Charles H. Keating Jr.'s use of Lincoln Savings and Loan Association amounted to a ''pure case of fraud'' costing taxpayers more than $1.5 billion, a government attorney said yesterday.

Keating's lawyer, however, rejected the government's contentions and suggested that U.S. District Court Judge Stanley Sporkin must overturn the government's April 1989 seizure of the Irvine, Calif., S&L or risk unraveling the entire S&L cleanup.

Ronald Fein, Keating's attorney, said potential buyers of rescued thrifts will not trust the government if the regulators' takeover -- which he labeled as arbitrary and capricious -- is allowed to stand.

''If the private sector can't rely on the government to apply the law in good faith ... rational businessmen are just not going to invest their money in these kinds of institutions,'' Fein said.

The charge and counter-charge were part of closing arguments in Keating's suit to regain control of Lincoln from the government. The proceedings have been watched closely because of the size of the Lincoln cleanup and its political spin-offs.

James Murphy, representing the Office of Thrift Supervision, noted that Lincoln's failure, perhaps the nation's costliest thrift collapse, will cost taxpayers ''in excess of $1.5 billion.'' The government already has pumped in $1.2 billion just to keep it afloat, he said.

Sporkin, who has conducted 30 days of hearings over six months, gave no indication when he would rule, telling a packed courtroom, ''I guess it's up to me. I'm going to ponder it a little bit.''

The judge could uphold the seizure, find it invalid or order a full trial on the matter, which could take several years. He also could fashion some other solution, including putting the thrift under court administration.

Afterward, Keating told reporters he believed he had received a fair hearing, but he vowed to fight any adverse decision.

''I have full confidence that what this judge does ... will be a fair and honest opinion,'' he said. ''But I don't know if it will work out for me. ... We have at least gotten a trial and America has gotten a trial.''

If Sporkin grants the government's motion to dismiss the suit, Keating said, ''We'll be fighting until the day I'm dead. I have no intention of being raped by the U.S. government.''

His case has attracted great attention because of Keating's involvement with five senators who met with regulators on his behalf after accepting political contributions.

The five are Sens. Alan Cranston (D-Calif.), Dennis DeConcini (D-Ariz.), Donald W. Riegle (D-Mich.), John Glenn (D-Ohio) and John McCain (R-Ariz.).

The government maintains Keating arranged ''accounting-driven'' land and stock deals to book false profits that allowed Lincoln to improperly funnel money to Keating's Arizona holding company, American Continental Corp.

Separately, Keating is the target of a federal grand jury probe in Los Angeles and a defendant in a $1.3 billion civil fraud suit filed in Arizona.