate development company to acquire 58-year-old Lincoln for $51 million.
Feb. 28, 1985--Keating testifies before Congress in effort to block regulators from imposing new industry restrictions, which hamper Lincoln's operations.
March 12, 1986--Federal thrift regulators begin regular audit of Lincoln, and it turns into long, bitterly fought examination over costly, luxurious Phoenician resort and other issues.
Nov. 3, 1986--American Continental wins state approval to sell $200 million in corporate bonds. Sales begin early December out of Lincoln's Southern California branches.
April 2, 1987--At Keating's behest, four U.S. senators, including Alan Cranston (D-Calif.), meet in private with top federal regulator Edwin J. Gray to discuss length of Lincoln's audit.
April 9, 1987--At Gray's suggestion, the senators plus Donald W. Riegle Jr. (D-Mich.) meet with federal thrift executives from San Francisco to discuss Lincoln's audit.
May 1, 1987--Federal agents in San Francisco recommend to superiors in Washington that Lincoln be seized or be subjected to stiff regulatory orders.
May 20, 1988--Regulators and Lincoln sign memorandum of understanding, aimed at wiping slate clean for new examination.