Judy J. Wischer, a onetime close associate of Charles H. Keating Jr., pleaded guilty Tuesday in federal court to bank and securities fraud and has agreed to testify against the former owner of the failed Lincoln Savings & Loan.
Wischer, the former president of American Continental Corp., the parent company of Lincoln, is the highest-ranking official in the Keating empire to plead guilty in the three-year criminal investigation of the thrift's collapse.
Wischer, 43, is the seventh individual to plead guilty in the sweeping federal case. Last Friday, Keating's son-in-law, 37-year-old Robert M. Wurzelbacher Jr., pleaded guilty to misapplying nearly $14 million of the thrift's federally insured deposits.
Lincoln is the nation's biggest savings and loan failure, costing taxpayers $2.6 billion. In addition, thousands of small investors lost $285 million in American Continental and are pursuing damages against Keating and his professional advisers in a trial now underway in Tucson.
Wischer is expected to be the prime witness at the criminal trial of Keating, American Continental's former chairman; his son, Charles H. Keating III, and Andrew Ligget, the company's former chief financial officer. The trial is scheduled to start Aug. 4 before U.S. District Judge Mariana R. Pfaelzer.
"We view the pleas today as a very significant development in the case," said David Sklansky, an assistant U.S. attorney in Los Angeles.
Wischer pleaded guilty to two bank fraud charges and a securities fraud charge, all of which are central to the conspiracy charges in the 77-count fraud, conspiracy and racketeering indictment filed against her and four others last December.
She admitted participating in a scheme to generate sham profits for Lincoln and American Continental, making two deals appear as if they were financially sound. She also admitted participating in a scheme to defraud small investors who bought the corporation's bonds at Lincoln branches by concealing American Continental's shaky financial condition.
"My client feels deep regret for her involvement," said Wischer's attorney, Donald Randolph. "Her plea today is an acknowledgment of that regret."
Wischer faces a maximum sentence of 15 years in prison, $750,000 fine and restitution.
She worked at Phoneix-based American Continental for many years, starting as an accountant and ending as president. Wischer was next in command to Keating at the real estate development company and, together with general counsel Robert J. Kielty, was his closest confidant.
Keating faces 70 fraud counts that could result in a prison term of more than 500 years, prosecutors say. He was convicted of state securities fraud and sentenced last month to 10 years in state prison.
For more than a year, Wischer and federal prosecutors have talked about a possible plea bargain, sources said. Her main concern was to avoid prison time because she has had custody of two young daughters.