In another legal victory for Charles H. Keating Jr., a federal appeals court Friday voided a $4.3-billion judgment against the former Lincoln Savings & Loan boss, ruling that the government should have given him a full trial before holding him personally liable for the collapse of his thrift.
The decision overturns a 1994 ruling by a federal judge in Arizona, who ordered Keating to pay the Resolution Trust Corp.--the government agency responsible for cleaning up the S&L mess--for the collapse of Lincoln Savings in 1989. At the time, the judge denied Keating's request for a trial, in part because Keating had already been convicted of criminal wrongdoing.
Keating, 75, who came to personify the excesses of the S&L scandal in the late 1980s, appealed the decision, complaining he was being made a scapegoat for the S&L crisis.
On Friday, the U.S. 9th Circuit Court of Appeals in San Francisco set aside the lower court's decision, ruling "that the summary judgment cannot be sustained on the basis of the criminal conviction."
The claims of the Resolution Trust Corp., which shut down in 1996, were inherited by the Federal Deposit Insurance Corp. An FDIC spokesman declined to comment Friday on whether the government would seek a new trial.
Throughout his legal problems, Keating has insisted that he is broke. He also faces an estimated $1 billion in judgments from investors, including many senior citizens in the Southland, who lost about $285 million on high-risk bonds.
Under a plea bargain reached with federal prosecutors in April, Keating settled the long-running case by pleading guilty to bankruptcy fraud. Under the agreement, he was not required to serve further prison time or pay restitution to victims.
After Keating served nearly five years in prison, his state and federal criminal convictions were both overturned for separate reasons. State attorneys are appealing the dismissal, but Keating has been free since October 1996.
The $3-billion failure of Irvine-based Lincoln Savings required the nation's costliest S&L bailout.