Charles H. Keating

Charles H. Keating (born December 4, 1923—died March 31, 2014) was an American businessman best known for his role in the savings and loan crisis of the 1980s and ’90s, which resulted in the closure of about half of all savings and loan associations in the United States and the bankruptcy of the Federal Savings and Loan Insurance Corporation (FSLIC). Until the subprime mortgage crisis of 2007–08, the savings and loan crisis was considered to be the worst financial disaster in the United States since the Great Depression. Keating, whose criminal activity as the head of Lincoln Savings and Loan led to its spectacular collapse in 1989, became the face of the crisis.

While studying business at the University of Cincinnati, Keating enlisted in the U.S. Naval Air Corps and trained as a fighter pilot during World War II, though he never served in combat. After his discharge in 1945 he returned to the University of Cincinnati, where he won a national collegiate swimming championship. He attended law school and established a successful legal practice, founding his own firm in Cincinnati in 1952. In the 1950s Keating gained a national reputation for organizing citizens’ groups to campaign against pornography and what he considered indecent literature.

In 1972 he left his law firm to become executive vice president of the American Financial Corporation, an insurance company. However, in 1979, both Keating and Carl H. Lindner, Jr., the head of the company, were charged by the Securities and Exchange Commission (SEC) with defrauding stockholders for having approved $14 million in loans to themselves and other officers of the company. Keating maintained his innocence but was fined.

In 1980 Keating moved to Phoenix, Arizona, and established a real-estate development company, which he called American Continental Corporation. In 1984 he acquired Lincoln Savings and Loan, based in Irvine, California. Within four years, Keating ostensibly increased the assets of the bank from about $1 billion to more than $5 billion. In reality, much of Lincoln’s assets were fictional, having been created through deceptive accounting practices. In one such practice, Keating and his partners at Lincoln traded empty lots with other companies and listed the trades as profit-producing sales.

Compounding the damage caused by his accounting fraud, Keating invested two-thirds of Lincoln’s federally insured deposits in junk bonds and other high-risk ventures. In the mid-1980s, when Lincoln began receiving unwanted attention from federal regulators, Keating appealed to a group of five U.S. senators to whom he had given large sums of money in campaign contributions. In 1987 the so-called Keating Five—Alan Cranston, Dennis DeConcini, John Glenn, John McCain, and Donald Riegle—duly intervened on Keating’s behalf with the director of the federal agency that oversaw the operation of the country’s savings and loans. Keating was apparently so sure that he would benefit from his influence with the senators that he boasted to reporters about his “bribes.” The Keating Five were subsequently investigated by the Senate in a scandal that ultimately derailed the political careers of two of the senators involved.

In 1989, federal regulators finally took control of Lincoln, which by then was insolvent. Its collapse, which required the Federal Savings and Loan Insurance Corporation (FSLIC) to cover more than $3 billion in losses, was the largest of more than 1,000 failures in the savings and loan industry. The savings and loan crisis ultimately bankrupted the FSLIC and cost American taxpayers an estimated $124 billion.

Charged with multiple counts of fraud, racketeering, and conspiracy, Keating faced a series of trials in both state and federal courts. In 1991 he was convicted and sentenced to 10 years in prison, and two years later he was convicted on separate charges and sentenced to a prison term of 12 years, to run concurrently with his previous sentence. He was also forced to pay $156 million in fines, and the government auctioned off his home.

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In 1996 a judge set aside Keating’s state convictions, finding that the jury had been prejudiced by prior knowledge of Keating’s affairs and that the trial judge had given the jury incorrect instructions. Later that year Keating’s federal convictions were also overturned on technical grounds. In 1999 Keating pleaded guilty to wire and bankruptcy fraud but was not returned to prison.