Former Lincoln Savings & Loan boss Charles H. Keating Jr. won a final victory Monday before the U.S. Supreme Court, defeating attempts to reinstate his 1991 state court conviction on charges of swindling elderly investors.
Without comment, the high court refused to reopen the case, leaving intact lower court rulings that Los Angeles Superior Court Judge Lance Ito had allowed a flawed prosecution.
The Supreme Court order left Keating, 76, without any convictions on charges he duped customers of the Irvine S&L into trading insured deposits for junk bonds issued by Lincoln's parent company, American Continental Corp. in Phoenix.
The securities became worthless when Keating's empire toppled into bankruptcy in 1989. More than 21,000 mostly elderly Southern California investors lost about $285 million, and taxpayers had to cover nearly $3 billion in Lincoln's losses, making it the nation's second-most-costly thrift failure.
Keating had served nearly five years in prison on both state and federal convictions. A sweeping 73-count federal conviction on racketeering and fraud also was reversed. To avoid a retrial in the federal case, he pleaded guilty last year to bankruptcy fraud and was sentenced to time he already had served.
Keating, whose aggressive investments and disdain for federal regulators made him the symbol of arrogance and excesses that marked the S&L debacle in the 1980s, couldn't be reached for comment.
"It's safe to say he's very pleased," said his attorney, Stephen C. Neal. "This vindicates the position we've been arguing for 10 years."
Assistant Los Angeles County Dist. Atty. William Hodgman, who prosecuted Keating, said through a spokeswoman that no decision had been made on whether to retry Keating.
A conference is scheduled Nov. 9 before Ito, but another trial seemed unlikely given the passage of time, the deaths of many key witnesses and the many previous rulings in state and federal courts against the prosecution.
Like other S&L operators in the 1980s, Keating took advantage of deregulation to make investments that previously would have been unthinkable. He poured government-insured deposits mainly into highly risky junk bonds, corporate takeovers, luxury hotels and a huge planned community outside Phoenix.
With his thrift under intense federal scrutiny, he sold his own junk bonds directly to Lincoln customers, who later described themselves as unsophisticated financial patsies. In battling government examiners, Keating persuaded five U.S. senators to meet with top federal regulators. The episode tarred the reputations of the senators, including former presidential candidate Sen. John McCain and former Sen. Alan Cranston of California.
After Lincoln's collapse, Keating was convicted in state court on 17 counts of securities fraud. He was sentenced to 10 years in prison.
His appeals were rejected through the state court system, but a federal trial judge and the U.S. 9th Circuit Court of Appeals ruled that Ito wrongly allowed jurors to convict him without deciding whether he intended to swindle investors.
"The Superior Court permitted the jury to convict him without a finding of criminal intent," said Neal.
The three-judge 9th Circuit panel split 2 to 1 to uphold the lower court. The dissenting judge said there had been "absolutely overwhelming evidence" of Keating's fraudulent intent.
Before the U.S. Supreme Court, California authorities argued that Keating should not have been allowed to challenge his state court convictions in federal court because he had missed the deadline to do so.
In the federal case, Keating was sentenced to 12 years, seven months in prison. But that conviction also was tossed out on appeal when it turned out the jurors learned of his state court conviction and discussed it in the jury room.
The federal case accused him not only of defrauding the investors, but of conducting a series of sham land and securities deals amounting to a conspiracy to misuse government-insured deposits.
In an April 1999 plea bargain, he admitted to four limited counts of bankruptcy and wire fraud.