Charles Keating Jr. dies at 90
A person with direct knowledge of the death confirmed Tuesday that Keating had died, but did not provide details. The person, who spoke anonymously, was not authorized to release the information.
When Keating’s Phoenix-based homebuilder American Continental Corp. bought Lincoln Savings & Loan in 1984, the multimillionaire grew his fortune from $1.1 billion to $5.5 billion in four years. But his financial empire collapsed amid state and federal convictions for defrauding investors. Keating allegedly sold $200 million in unsecured “junk” bonds to Lincoln customers. They became worthless when Keating’s company went bankrupt.
The austerity collapse cost taxpayers $2.6 billion and tarnished the reputations of five senators known as the Keating Five: John McCain (R-Ariz.), John Glenn (D-Ohio), Alan Cranston (D-Calif.), Donald Riegle (D-Mich.) and Dennis DeConcini (D-Ariz.). The debate lasted until McCain’s 2008 presidential campaign.
As the public heard the testimonies of elderly bondholders who lost their life savings, Keating became a national poster boy for corporate greed. Keating was convicted in both state and federal courts, but the conviction was overturned and he agreed to a federal plea deal that freed him after nearly five years in prison.
Although Keating insisted that he was the symbol of the common man, he was more known for his extravagant lifestyle. Keating received $19.4 million in salary, stock purchases and other compensation over the five years through 1988. His company provided luxuries such as a $5 million renovated Florida estate. The company opted for lavish events like a 1986 Christmas party where almost $2,000 was spent on Silly String alone.
American Continental also paid for the maintenance of three corporate jets. Keating was known to make long journeys to Africa, Europe and elsewhere. As the savings and loan’s profits soared, San Francisco’s Federal Home Loan Bank began looking into investment activity in 1986. The investigation was the start of several conflicts between Keating and federal regulators.
In April 1989, American Continental filed for bankruptcy protection—one day before federal regulators seized Lincoln for alleged bad business practices. The government alleged that Keating entered into land swaps to generate real estate profits.
Through a tax sharing agreement, American Continental was then able to deduct $94 million in federally insured deposits in deferred taxes that were never actually paid to the Internal Revenue Service. The financial collapse triggered an investigation and several lawsuits from all sides.
Keating filed a lawsuit accusing the government of illegal seizure. In return, the government hit Keating and several of his family members and associates with a $1.1 billion fraud and civil lawsuit. Several of the 23,000 investors who bought the junk bonds sued Keating. The scandal also shook the political world. The five senators who received campaign donations from Keating were charged with wrongdoing for appealing to regulators on Keating’s behalf in 1987.
