LOS ANGELES, SEPT. 18 -- Charles H. Keating Jr. was taken into custody today after the Los Angeles district attorney unsealed a 42-count criminal indictment against the man who has become one of the foremost symbols of the nation's savings and loan scandal.
The Phoenix developer, whose lavish lifestyle, political contacts and high-risk investment strategy brought him national attention, showed little emotion in Los Angeles Superior Court as Judge Gary Klausner set bail at $5 million.
Keating, 66, who was chairman of the failed American Continental Corp., also is the target of several investigations into American Continental's management of Lincoln Savings and Loan Association, a California thrift that was seized by the government in April 1989 and whose failure is expected to cost taxpayers as much as $2 billion.
The state grand jury indictment charges Keating with selling securities by using false statements or omissions, selling securities without qualifications, lying to the California Department of Corporation and advertising bond sales without the approval of regulators. The fraud charges against Keating and three others are the first criminal charges filed against the savings and loan's executives.
If convicted, Keating faces up to 10 years in the state penitentiary and a fine of $250,000, according to District Attorney Ira Reiner.
Five senators who received political contributions from Keating are under investigation by the Senate Ethics Committee, which plans a series of meetings starting today on whether to press ahead with charges against them. The issue is whether the five, four Democrats and one Republican, intervened improperly with S&L regulators to head off inquiries into Lincoln's financial condition.
The so-called "Keating Five" are Alan Cranston (D-Calif.), Dennis DeConcini (D-Ariz.), John Glenn (D-Ohio), John McCain (R-Ariz.) and Donald W. Riegle Jr. (D-Mich.).
The committee is considering whether to dismiss charges against some or all of the senators or to conclude that there is substantial evidence of ethical violations and continue the inquiry.
Keating has traveled the country contending that the government is trying to make a scapegoat of him for the savings and loan debacle and that all his deals would have made money if the government had not seized Lincoln.
The tall, outspoken Keating, who boasted of his political connections in Washington, now maintains that he is penniless, although he has continued to live in his million-dollar mansion in Phoenix. Under Keating, Lincoln was known for its speculative investments in real estate development, including the lavish Phoenician Hotel and Resort outside Phoenix, and Keating vigorously defended the use of government-insured deposits to fund such projects.
Others charged in the indictment today were Judy E. Wischer, former president of American Continental; Robin S. Symes, former chief executive officer of Lincoln; and Ray C. Fidel, former president of Lincoln. Bail was set for them at $1 million apiece.
District Attorney Reiner, at a press conference after the hearing, said "the bail is justified" because Lincoln is accused of defrauding 22,000 victims of more than $250 million.
Reiner said the investigation, headed by San Francisco attorney Lynn Miller, showed that elderly people were "deliberately targeted," enticed to invest their life savings on high-risk junk bonds that turned out to be uninsured and worthless. They were unsophisticated buyers, he said, "and thought people had their best interest at heart." The money went to Lincoln, then to American Continental and "from there to Mr. Keating," Reiner said.
Judge Klausner postponed arraignment until Oct. 5 since attorneys did not see the indictment until this morning.
Keating and other former executives also face civil lawsuits and court actions, which were filed after American Continental sought bankruptcy protection and the government seized Lincoln. The Department of Corporations has sued Keating on behalf of the investors, although the investors themselves filed a claim against the department for allowing the bonds to be sold.
Reiner said his office kept the 10-month state grand jury investigation tightly and narrowly focused. The charges unveiled today involved only 20 of the alleged victims. "Massive fraud cases are far too complex for a jury to absorb everything," Reiner said, so his office focused on the bonds that were sold primarily to elderly people.
The S&L scandal also shadowed President Bush yesterday during a political trip to Denver, home of his son, Neil, who has been the subject of various investigations into his role as a director of the failed Silverado Banking, Savings and Loan Association.
The chairman of the Colorado Democratic Party, Dick Freese, said in a statement: "Neil and his buddies at Silverado ... broke $1 billion worth of windows that belong to Coloradans. His father is here raising political money and that money should go to pay for the damage."
Staff writers Helen Deway and Ann Devroy contributed to this report.