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Keating's Son Sentenced to 8 Years in Lincoln Case : Thrifts: Judge says federal sentencing guidelines 'do not adequately reflect' the 'staggering' scope of fraud committed at the failed S&L.

July 30, 1993|JAMES S. GRANELLI | TIMES STAFF WRITER

Charles H. Keating III, a onetime Olympic swimmer who labored in the long shadow of his domineering father, was sentenced in Los Angeles on Thursday to eight years and one month in federal prison for his role in the 1989 collapse of Lincoln Savings & Loan.

The only son of Lincoln Savings operator Charles H. Keating Jr. also was ordered to pay $97.3 million in restitution and was banned from ever again working at banks, thrifts and other regulated financial institutions.

In handing out the stiff sentence, U.S. District Judge Mariana R. Pfaelzer said the 38-year-old Keating appeared to be "completely dominated" by his father but was old enough to know what he was doing.

The judge justified the term by saying that federal sentencing guidelines "do not adequately reflect" the "staggering" scope of the fraud committed at the Irvine-based thrift. Lincoln lost more than $950 million from fraud and other wrongdoing by the Keatings and top executives, law enforcement officials say.

The collapse of Lincoln Savings is one of the costliest thrift failures ever, leaving taxpayers with a $2.6-billion cleanup bill. The Keatings were convicted in January of racketeering, conspiracy and fraud, and Pfaelzer sentenced the father earlier this month to 12 years, seven months in prison.

The son was an executive vice president at Lincoln's parent company, American Continental Corp., and president of the thrift's development company, AMCOR Investments. Evidence showed that he signed documents helping to create and continue frauds on the S&L and American Continental's investors.

"He didn't just look the other way," Asst. U.S. Atty. David A. Sklansky said. "He signed documents that he knew were false."

Known as C3, Keating stood with head high and hands clasped behind his back during the sentencing. He showed little emotion, though his brother-in-law, Robert M. Wurzelbacher Jr., grimaced.

"We all were stunned with the sentence imposed," said Dennis J. Landin, chief deputy federal public defender. Even American Continental bondholders who lost money in the failure had expected a term of only a few years.

"Mr. Keating maintains his innocence, and certainly we don't think there was any evidence to show he isn't," Landin said. Keating will appeal the sentence as well as the conviction, and Pfaelzer allowed him to remain free on bail pending appeal.

The younger Keating, who was divorced and went bankrupt after Lincoln's collapse, never appeared to be much of a force in his father's company. As the only son among six children, he was often treated more harshly by his father.

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