Misplaced Pages

Revision as of 01:51, 16 October 2008

Charles Humphrey Keating Jr. (born December 4, 1923 in Cincinnati, Ohio) is a retired American lawyer, politician, and banker best known for his involvement in the savings and loan scandal of the late 1980s. His association with, and financial contributions to, five US senators (Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), and Donald W. Riegle (D-MI) ) to argue for preferential treatment from regulators led to those politicians being dubbed the Keating Five in reference to him.

Early life, education and the war

Keating graduated from St. Xavier High School in 1941. After one semester at the University of Cincinnati, he joined the Naval Air Corps in 1943 and trained to become a fighter pilot. By the time he qualified, World War II was over and he was not deployed. He subsequently went back to college and received a law degree in 1948 from the University of Cincinnati. He became a founding partner of the Cincinnati law firm Keating, Muething & Klekamp. Together with his wife Marie Elaine, he has five daughters and a son. His brother, William J. Keating, was a Republican congressman from Ohio.

Swimming

In the 1940s, Charles Keating was a champion swimmer, winning the 1946 NCAA 200 yard butterfly competition, the first ever national championship for the University of Cincinnati. He is a member of the University of Cincinnati's athletic hall of fame. His son, Charles Keating III, swam in the 1976 Olympics, and his grandson Gary Hall Jr. competed in three Olympics and won 10 medals. Charles Keating has been a long-time supporter of U.S. swimming and in the early 1970s donated a large sum of money to St. Xavier High School in Cincinnati to build a state-of-the-art competition pool. St. Xavier named the Keating Natatorium after Keating, its major benefactor. Additionally, the University of Cincinnati's new athletic building is similarly named Keating Aquatic Center, in honor of the donations from the Keating family used to construct it.

Anti-pornography crusading

In the late 1950s, Keating founded the Cincinnati-based, self-described anti-pornography organization Citizens for Decent Literature, later Citizens for Decency through Law. In 1960 he testified about pornography before Congress.

In 1964 – 1965, he produced the movie Perversion for Profit featuring announcer George Putnam. It was a survey of then-available pornography, and presented an assertion that linked pornography to an alleged decline of culture and to what it claimed was the depravity of youth.

In 1969, President Richard Nixon appointed Keating to the President's Commission on Obscenity and Pornography, which had been begun under his predecessor, Lyndon B. Johnson. Keating unsuccessfully attempted to stop publication of the commission's recommendations with a restraining order. Failing in that effort, he filed a dissenting report, stating "One can consult all the experts he chooses, can write reports, make studies, etc., but the fact that obscenity corrupts lies within the common sense, the reason, and the logic of every man."

In 1971, Keating tried to prevent the showing in Cincinnati of the film Vixen!, produced by film-maker Russ Meyer claiming that it was pornographic. Keating's assertion was rejected and his attempt to ban the film failed. Keating was also instrumental in the ineffective obscenity prosecution of pornographer Larry Flynt in 1976 in Cincinnati. In the 1996 Flynt biopic The People vs. Larry Flynt, he was portrayed by actor James Cromwell.

He also appears in the 2005 documentary Inside Deep Throat.

Failure of Saving & Loan, the Keating Five

In 1972, Charles Keating began to work for American Financial Corporation, a company involved in insurance and banking. Four years later he moved to Phoenix, Arizona to run the real estate firm American Continental Corporation, a spin-off of American Financial Corp. In 1984, American Continental Corporation bought Lincoln Savings. Such savings and loan associations had been deregulated in the early 1980s, allowing them the opportunity to make highly risky investments with their depositors’ money, an opportunity of which Keating took advantage. Specifically, Keating directed the violation is the direct investment rule, regulating the amount of investments that can be owned by savings and loans. Keating had accounting violations to the tune of $650 million dollars, the largest in the history of the FTC, and greatly leading the banks to peril.

Some regulators noted the danger posed by these deregulations and pushed for more oversight, but Congress refused. This may be due, in part, to the Keating Five, five Senators — Dennis DeConcini, Alan Cranston, John Glenn, Don Riegle and John McCain , well over $1 million from Keating in the 1980s as favors and political contributions. Keating's contributions, by his own admissions, were to immunize the violations of the direct investment rule. They later met twice with regulators who were investigating American Continental Corporation, in an attempt to end the investigation. (In 1991, they would be rebuked to various degrees by the Senate Ethics Committee.)

In 1985, Keating hired Alan Greenspan as an economic consultant, in an unsuccessful effort to convince an oversight agency to exempt Lincoln Savings from certain regulations. Greenspan delivered a favorable report, writing that Lincoln Savings was “a financially strong institution that presents no foreseeable risk to depositors or the government.” (Greenspan produced similar favorable reports on numerous other banks that also failed soon after.)

In 1989, American Continental Corporation, the parent of Lincoln Savings, went bankrupt. More than 21,000 investors, most of them elderly, lost their life savings (in total about $285 million.) This occurred largely because they held securities backed by the parent company rather than deposits in the federally-insured institution — a distinction apparently lost on many if not most depositors until it was too late. The federal government covered almost $3 billion of Lincoln’s losses when it seized the institution. Many creditors were made whole, and the government then attempted to liquidate the seized assets through its Resolution Trust Corporation, often at pennies on the dollar compared to what the property had allegedly been worth and the valuation at which loans against it had been made.

In 1989, Keating was subpoenaed to testify before the House Banking Committee, but refused to answer questions, invoking his right against self-incrimination under the Fifth Amendment to the United States Constitution.

Legal consequences

Keating blamed government regulators for the failure of Lincoln Savings and filed suit in order to regain control over the bank. The suit was dismissed in August 1990, with the judge calling the seizure fully justified because of the looting of the institution by Keating and his associates.

In September 1990, Keating was criminally charged with having duped Lincoln's customers into buying worthless junk bonds of American Continental Corporation; he was convicted in state court in 1992 of fraud, racketeering, and conspiracy and received a 10-year prison sentence. In January 1993, a federal conviction followed, with a 12-and-a-half year sentence. He spent four-and-a-half years in prison, but convictions were eventually overturned. Thereafter, on the eve of the retrial on the federal charges, Keating pleaded guilty to several felony charges in return for a sentence of time served.

In the 1980s, Keating donated approximately $1,250,000 to Mother Teresa. During his state trial, she wrote a letter on his behalf to presiding Judge Lance Ito, saying that she had not been informed about his business, but she knew him as a man who was generous toward the poor.

Various government agencies and private parties initiated civil lawsuits against Keating. One federal class action case involving 20,000 plaintiffs resulted in a $3.3-billion judgment (later reduced to $1.6 billion) against him, and his former companies, for having defrauded investors.

Another case filed by the U.S. Securities and Exchange Commission was settled in 1994. Keating claimed to be bankrupt but agreed to repay millions should any hidden assets be discovered. A third case filed by the Resolution Trust Corporation resulted in a summary judgment of $4.3 billion against Keating and his wife in 1994, the largest judgment ever against a private person. The judgment was overturned on appeal in 1996.

Also in 1996, the 9th U.S. Circuit Court of Appeals in San Francisco ruled that the state trial judge Lance Ito had mistakenly allowed the jury to convict Keating without instructing them to determine whether he intended to defraud investors. Thus, the conviction was overturned; the U.S. Supreme Court refused to hear the government's appeal in October 2000, and state prosecutors declined to move for a retrial.

In 1996, the same Court of Appeals ruled that some of the jurors in the federal case might have been influenced by their knowledge of the state case and ordered the trial judge to investigate the matter. The trial judge then granted a new trial.

In 1996, on the eve of the retrial of the federal case, Keating entered a plea agreement --- he admitted to having committed bankruptcy fraud by extracting $1 million from American Continental Corp. while already anticipating the collapse that happened weeks later. In return, the federal prosecutors dropped all other charges against him and his son, Charles Keating III. He was sentenced to the four years he had already served.

Keating remains unrepentant, maintaining that it was not his mistakes or criminal deeds but regulators' actions that were responsible for the major losses. He repeated these claims in an interview in 2006. The 2004 book The Savings and Loan Crisis: Lessons from a Regulatory Failure makes similar claims and presents Keating in a favorable light.

Keating Family Profited from the RTC Disposition of Real Estate In 1995 & later

Real estate properties to be liquidated by Congressional mandate through the Resolution Trust Corporation from the thrift and savings & loan failures were seized and sold in 1989 at a loss incurred by the U.S. government and ultimately borne by American taxpayers. However, Charles Keatings' daughter Mary and his then 18-year old grandson Gary Jr. purchased luxury real estate properties located within a 24-hour guarded and gated golf course development from properties seized by the Resolution Trust Corporation. Two Arizona Biltmore Estates Village Association luxury condominiums were purchased by the Hall family at depressed market prices for 50 cents on the dollar. Keating's daughter and grandson sold the real estate at a return ratio of over $1.38 for each dollar invested. Verification can be found by doing a title search of Maricopa County Tax Assessor numbers for the condos purchased from the RTC by Gary Hall Jr. APN #164-69-485 and the Maricopa County Tax Assessor number of the condo purchased from the RTC by Dr. Gary Hall & his wife Mary Hall and APN # 164-69-505.

Notes

1. Richard L. Berke, Bitter McCain Bids Ethics Panel To End Delay on Deciding Case New York Times, October 23, 1990
2. Jim Ruenberg, Marilyn W. Thompson, David D. Kirkpatrick and Stephen Labaton, For McCain, Self-Confidence on Ethics Poses Its Own Risk New York Times, February 21, 2008
3. Phipip Shenon, 5 Senators Struggle to Avoid Keating Inquiry Fallout New York Times, November 22, 1989
4. Charles Keating's federal campaign contributions 1979-1990 NewsMeat
5. Bibliography about Keating's involvement in the S&L scandal 1989-1993 FDIC
6. Charles Keating pleads guilty to federal fraud charges; four criminal convictions resolve 10-year-old case April 6, 1999
7. Keating asks hometown to hear his side February 7, 2006

• 1923 births
• Living people
• American bankers
• American businesspeople
• Anti-pornography activists
• American fraudsters
• American criminals
• Ohio lawyers
• Politicians from Cincinnati
• People from Cincinnati, Ohio
• American Roman Catholics
• Roman Catholic activists
• Savings and Loan Crisis
• American white-collar criminals
• Congressional scandals
• American political scandals