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Savings and loan figure Charles Keating dies at 90

PHOENIX (AP) - Charles H. Keating Jr., the notorious financier who served prison time and was disgraced for his role in the costliest savings and loan failure of the 1980s, has died. He was 90.

A person with direct knowledge of the death confirmed on Tuesday that Keating had died but didn't provide further details. The person wasn't authorized to release the information and spoke on condition of anonymity.

When Keating's Phoenix-based home construction company, American Continental Corp., bought Lincoln Savings & Loan in 1984, the multimillionaire elevated its worth from $1.1 billion to $5.5 billion in a four-year period.

But his financial empire crumbled with state and federal convictions for defrauding investors. Keating allegedly bilked Lincoln customers by selling them $200 million of unsecured "junk" bonds. They became worthless when Keating's company became bankrupt.

The thrift's collapse cost taxpayers $2.6 billion and tarnished the reputations of five senators who became known as the "Keating Five." One of them was Republican U.S Sen. John McCain of Arizona, and the scandal re-entered the spotlight during the 2008 presidential campaign.

As the public heard testimony of elderly bondholders who had lost their life savings, Keating became a national poster boy for corporate greed. Keating was convicted in both state and federal court, but the convictions were thrown out and he agreed to a federal plea deal that freed him after nearly five years in prison.

Though Keating insisted he was a symbol of the common man, he was known more for an extravagant lifestyle. Keating received $19.4 million in salary, stock purchases and other compensation over five years, ending in 1988. His company provided luxuries like the use of a $5 million refurbished Florida estate. The corporation picked up the tab for lavish events like a 1986 Christmas party at which nearly $2,000 was spent on Silly String alone.

American Continental also paid to maintain three corporate jets. Keating was known to take long trips to Africa, Europe and elsewhere.

As the savings and loan institution's profits rose, the Federal Home Loan Bank in San Francisco began looking into investment activity in 1986. The examination was the beginning of numerous conflicts between Keating and federal regulators.

By April 1989, American Continental filed for bankruptcy protection - one day before federal regulators seized Lincoln for alleged bad business practice. The government claimed Keating made land swap deals to fabricate real estate profits.

Through a tax-sharing agreement, American Continental was then able to siphon off $94 million of federally insured deposits in the form of deferred taxes never actually paid to the Internal Revenue Service.

The financial fallout triggered investigations and multiple lawsuits from all sides.

Keating filed a lawsuit, accusing the government of illegal seizure. In turn, the government slapped Keating, as well as several family members and associates, with a $1.1 billion fraud and racketeering civil lawsuit.

Several of the 23,000 investors who purchased junk bonds also filed suit against Keating.

The scandal also shook the political world. Five senators who received campaign donations from Keating - McCain, Democrat Alan Cranston of California, Democrat John Glenn of Ohio, Democrat Donald W. Riegel Jr. of Michigan and Democrat Dennis DeConcini of Arizona - were accused of impropriety for appealing to regulators on Keating's behalf in 1987.

In 1991, the Senate Ethics Committee formally reprimanded Cranston for "improper and repugnant" dealings with Keating. DeConcini and Riegle received rebukes from the committee but no further punishment for creating the appearance of impropriety. Glenn and McCain were criticized less severely; the panel said they "exercised poor judgment."

McCain later called his involvement with Keating "the worst mistake of my life" and said having his honor questioned was in some ways worse than the torture he endured in Vietnam. During the 2008 presidential campaign, then-Sen. Barack Obama revisited McCain's role in the scandal in a campaign Web video.

In a statement provided to The Arizona Republic, McCain said Tuesday that "my thoughts and prayers are with the family of Charles Keating, a loving father and grandfather."

Throughout Keating's 1991 trial in California on state securities fraud charges, he stuck to his claim that he was an innocent target of a power-hungry federal government.

The four-month trial ended with a jury finding Keating guilty of 17 of 18 charges. Two years later, Keating and his son, Charles Keating III, were convicted of multiple federal charges of racketeering, fraud, conspiracy and transporting stolen property. He started serving a 12-year federal and 10-year state prison sentence concurrently in 1993.

In all, Keating served nearly five years in prison. His state convictions were overturned a second time in 1998 when a federal court judge ruled the trial judge, Lance Ito, had not properly instructed the jury.

That same year, an appeals court judge threw out Keating's federal securities charges. The judge said jurors had improperly learned of his state convictions. Keating then made a plea deal with federal prosecutors, pleading guilty to three counts of wire fraud and one count of bankruptcy fraud in exchange for time served, with no fines or restitution. Charges were also dismissed against his son.

State prosecutors decided in 2000 not to retry Keating.

"I had the honor to represent him over many years, and I got to see a side of him many others did not," Stephen C. Neal, chairman of Cooley LLP and Keating's longtime attorney, said in a statement Tuesday night. "Though his controversies were many, he faced adversity with great dignity, wit and courage. Charlie never wavered in his faith."

Post-prison, Keating moved into his daughter's home in the wealthy Phoenix enclave of Paradise Valley. In 2006, he quietly began work as a business consultant in Phoenix.

Born in 1923, in Cincinnati, Ohio, Keating had a middle class upbringing as the son of Charles Sr., a dairy company worker, and Adele, a homemaker. His family had financial difficulties when the senior Keating was diagnosed with Parkinson's disease.

Educated in Roman Catholic schools, Keating studied business at the University of Cincinnati. After the first quarter, he enlisted in the Naval Air Corps and trained to fly in combat. Keating was honorably discharged in 1945.

He later returned to the university, where he achieved an NCAA gold medal in swimming. Keating then attended law school and joined a law firm in 1947.

He is survived by wife Mary Elaine, daughter Mary, son Charles and grandson Gary Hall Jr., who was an Olympic swimming champion.

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knute9 April 02 2014 at 6:07 AM

The 2008 bank bust was just a larger version of the Savings and Loan crisis of 1989. These crisis required huge taxpayer bailouts, though our government has done nothing to prevent this big problem. If and when is our government going to breakup these "Too Big to Fail or Jail" companies? Our government wont, in fact they are STILL approving the mega mergers which create the "Too Big to Fail or Jail" companies. Don't believe it.....the Comcast-Time Warner merger. Now let's say the new company, which would service 30% of the county, fails. Because of past logic used by our government a huge taxpayer would be required to bailout company. We need to stop this insanity, we need Campaign Finance Reform.

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kcarthey knute9 April 02 2014 at 7:57 AM

The roots of both go back to the failure of an Oklahoma bank named Penn Square and massive lending by Seattle First National bringing down both in the early 80s and leading to the disaster in Texas in the following years. As in most cases, Reagan either took the easiest route or did nothing thus once again creating the problems we face today on so many fronts. Worst President ever.

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sam54ct kcarthey April 02 2014 at 8:38 AM

You left out the collapse of the oil industry as one of the major causes for Oklahoma bank failures. I worked at First National Bank of OKC when it all went down, and oil was the main reason so many oil States lost banks.

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Eric April 02 2014 at 9:08 AM

You think Wallstreet would have learned from the Keating 7. Oh wait they did! They changed the law to make it easier to steal and screw people over with no accountability. Thats the lacey Keating leaves behind.

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kabube Eric April 02 2014 at 9:37 AM

The laws were changed by our senators/congress--they again should be ashamed, but they aren't--they too profited handsomely!

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akhn29 April 02 2014 at 3:36 AM

Probably about 15 years ago a friend and I saw Keating at a yard sale in Arcadia, a quite afluent area of Phoenix, not too far from Paradise Valley. He wasn't impoverished by any means but ,I believe, that he had been humbled, but not quite enough. Many retirees lost everything because of Keating's greed. The politicians cited in the article got a slap on the wrist ,notably, McCain and Cranston , Glenn and De Concini. I don't remember who Riegel was. Unfortunately, we, as a Nation, do not remember our history and continue to give those in power a slap on the wrist when they should, at least , get the same punishment as a common drug dealer. That would be many years in prison and the loss of their right to vote for the rest of their lives. The politicians named here not only continued to vote but continued to serve in the government.

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4 replies
worethewrongsox April 02 2014 at 9:13 AM

He lived FAR LONGER than a man who committed the crimes he committed on his fellow man. I hope against hope there IS A HELL for people like him, Neil Bush, Bernie Madoff, the Enron f'ers and their ilk.

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snhhert April 02 2014 at 9:19 AM

Growing up in Phoenix I remember those days of the keating 5. This was another black eye for the state of Arizona.
Anyone remember Ev Mechan?
Another piece of work.
May Charlie rest in peace knowing what he did to so many people.

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1 reply
BLONDIE & GRUMPY snhhert April 02 2014 at 10:05 AM

What did Ev do, other than try to fight the Keating 5, and the Phoenix 40; he was the most Honorable Governor that we've had... But, the Phoenix 40 knew he wouldn't go along with their plans, so they got him ousted...

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eyerisheyes8 April 02 2014 at 2:54 AM

he started the down fall of our old people. Plus him and his FRIENDs help steve wynn Built most of his casino with a promise. Steve Wynn is still buddies with one of them. Junk bones should have not been put on the market. Worthless paper. Thats what make egos.

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1 reply
idaplaya eyerisheyes8 April 02 2014 at 3:04 AM

As I recall Michael Milken was the Junk Bond King. He did time but kept his money, some of which he used to build a school and form a nonprofit to fight prostate cancer. He just bought a 102 million dollar estate in L.A. and is admired as a hero. The victors make history (or pervert it).

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aman4mennj idaplaya April 02 2014 at 4:53 AM

Justice is like a **** sandwich: the more bread you have this less **** you taste!

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lakeoz79 April 02 2014 at 2:35 AM

this is hp for goodness sake. why do you twisted right wingers post here with such idiotic terms as "gerbil warming"? the article clearly stated all of the politicians who were reprimanded, and anyone with any common sense knows that keating and those like him in those days were the grandfathers of all the corporate grifters who bilk people out of billions today. you righties are just ticked because keating actually did some jail time. that doesn't happen today because we've moved from capitalism straight into corporatism where now, more than ever our representatives are bought and paid for from day one

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jerzeypal April 02 2014 at 2:14 AM

sounds no different today except this time insiders got very rich and so did insiders in on it, no arrests made, get it?

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IBruzEZ April 02 2014 at 9:27 AM

He is not the first and I am sure he will not be the last. The worst is that these folks take everything from a few hard working folks and live lavish lifestyles and don't ever really pay back what they have stolen. He should have been in jail for life.

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kyconlon April 02 2014 at 9:44 AM

This is the guy that visited our high school (all girls) a few times every year in the late 50's & early 60's. He was very boring and we hated to see him coming even though we got out of classes. Get this.... the subject of his talks were always the evils of porn. His opinion of porn included all Elvis movies. He was part of a group called CDL. (Citizens for Decent Literature) Now mind you... we innocent young Catholic girls had no idea what pornography was, nor were we the least bit interested in it! Maybe we should have been giving him some talks about his "holier than thou" attitude and infused in him some real morals and info on how to treat people! We all knew he was a jerk even back then.

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