Charles Keating
Encyclopedia
Charles Humphrey Keating Jr. (born December 4, 1923) is an American
athlete, lawyer
, real estate developer, banker, and financier
, most known for his role in the savings and loan scandal of the late 1980s.
Keating was a champion swimmer for the University of Cincinnati
in the 1940s. From the late 1950s through the 1970s, he was a noted anti-pornography crusader, founding decency organizations and serving as a dissenting member on the President's Commission on Obscenity and Pornography.
In the 1980s, Keating ran American Continental Corporation
and the Lincoln Savings and Loan Association
, and took advantage of loosened restrictions on banking investments. His enterprises began to suffer financial problems and were investigated by federal regulators. His association with, and financial contributions to, five U.S. senators to argue for preferential treatment from the regulators led to them being dubbed the Keating Five
. When Lincoln failed in 1989, it cost the federal government over $3 billion and about 23,000 customers were left with worthless bonds. In the early 1990s, Keating was convicted in both federal and state courts of many counts of fraud
, racketeering, and conspiracy
. He served four and a half years in prison before those convictions were overturned in 1996. In 1999, he pleaded guilty to a more limited set of wire fraud
and bankruptcy fraud counts, and was sentenced to the time he had already served.
and grew up in the Avondale and Clifton
neighborhoods of that city. His brother William
was born in 1927. Keating's father, Charles Humphrey Keating, came from Kentucky
and managed a dairy
. His father had lost one leg in a hunting accident, and then fell into a long decline from Parkinson's disease
, beginning when Keating was seven, and was nursed by his mother Adelle until his father's death in 1964.
Keating began swimming at a Catholic summer camp
and became passionately involved in the sport. He attended St. Xavier High School, where he was a good student, was on the swim team
all four years, and also ran track and played football
. In swimming he led the team to three Greater Catholic League championships, set several school records, was named all-state, and was captain of the team in his senior year. Keating graduated from St. Xavier in 1941.
After one semester at the University of Cincinnati
in fall 1941, Keating left because of poor grades, although he advanced to the NCAA Men's Swimming and Diving Championships
in 1942, finishing sixth in the 200 yard breaststroke
. He enlisted in the United States Navy
, where he would spend four years. He trained in the Naval Air Corps
to become a carrier-based
night fighter
pilot flying F6F Hellcat
s. During World War II
he was stationed in the U.S., sometimes at Banana Creek in Florida
, and flew Hellcats to armed services swimming meets. He narrowly escaped serious injury one night at Naval Air Station Vero Beach when he neglected to lower the landing gear
on his Hellcat and wrecked the plane in an unexpected belly landing
. Due to additional training on new intercept methods and the vagaries of squadron transfers, the war ended before he was deployed to any combat theater.
wherein they would accept for academic credit much of his Navy service, then he would take six months of liberal arts
courses before entering their law school
.
In 1945, Keating won the 200 yard breaststroke
at the Ohio Intercollegiate Conference championship. On March 30, 1946, Keating competed in the 200 yard breakstroke at the NCAA Men's Swimming and Diving Championships
, before a packed house of 2,500 spectators at Yale University
's Payne Whitney Gymnasium
. In an exciting, back-and-forth contest with Paul Murray of Cornell University
and future coaching legend James Counsilman
of Ohio State University
, Keating prevailed by a foot to win the championship with a time of 2:26.2. (The event was later reclassified as the butterfly
in NCAA records due to a definitional evolution involving the two strokes.) This was the first ever national championship in any sport for the University of Cincinnati. He and teammate Roy Lagaly also become the first-ever Bearcats to be named All-America
ns. Keating was an imposing 6 foot 5 inches, a natural leader and co-captain of the team with Lagaly. Of Keating, Lagaly later said, "You could tell even then he was going to be very successful. He was very ambitious. Whatever he did, he did all the way."
Keating followed this by, swimming for Cincinnati Gym, finishing second to future Olympic gold medalist Joseph Verdeur in the 220 yard breaststroke at the April 1946 national AAU
championships.
In 1948, Keating received his law degree from the University of Cincinnati College of Law
. Keating would later be named a member of the University of Cincinnati's Athletic Hall of Fame.
His son, Charles Keating III, swam in the 1976 Olympics
, finishing fifth in the 200 meter breaststroke
. His grandson Gary Hall Jr. competed in three Olympics as a swimmer and won 10 medals.
Charles Keating has been a long-time supporter of U.S. swimming and beginning in 1969 he and his brother William
donated $600,000 to St. Xavier High School in Cincinnati to build a state-of-the-art competition pool. The school's swim team went on to win many state titles. St. Xavier named the Keating Natatorium after the brothers' father, and inducted Charles Keating into its initial Athletic Hall of Fame class in 1985. The University of Cincinnati's 2006 athletic building is named the Keating Aquatic Center, in honor of Keating's brother William and the donations from the Keating family used to construct it. He also funded Cincinnati's Marlins swim club; six swimmers on the 1980 Olympic squad were from its roster, including future Olympic champion Mary T. Meagher
. When he later moved to Phoenix, he built the Phoenix Swim Club, where Hall Jr. trained.
After law school graduation, Keating did spot legal work for the FBI, then joined a law firm doing corporate law
. On the side, he experimented with other businesses, selling life insurance
, running a fruit stand
, and working for Roto-Rooter
.
In 1952, along with his brother William
and a friend from law school, he became a founding partner of the Cincinnati law firm Keating, Muething & Keating. Beginning in the late 1950s they took on as a client Carl Lindner, Jr.
, who was rapidly accumulating ice cream stores, supermarkets, real estate, and savings and loans, and soon Lindner essentially became Keating's sole client. In 1956, Keating filed requests for Q clearance
s on behalf of a small company of former Los Alamos Scientific Laboratory scientists with an office in Newtown, Ohio
; unknown to Keating, the FBI suspected the application was fradulent and launched an investigation of him, but no charges were made. Keating was admitted to the U.S. Supreme Court bar in 1958.
In 1960, Lindner and Keating created American Financial Corporation, a holding company of Lindner's disparate businesses that created further subsidiaries and financial instruments, all doing business with each other. Keating was named to the board of directors of the company in 1963.
, and he began giving fervent talks on the subject to parents and other groups. In 1958 he went to Washington, D.C.
and testified before the House Judiciary Committee on mail-order pornography, saying that it was "capable of poisoning any mind at any age and of perverting our entire younger generation", that it was closely tied to juvenile delinquency, and that it was "part of the Communist conspiracy".
Keating founded Citizens for Decent Literature
in 1958, (later renamed a number of times, the best known of which is Citizens for Decency through Law), which advocated reading classics not "smut." It would grow to 300 chapters and 100,000 members nationwide and become the largest anti-pornography organization in the nation. Over the following 20 years the organization mailed some 40 million letters on behalf of its position and had filed amicus curiae
briefs. Keating gained the moniker "Mr. Clean". During the early 1960s, Keating twice requested FBI assistance on behalf of his anti-pornography campaign but the bureau, still skeptical regarding Keating due to its early investigation, declined.
In 1964 – 1965, he produced the movie Perversion for Profit
featuring announcer George Putnam
. It was a survey of then-available pornography, and asserted that pornography was linked to juvenile delinquency and decline in culture.
In 1969, Keating's national reputation on the issue led to President
Richard Nixon
appointing him to the President's Commission on Obscenity and Pornography, which had been begun under his predecessor, Lyndon B. Johnson
. The majority on the commission developed a controversial report which concluded that pornography does not degrade the morals of adults or cause crime, and recommended that all federal, state, and local laws preventing consenting adults from obtaining pornographic materials be repealed. Keating, Nixon's only appointee on the 18-person commission, was the leading commission dissident against this report. In September 1970, Keating gained a temporary restraining order
from the D.C. Federal District Court
to hold up publication of the report, on the grounds that he needed access to all the report's backing materials and more time in order to write a comprehensive dissenting report. The order put at risk any publication of the report at all, since the commission was about to expire. Several days later, Keating and the commission settled the case out of court, and Keating was given the desired materials and two weeks to write his report.
Keating then filed his dissenting report, stating, "At a time when the spread of pornography has reached epidemic proportions in our country and when the moral fiber of our nation seems to be rapidly unravelling, the desperate need is for enlightenment and intelligent control of the poisons which threaten us – not the declaration of moral bankruptcy inherent in the repeal of the laws which have been the defense of decent people against the pornographer for profit." Keating also wrote, "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." The Nixon administration tacitly supported Keating's legal efforts, and Counsellor to the President John Ehrlichman
assigned White House speechwriter Pat Buchanan
to help draft the dissenting report. The commission's majority report was denounced by congressional leaders of both parties as well as by the administration.
The commission involvement earned Keating even further national attention, which he used to push towards stringent behavior in Cincinnati. In 1969, Keating obtained an injunction preventing the showing in Cincinnati of softcore
sexploitation
master Russ Meyer
's film Vixen!
, claiming it was obscene, and the film was seized by the police the first day it opened. Showing of the film was successfully stopped in other parts of Ohio as well, and Meyer spent $250,000 in defense against Keating legal actions. Keating said that Meyer had done more to undermine morals in the nation than anyone else; Meyer responded that "I was glad to do it." The Cincinnati Vixen! case was appealed and in 1971 the Supreme Court of Ohio
upheld the prohibition. In 1970, Keating tried to block a closed-circuit showing of the musical Oh! Calcutta!
in Cincinnati, saying that "it appeals to a prurient interest in sex." During 1972, a Keating legal action kept a sex film theater shut as a "public nuisance". He tried to prevent newsstands near his office from selling Playboy
and Oui
magazines. He denounced the Ramada Inn chain for offering adult programming on cable television to guests. Other local actions involving shutting stores and removing books from public libraries were attributed by civil liberties advocates to the "oppressive" trend that Keating had set. Such was the effectiveness of Keating and his organization that when the U.S. Supreme Court handed down the 1973 Miller v. California
decision establishing that obscenity definitions should be established based upon local community standards, every adult bookstore and movie house in Cincinnati was closed within hours.
Keating also held a strong dislike for gays, saying "Homosexuals should be prosecuted and put in jail." Keating kept a large supply of pornographic examples in his law offices in Cincinnati, to show to any visitors who seem skeptical about the nature of the problem. He continued to testify to Congress about the dangers of pornography during the 1970s, often describing the materials in question in lurid detail.
In 1975, Oui
magazine gave Keating the top spot on its "Enemies of pornography" list. Hamilton County
prosecutor Simon L. Leis, Jr.
, who was also a crusader against obscenity, put Ohio pornographer Larry Flynt
on trial in 1976 for pandering obscenity and for engaging in a form of organized crime. Local public opinion ran against Flynt, largely because of Keating's denunciations of him. Flynt was convicted of both counts and received the maximum sentence of 7 to 25 years in prison. While the conviction was later overturned on appeal, the verdict again established Cincinnati's community standards in this regard, and even after Keating left for Arizona, his influence remained in Cincinnati being a center of anti-pornography fervor. In the 1996 Flynt biopic The People vs. Larry Flynt
, which exaggerated Keating's role in the prosecution and trial, Keating was portrayed by actor James Cromwell
. Attempts to show Vixen! in Cincinnati would continue, but by the late 1990s it was still illegal to do so.
Keating left his law practice in 1972 and formally joined American Financial Corporation, by now a $1 billion enterprise, as executive vice president. Keating became Lindner's hatchet man
, in charge of firing employees from newly acquired companies. Within business circles Keating gained a reputation for aggressiveness and arrogance. Keating also took on an operational involvement in The Cincinnati Enquirer
, the town's only morning newspaper. To some on the paper, he interfered in editorial decisions, such as adding coverage to high school sports that he or Lindner's sons were involved in. The paper was then sold to a group including his brother William, who had been a Republican congressman from Ohio's 1st congressional district
in the early 1970s. Keating was involved in American Financial's 1974 sale of Bantam Books
and its decision that year not to enter the investment banking
field.
By 1975 and 1976, several stockholder lawsuits were filed against American Financial, and Keating was under fire for aspects involving unsecured loans, stock warrants, and the sale of the Enquirer. The Securities and Exchange Commission launched a major investigation of the company and charged Lindner, Keating, and others with having defrauded investors for their own benefit and filing false SEC reports. At particular issue was a $14 million loan that the SEC said was made on preferential terms.
Keating resigned from American Financial in August 1976, with conflicting stories regarding the reason and whether he remained close to Lindner or had a falling out with him.
, in 1976 to run the real estate
firm American Continental Homes, a struggling, millions-losing homebuilding spin-off of American Financial that was given over to Keating for $300,000 as part of his departure package. The move was completed when his family followed him in 1978. In 1979 the SEC case with American Financial was settled, with Keating signing a consent agreement where he neither admitted nor denied guilt but agreed not to violate federal fraud and securities statutes. In practice, Keating was blamed for much of the irregular financial practices that had gone on and his reputation was significantly damaged.
Meanwhile, Keating benefitted from the move to Arizona, a wide-open territory in both a physical and business sense that allowed someone a fresh start. He turned the now-renamed American Continental Corporation
around, adding various operations and divisions in a structure somewhat reminiscent of American Financial. As chairman and controlling stockholder, Keating relied heavily upon family members, employing his son and four of his sons-in-law in prominent positions. His son Charles Keating III had an especially fast career rise within the company.
During 1979, Keating served as head of fundraising in the Southwest for John Connally
's campaign for the 1980 Republican Party presidential nomination
. Connally was a favorite of the business community, but his campaign had difficulty parlaying its fundraising successes into popular support. In early December 1979, Keating was named campaign manager, with the existing manager being demoted to campaign strategist. Keating's first action was as a "pruner" who immediately fired twenty workers at the campaign's Virginia headquarters. The campaign continued to struggle, and by late February 1980, Keating was out as manager, with Connally taking over the role himself. Connally's campaign ended two weeks later, famously known for having spent $11 million and gaining only one delegate.
Having won the 1980 election, President Ronald Reagan
contacted Keating about becoming U.S. Ambassador to the Bahamas
, where Keating had spent considerable time. When Keating's run-in with the SEC resurfaced in press reports, however, he was dropped from consideration. This dismayed Keating, who subsequently said, "To keep people like me out of positions like that because of yellow journalism, I don't know what good it does."
By the early 1980s, American Continental's profits were in the millions and it had become the biggest single-family home builder in Phoenix and Denver. At its peak it would have $6 billion in assets, a large number of subsidiaries, 2,500 employees, and a headquarters complex on Phoenix's Camelback Road. It also had three corporate jets and a helicopter. Keating was a very hard worker and a strong presence to his employees; one later said, "It's almost magnetic. When he moves, things happen. The office would come alive when he walked in." He inspired both camaraderie and fervent loyalty in them, and while he demanded long hours they were often rewarded them very well financially and with gifts. Business people outside his company, however, often found Keating arrogant and difficult to deal with. Former Congressman William Keating
, who was as well liked as his brother was not, said: "Charlie is impatient, aggressive, always on the move. He has clearly defined goals. I don't think he worries about the popularity of his positions." A 1977 Fortune
magazine profile had reported that "It seems almost impossible to find anyone who actually likes Charlie Keating." The story long rankled Keating, who later had over five thousand large yellow "I Like Charlie Keating" buttons made up which he handed out to employees and visitors. Keating said, "There are a lot of people that would say nasty things, I'm sure, about me, but it ain't true that nobody ever liked Charlie Keating."
Still deeply religious, Keating became a heavy giver to charity when he moved to Phoenix, donating $100,000 to the Society of Saint Vincent de Paul
, more than $1 million to Covenant House
, and another more than $1 million to Mother Teresa
's operations, including lending her his helicopter when she was in Arizona so that she could visit remote Indian reservations in the state. Covenant House's Father Bruce Ritter
said of Keating, "He makes you believe in Providence."
In 1983, Keating and his companies made legal but unusually large campaign donations in races for the Phoenix City Council
, who were responsible for approving his building projects including water usage for residential developments built around artificial ponds. The scale of donations represented a change from past practice in local Phoenix politics; some council figures opposed the trend, while others readily asked for the funds.
for just over $50 million. Up through the early 1980s, Lincoln had been a conservatively-run enterprise, with almost half its assets in home loans
and only a quarter of its assets considered at risk. It made slow growth at best, and had shown a loss for several years until it made a profit of a few million dollars in 1983. Once he took over, Keating fired the existing management. Savings and loan association
s had been deregulated
in the early 1980s, allowing them to make high-risk investments with their depositors' money, a change of which Keating and other savings and loan operators took advantage. (When Keating was later asked why he got into savings and loans, he said, "I know the business inside out, and I always felt that an S & L, if they'd relax the rules, was the biggest moneymaker in the world.") Over the next four years, Lincoln's assets increased from $1.1 billion to $5.5 billion. Lincoln's particular investments took the form of buying land, taking equity
positions in real estate development projects, and buying high-yield junk bonds.
Beginning in 1985, the Federal Home Loan Bank Board
(FHLBB) feared that the savings industry's risky investment practices were exposing the government's insurance funds to huge losses. It instituted a rule whereby savings associations could hold no more than 10 percent of their assets in "direct investments", and were thus prohibited from taking ownership positions in certain financial entities and instruments. Lincoln had become burdened with bad debt resulting from its past aggressiveness, and by early 1986, its investment practices were being investigated and audit
ed by the FHLBB: in particular, whether it had violated these direct investment rules; Lincoln had directed accounts insured by the Federal Deposit Insurance Corporation
into commercial real estate ventures. By the end of 1986, the FHLBB had found that Lincoln had $135 million in unreported losses and had surpassed the regulated direct investments limit by $600 million.
Keating had taken several aggressive measures to oppose the FHLBB, including recruiting a study from then-private economist Alan Greenspan
saying that direct investments were not harmful, trying to hire FHLBB members or their wives, and getting President Ronald Reagan
to make a recess appointment of a Keating ally, real estate developer Lee H. Henkel Jr., to the FHLBB. By March 1987, however, the ally had resigned upon news of his having large loans due to Lincoln. It appeared as though the government might seize Lincoln for being insolvent.
Starting in January 1987, Keating looked for help from what became known as the Keating Five
: U.S. Senators
Alan Cranston
(D
-CA
), Dennis DeConcini
(D
-AZ
), John Glenn
(D
-OH
), John McCain
(R
-AZ
), and Donald W. Riegle
(D
-MI
). Keating had, or would soon make, legal political contributions of about $1.3 million to the senators, and he called on them to help him resist the regulators. Keating had become a personal friend of McCain following their initial contacts in 1981, and McCain was the only one of the five with close social and personal ties to Keating. McCain and his family had made several trips at Keating's expense, sometimes aboard American Continental's jet, for vacations at Keating's opulent Bahamas retreat at Cat Cay.
Keating asked that Lincoln be given a lenient judgment by the FHLBB, so it could limit its high risk investments and get into the relatively safe home mortgage
business, allowing the business to survive. A letter from audit firm Arthur Young & Co. bolstered Keating's case that the government investigation was taking a long time. McCain initially refused to meet with Keating over the FHLBB matter and Keating called McCain a "wimp" behind his back. The two had a heated, contentious meeting in which McCain said he had not spent years in North Vietnamese prisoner-of-war camps
to have his courage or integrity questioned; the friendship ended and they would not speak again. In April 1987, the group of senators met twice with FHLBB members who were investigating American Continental Corporation and Lincoln, in an attempt to end the investigation. Meanwhile Keating filed a lawsuit against the FHLBB, saying it had leaked confidential information about Lincoln. The outgoing head of the FHLBB deferred judgment on the matter, and the new head was more sympathetic to Keating; in May 1988, the FHLBB agreed to an unprecedented memorandum of understanding
that gave Lincoln a clean slate and forgiveness for any violations up to that point. (In 1991, the senators would be rebuked to various degrees by the Senate Ethics Committee, with Cranston receiving the harshest verdict and Glenn and McCain the least. McCain later testified against Keating in a civil lawsuit brought by Lincoln bondholders, while the other four refused to testify.)
profile assessed Keating as "a businessman without apparent peer in Arizona in terms of riches, clout and color." While Keating had taken Citizens for Decency through Law with him, he had generally deemphasized his anti-pornography work when he moved to Arizona. Nevertheless, X-rated movies and Playboy magazine were banned from his hotels.
In October 1988, Keating opened his most extravagant real estate project ever, the 250 acres (1 km²), 600-room The Phoenician resort at the base of Camelback Mountain
. Its construction cost $300 million, included many opulent, imported features, and saw a number of instances of Keating or his decorator wife making wholesale late design changes at great expense. Keating's other grand project was Estrella
, a 20000 acres (80.9 km²) mixed-use development outside of Phoenix in Goodyear, Arizona
in the direction of the Sierra Estrella
. Incorporating homes, offices, industrial buildings, schools, shopping, a resort and a hospital, it was intended to eventually house 200,000 people and become a model 21st century city. American Continental wrote rules saying that Estrella homeowners could not "intentionally terminat[e] a human pregnancy" or possess "adult material", but removed them once Keating was informed that such covenants were unconstitutional. A late 1980s downturn in the Sun Belt
real estate market put Estrella in jeopardy before much building could be done.
Asked in an interview if he ever worried about going broke, Keating responded, "All the time, every day. I come into the office with this hollow feeling in my stomach lots of time.... You get trapped almost. You get too many responsibilities. It's a bellyfull to carry. It's risky. Dangerous. There's the possibility of failure with it every day and every night. But in a way, it's a challenge. It's invigorating. There isn't any point in not being a player – you're here.... It's not only the money. It's the disgrace, yourself, your manhood. I'm not sure I'd have a big problem with that. On the other hand I'm not sure I wouldn't."
As Lincoln grew, money was siphoned from Lincoln to the parent American Continental Corporation under a variety of schemes, and American Continental spent lavishly on speculative investments and personal expenses. A new regulatory investigation began in July 1988. After Arthur Young indicated doubts about some accounting practices, Keating fired them in September 1988 and switched to Touche Ross. American Continental was desperate for cash inflow to make up for losses in real estate purchases and projects. Lincoln's branch managers and tellers convinced customers to replace their federally-insured certificates of deposit with higher-yielding bond certificates of American Continental; the customers later said they were never properly informed that the bonds were uninsured and very risky given the state of American Continental's finances. Indeed, the regulators had already adjudged the bonds to have no solvent backing. Federal Deposit Insurance Corporation chair L. William Seidman
would later write that Lincoln's push to get depositors to switch was "one of the most heartless and cruel frauds in modern memory." In late 1988, Keating began desperate attempts to sell Lincoln; regulators rejected one $50 million potential sale due to the buyers not meeting federal requirements. A December 1988 audit by the FHLBB found Lincoln in violation of many regulations and in danger of default. The following month they ordered Keating to stop transferring cash from Lincoln to American Continental, which imperiled the latter's survival strategy and caused its stock price to nosedive. Keating tried to arrange junk bond deals with Michael Milken
and place bets in the global currency markets to generate cash, but the moves failed and he lost $11 million in one month alone. Keating got Senators DeConcini and Cranston to pressure the regulators to let a sale go through, but this time the lawmakers were ignored.
American Continental went bankrupt
in April 1989, and Lincoln was seized by the FHLBB. About 23,000 customers were left with worthless bonds. Many investors, often ones living in California retirement communities, lost their life savings, and later claimed to have suffered emotional trauma
for having been duped on top of their financial devastation. The total bondholder loss came to between $250 million and $288 million. The federal government was eventually liable for $3.4 billion to cover Lincoln's losses when it seized the institution. In talking to reporters in April 1989, Keating maintained that he was the victim of a federal government that had spent years trying to destroy him, and then said, "One question, among many raised in recent weeks, had to do with whether my financial support in any way influenced several political figures to take up my cause. I want to say in the most forceful way I can: I certainly hope so."
In September 1989, Keating was hit with a $1.1 billion fraud and racketeering action, filed against him by the regulators. He proclaimed that, "We've lost everything in this thing, my wife and I. It's devastating." In November 1989, Keating was subpoena
ed to testify before the House Banking Committee, but refused to answer questions, invoking his right against self-incrimination under the Fifth Amendment
. Also in November, his Phoenician Resort was seized by the FBI; under their operation it became known as "Club Fed" before later being sold to a Kuwait
i group. The vastly ambitious Estrella project would remain desert and was sold in 1993 to an investment group.
By November 1989, the estimated cost of the overall savings and loan crisis
had reached $500 billion, and the media's coverage often highlighted Keating's role as part of what became a feeding frenzy
. Indeed, Keating and Lincoln Savings became convenient symbols for arguments about what had gone wrong in America's financial system and society, as well as for 1980s greed in general, and were featured in popular culture references. A deck of playing cards would be marketed, called "The Savings and Loan Scandal", that featured on their face Charles Keating holding up his hand, with images of the Keating Five senators portrayed as puppets on his fingers.
In September 1990, Keating and his associates were indicted
by the State of California on 42 counts related to having duped Lincoln's customers into buying worthless junk bonds of American Continental Corporation; Keating went to jail when he could not post a $5 million bond. He was convicted in December 1991 of 17 counts of fraud
, racketeering, and conspiracy
. Mother Teresa
asked the court to show leniency to Keating, in recognition of the considerable sums he had donated to her charitable operations. However, in April 1992, California Superior Court Judge Lance Ito
gave Keating the maximum 10-year prison sentence, quoting Woody Guthrie
's line that "More people have suffered from the point of a fountain pen than from a gun." Keating went to the medium-security Federal Correctional Institution, Tucson
to serve his time.
In May 1992, Keating's son-in-law Robert M. Wurzelbacher Jr. (married to his daughter Elizabeth), a senior vice president of American Continental, and chief executive of an investment firm owned by Lincoln Savings, was also implicated, pleaded guilty to three federal fraud counts in connection with the collapse of the Lincoln Savings and Loan Association and agreed to testify against Keating. (In December 1993, Wurzelbacher was sentenced to a 40-month prison term.)
In January 1993, a federal conviction followed, on 73 counts of fraud, racketeering and conspiracy. In July 1993, Keating was given a 12½ year sentence. The judge also ordered Keating to pay restitution of $122 million to the government, but Keating said he was $10 million in debt and had no assets to sell.
One 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 1999, on grounds that Keating could not be held personally liable to the government without a specific criminal conviction or some other decision at trial.)
Throughout his imprisonment, Keating maintained his innocence, saying he was a "political prisoner
" of the U.S. government and a scapegoat for the largest banking scandal in the nation's history.
In April 1996, the 9th U.S. Circuit Court of Appeals in San Francisco ruled that state trial judge Ito had mistakenly allowed the jury to convict Keating by giving them faulty instructions as the law as regarding fraud. Thus, the conviction was overturned. In December 1996, the same Court of Appeals ruled that some of the jurors
in the federal case might have been influenced by their knowledge and discussion of the results of the state case, and threw out the federal conviction. Keating was now a free man after having spent 4½ years in prison; he later said that staying tough during his incarceration was the thing he was proudest of that he had done.
In April 1999, on the eve of the retrial of the federal case, Keating entered a plea agreement
. He admitted to having committed four counts of wire
and bankruptcy fraud by extracting nearly $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 over four years time he had already served.
In October 2000, the U.S. Supreme Court refused to hear the government's appeal of the overturning of the state conviction. This left Keating without any convictions on his record of the core charge that he had duped and defrauded investors by having them switch from insured accounts for junk bonds. State prosecutors declined to move for a retrial, saying it would bring no more than a six-month jail sentence and that many witnesses had died in the interim or were in bad health. In reaction, Keating said that if the government had left him alone, investors "would all be rich."
s lengthy profile of Keating in 1990 said in summary:
Michael Binstein and Charles Bowden
's 1993 book, Trust Me: Charles Keating and the Missing Billions, also presents Keating as a complex individual with contradictory tendencies, and concludes:
Keating steadfastly maintains that it was not his mistakes or criminal deeds but regulators' actions that were responsible for the major losses. A 2004 Milken Institute
study also makes the claim that regulators' actions were responsible for the Lincoln failure and presents Keating's actions in a favorable light.
Some of Keating's 1980s judgement as a developer was later validated. The Phoenician became a successful hotel in the luxury segment, and the Estrella project achieved at least some of Keating's vision and was acquired again in 2005.
Following his release from prison, Keating moved in with one of his daughters in the Paradise Valley neighborhood of Phoenix. During the 2000s he began working as a business consultant and as of 2008 was involved in some successful real estate developments in the Phoenix market. He keeps a low profile in his business operations, and he declined comment during John McCain's 2008 presidential campaign
when the Keating Five scandal was brought up again by the press.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
athlete, lawyer
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
, real estate developer, banker, and financier
Financier
Financier is a term for a person who handles typically large sums of money, usually involving money lending, financing projects, large-scale investing, or large-scale money management. The term is French, and derives from finance or payment...
, most known for his role in the savings and loan scandal of the late 1980s.
Keating was a champion swimmer for the University of Cincinnati
University of Cincinnati
The University of Cincinnati is a comprehensive public research university in Cincinnati, Ohio, and a part of the University System of Ohio....
in the 1940s. From the late 1950s through the 1970s, he was a noted anti-pornography crusader, founding decency organizations and serving as a dissenting member on the President's Commission on Obscenity and Pornography.
In the 1980s, Keating ran American Continental Corporation
American Continental Corporation
American Continental Corporation was a Phoenix, Arizona-based real estate company of the 1970s and 1980s.It was created in 1978 as a spin-off of American Financial Group, meant to do residential home construction...
and the Lincoln Savings and Loan Association
Lincoln Savings and Loan Association
The Lincoln Savings and Loan Association of Irvine, California was the financial institution at the heart of the Keating Five scandal during the 1980s Savings and Loan crisis....
, and took advantage of loosened restrictions on banking investments. His enterprises began to suffer financial problems and were investigated by federal regulators. His association with, and financial contributions to, five U.S. senators to argue for preferential treatment from the regulators led to them being dubbed the Keating Five
Keating Five
The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators – Alan Cranston , Dennis DeConcini, John Glenn , John McCain , and Donald W. Riegle,...
. When Lincoln failed in 1989, it cost the federal government over $3 billion and about 23,000 customers were left with worthless bonds. In the early 1990s, Keating was convicted in both federal and state courts of many counts of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, racketeering, and conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
. He served four and a half years in prison before those convictions were overturned in 1996. In 1999, he pleaded guilty to a more limited set of wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
and bankruptcy fraud counts, and was sentenced to the time he had already served.
Early life and military service
Keating was born on December 4, 1923 in Cincinnati, OhioCincinnati, Ohio
Cincinnati is a city in the U.S. state of Ohio. Cincinnati is the county seat of Hamilton County. Settled in 1788, the city is located to north of the Ohio River at the Ohio-Kentucky border, near Indiana. The population within city limits is 296,943 according to the 2010 census, making it Ohio's...
and grew up in the Avondale and Clifton
Clifton, Cincinnati, Ohio
Clifton, incorporated as a village in 1850, is now a neighborhood in the north central part of Cincinnati, Ohio, United States. The area includes the Ludlow Avenue Shopping and Dining District. Clifton is situated around Clifton Avenue, north of Dixmyth Avenue, approximately three miles north of...
neighborhoods of that city. His brother William
William J. Keating
William John Keating is a former American politician of the Republican party.Keating served in the United States House of Representatives from 1971 to 1974 representing Ohio's 1st congressional district. He was the brother of financier Charles H Keating Jr. and later was Chairman CEO & Publisher...
was born in 1927. Keating's father, Charles Humphrey Keating, came from Kentucky
Kentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
and managed a dairy
Dairy
A dairy is a business enterprise established for the harvesting of animal milk—mostly from cows or goats, but also from buffalo, sheep, horses or camels —for human consumption. A dairy is typically located on a dedicated dairy farm or section of a multi-purpose farm that is concerned...
. His father had lost one leg in a hunting accident, and then fell into a long decline from Parkinson's disease
Parkinson's disease
Parkinson's disease is a degenerative disorder of the central nervous system...
, beginning when Keating was seven, and was nursed by his mother Adelle until his father's death in 1964.
Keating began swimming at a Catholic summer camp
Summer camp
Summer camp is a supervised program for children or teenagers conducted during the summer months in some countries. Children and adolescents who attend summer camp are known as campers....
and became passionately involved in the sport. He attended St. Xavier High School, where he was a good student, was on the swim team
Swimming (sport)
Swimming is a sport governed by the Fédération Internationale de Natation .-History: Competitive swimming in Europe began around 1800 BCE, mostly in the form of the freestyle. In 1873 Steve Bowyer introduced the trudgen to Western swimming competitions, after copying the front crawl used by Native...
all four years, and also ran track and played football
American football
American football is a sport played between two teams of eleven with the objective of scoring points by advancing the ball into the opposing team's end zone. Known in the United States simply as football, it may also be referred to informally as gridiron football. The ball can be advanced by...
. In swimming he led the team to three Greater Catholic League championships, set several school records, was named all-state, and was captain of the team in his senior year. Keating graduated from St. Xavier in 1941.
After one semester at the University of Cincinnati
University of Cincinnati
The University of Cincinnati is a comprehensive public research university in Cincinnati, Ohio, and a part of the University System of Ohio....
in fall 1941, Keating left because of poor grades, although he advanced to the NCAA Men's Swimming and Diving Championships
NCAA Men's Swimming and Diving Championships
The NCAA Men's Swimming and Diving Championships are college championship events in the USA. The event is held annually, and the NCAA hosts Swimming & Diving Championships in each of its three Divisions ....
in 1942, finishing sixth in the 200 yard breaststroke
Breaststroke
The breaststroke is a swimming style in which the swimmer is on his or her chest and the torso does not rotate. It is the most popular recreational style due to its stability and the ability to keep the head out of the water a large portion of the time. In most swimming classes, beginners learn...
. He enlisted in the United States Navy
United States Navy
The United States Navy is the naval warfare service branch of the United States Armed Forces and one of the seven uniformed services of the United States. The U.S. Navy is the largest in the world; its battle fleet tonnage is greater than that of the next 13 largest navies combined. The U.S...
, where he would spend four years. He trained in the Naval Air Corps
United States Naval Air Corps
The United States Naval Air Corps was a term denoting the portion of the United States Navy made up of United States Naval Aviators. The term was especially in use before and during World War II....
to become a carrier-based
Aircraft carrier
An aircraft carrier is a warship designed with a primary mission of deploying and recovering aircraft, acting as a seagoing airbase. Aircraft carriers thus allow a naval force to project air power worldwide without having to depend on local bases for staging aircraft operations...
night fighter
Night fighter
A night fighter is a fighter aircraft adapted for use at night or in other times of bad visibility...
pilot flying F6F Hellcat
F6F Hellcat
The Grumman F6F Hellcat was a carrier-based fighter aircraft developed to replace the earlier F4F Wildcat in United States Navy service. Although the F6F resembled the Wildcat, it was a completely new design powered by a 2,000 hp Pratt & Whitney R-2800. Some tagged it as the "Wildcat's big...
s. During World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
he was stationed in the U.S., sometimes at Banana Creek in Florida
Merritt Island, Florida
Merritt Island is a census-designated place in Brevard County, Florida, United States. It is located on the east coast of the state on the Atlantic Ocean. As of the 2000 census, the population was 36,090. It is part of the Palm Bay – Melbourne – Titusville, Florida Metropolitan Statistical Area...
, and flew Hellcats to armed services swimming meets. He narrowly escaped serious injury one night at Naval Air Station Vero Beach when he neglected to lower the landing gear
Landing Gear
Landing Gear is Devin the Dude's fifth studio album. It was released on October 7, 2008. It was his first studio album since signing with the label Razor & Tie. It features a high-profile guest appearance from Snoop Dogg. As of October 30, 2008, the album has sold 18,906 copies.-Track...
on his Hellcat and wrecked the plane in an unexpected belly landing
Belly landing
A belly landing or gear-up landing occurs when an aircraft lands without its landing gear fully extended and uses its underside, or belly, as its primary landing device...
. Due to additional training on new intercept methods and the vagaries of squadron transfers, the war ended before he was deployed to any combat theater.
Education and swimming
Keating was ready to return to college after finishing his Navy service in 1945. His abilities as a swimmer made him an attractive recruit, despite his having dropped out earlier. He cut a deal with University of CincinnatiUniversity of Cincinnati
The University of Cincinnati is a comprehensive public research university in Cincinnati, Ohio, and a part of the University System of Ohio....
wherein they would accept for academic credit much of his Navy service, then he would take six months of liberal arts
Liberal arts
The term liberal arts refers to those subjects which in classical antiquity were considered essential for a free citizen to study. Grammar, Rhetoric and Logic were the core liberal arts. In medieval times these subjects were extended to include mathematics, geometry, music and astronomy...
courses before entering their law school
University of Cincinnati College of Law
The University of Cincinnati College of Law is the fourth oldest continually running law school in the United States and a founding member of the Association of American Law Schools. It was started in 1833 as the Cincinnati Law School...
.
In 1945, Keating won the 200 yard breaststroke
Breaststroke
The breaststroke is a swimming style in which the swimmer is on his or her chest and the torso does not rotate. It is the most popular recreational style due to its stability and the ability to keep the head out of the water a large portion of the time. In most swimming classes, beginners learn...
at the Ohio Intercollegiate Conference championship. On March 30, 1946, Keating competed in the 200 yard breakstroke at the NCAA Men's Swimming and Diving Championships
NCAA Men's Swimming and Diving Championships
The NCAA Men's Swimming and Diving Championships are college championship events in the USA. The event is held annually, and the NCAA hosts Swimming & Diving Championships in each of its three Divisions ....
, before a packed house of 2,500 spectators at Yale University
Yale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...
's Payne Whitney Gymnasium
Payne Whitney Gymnasium
The Payne Whitney Gymnasium is the gymnasium of Yale University. Built in the prevailing Gothic architecture style of the campus in 1932, it is a remarkable building, possessing a Gothic tower, a third-floor swimming pool, a polo practice room, and a rooftop running track. It is the second-largest...
. In an exciting, back-and-forth contest with Paul Murray of Cornell University
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
and future coaching legend James Counsilman
James Counsilman
James Edward "Doc" Counsilman was an Olympic and hall-of-fame swimming coach from the United States. He is perhaps best known for being the head swimming coach Indiana University from 1957-1990...
of Ohio State University
Ohio State University
The Ohio State University, commonly referred to as Ohio State, is a public research university located in Columbus, Ohio. It was originally founded in 1870 as a land-grant university and is currently the third largest university campus in the United States...
, Keating prevailed by a foot to win the championship with a time of 2:26.2. (The event was later reclassified as the butterfly
Butterfly stroke
The butterfly is a swimming stroke swum on the breast, with both arms moving simultaneously. The butterfly kick was developed separately, and is also known as the "dolphin kick"...
in NCAA records due to a definitional evolution involving the two strokes.) This was the first ever national championship in any sport for the University of Cincinnati. He and teammate Roy Lagaly also become the first-ever Bearcats to be named All-America
All-America
An All-America team is an honorary sports team composed of outstanding amateur players—those considered the best players of a specific season for each team position—who in turn are given the honorific "All-America" and typically referred to as "All-American athletes", or simply...
ns. Keating was an imposing 6 foot 5 inches, a natural leader and co-captain of the team with Lagaly. Of Keating, Lagaly later said, "You could tell even then he was going to be very successful. He was very ambitious. Whatever he did, he did all the way."
Keating followed this by, swimming for Cincinnati Gym, finishing second to future Olympic gold medalist Joseph Verdeur in the 220 yard breaststroke at the April 1946 national AAU
Amateur Athletic Union
The Amateur Athletic Union is one of the largest non-profit volunteer sports organizations in the United States. A multi-sport organization, the AAU is dedicated exclusively to the promotion and development of amateur sports and physical fitness programs.-History:The AAU was founded in 1888 to...
championships.
In 1948, Keating received his law degree from the University of Cincinnati College of Law
University of Cincinnati College of Law
The University of Cincinnati College of Law is the fourth oldest continually running law school in the United States and a founding member of the Association of American Law Schools. It was started in 1833 as the Cincinnati Law School...
. Keating would later be named a member of the University of Cincinnati's Athletic Hall of Fame.
His son, Charles Keating III, swam in the 1976 Olympics
1976 Summer Olympics
The 1976 Summer Olympics, officially known as the Games of the XXI Olympiad, was an international multi-sport event celebrated in Montreal, Quebec, Canada, in 1976. Montreal was awarded the rights to the 1976 Games on May 12, 1970, at the 69th IOC Session in Amsterdam, over the bids of Moscow and...
, finishing fifth in the 200 meter breaststroke
Breaststroke
The breaststroke is a swimming style in which the swimmer is on his or her chest and the torso does not rotate. It is the most popular recreational style due to its stability and the ability to keep the head out of the water a large portion of the time. In most swimming classes, beginners learn...
. His grandson Gary Hall Jr. competed in three Olympics as a swimmer and won 10 medals.
Charles Keating has been a long-time supporter of U.S. swimming and beginning in 1969 he and his brother William
William J. Keating
William John Keating is a former American politician of the Republican party.Keating served in the United States House of Representatives from 1971 to 1974 representing Ohio's 1st congressional district. He was the brother of financier Charles H Keating Jr. and later was Chairman CEO & Publisher...
donated $600,000 to St. Xavier High School in Cincinnati to build a state-of-the-art competition pool. The school's swim team went on to win many state titles. St. Xavier named the Keating Natatorium after the brothers' father, and inducted Charles Keating into its initial Athletic Hall of Fame class in 1985. The University of Cincinnati's 2006 athletic building is named the Keating Aquatic Center, in honor of Keating's brother William and the donations from the Keating family used to construct it. He also funded Cincinnati's Marlins swim club; six swimmers on the 1980 Olympic squad were from its roster, including future Olympic champion Mary T. Meagher
Mary T. Meagher
Mary Terstegge Meagher Plant is an Olympic champion and former World Record holding swimmer from the United States...
. When he later moved to Phoenix, he built the Phoenix Swim Club, where Hall Jr. trained.
Marriage and family, early legal and business career
In 1949, Keating married Mary Elaine Fette, who was an athletically-minded Catholic from an established Cincinnati family. They would have five daughters, including Kathleen, Mary, and Elizabeth, and a son, Charles Keating III.After law school graduation, Keating did spot legal work for the FBI, then joined a law firm doing corporate law
Corporate law
Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another. Corporate law is a part of a broader companies law...
. On the side, he experimented with other businesses, selling life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...
, running a fruit stand
Fruit stand
A fruit stand is a primarily open-air business venue that sells seasonal fruit and many fruit products from local business. It might also sell vegetables and various processed items derived from fruit...
, and working for Roto-Rooter
Roto-Rooter
Roto-Rooter is a United States company which originally specialized in clearing tree roots and other obstructions from sewer lines.- History :...
.
In 1952, along with his brother William
William J. Keating
William John Keating is a former American politician of the Republican party.Keating served in the United States House of Representatives from 1971 to 1974 representing Ohio's 1st congressional district. He was the brother of financier Charles H Keating Jr. and later was Chairman CEO & Publisher...
and a friend from law school, he became a founding partner of the Cincinnati law firm Keating, Muething & Keating. Beginning in the late 1950s they took on as a client Carl Lindner, Jr.
Carl Lindner, Jr.
Carl Henry Lindner, Jr. was a Cincinnati businessman and one of the world's richest people. According to the 2006 issue of Forbes Magazine's 400 list, Lindner was ranked 133 and was worth an estimated $2.3 billion...
, who was rapidly accumulating ice cream stores, supermarkets, real estate, and savings and loans, and soon Lindner essentially became Keating's sole client. In 1956, Keating filed requests for Q clearance
Q clearance
Q clearance is a United States Department of Energy security clearance equivalent to a United States Department of Defense Top Secret clearance and Critical Nuclear Weapon Design Information . DOE clearances apply for access specifically relating to atomic or nuclear related materials...
s on behalf of a small company of former Los Alamos Scientific Laboratory scientists with an office in Newtown, Ohio
Newtown, Ohio
Newtown is a village in southeastern Hamilton County, Ohio, United States, near Cincinnati. The population was 2,420 at the 2000 census.Newtown was first settled in 1792 under the name of Mercersburg. The name was changed before the village incorporated in 1901.-History:Multiple Native American...
; unknown to Keating, the FBI suspected the application was fradulent and launched an investigation of him, but no charges were made. Keating was admitted to the U.S. Supreme Court bar in 1958.
In 1960, Lindner and Keating created American Financial Corporation, a holding company of Lindner's disparate businesses that created further subsidiaries and financial instruments, all doing business with each other. Keating was named to the board of directors of the company in 1963.
Anti-pornography crusading
In 1956, Keating joined a priest leading a group of Catholic men in Cincinnati who were concerned about the dangers of pornographyPornography
Pornography or porn is the explicit portrayal of sexual subject matter for the purposes of sexual arousal and erotic satisfaction.Pornography may use any of a variety of media, ranging from books, magazines, postcards, photos, sculpture, drawing, painting, animation, sound recording, film, video,...
, and he began giving fervent talks on the subject to parents and other groups. In 1958 he went to Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
and testified before the House Judiciary Committee on mail-order pornography, saying that it was "capable of poisoning any mind at any age and of perverting our entire younger generation", that it was closely tied to juvenile delinquency, and that it was "part of the Communist conspiracy".
Keating founded Citizens for Decent Literature
Citizens for Decent Literature
Citizens for Decent Literature was a pro-censorship advocacy body founded in 1958 by the Roman Catholic anti-pornography campaigner Charles Keating which advocated reading classics, not "smut."...
in 1958, (later renamed a number of times, the best known of which is Citizens for Decency through Law), which advocated reading classics not "smut." It would grow to 300 chapters and 100,000 members nationwide and become the largest anti-pornography organization in the nation. Over the following 20 years the organization mailed some 40 million letters on behalf of its position and had filed amicus curiae
Amicus curiae
An amicus curiae is someone, not a party to a case, who volunteers to offer information to assist a court in deciding a matter before it...
briefs. Keating gained the moniker "Mr. Clean". During the early 1960s, Keating twice requested FBI assistance on behalf of his anti-pornography campaign but the bureau, still skeptical regarding Keating due to its early investigation, declined.
In 1964 – 1965, he produced the movie Perversion for Profit
Perversion for Profit
Perversion for Profit is a 1965 propaganda film financed by Charles Keating and narrated by news reporter George Putnam. A vehement diatribe against pornography, the film attempts to link explicit portrayals of human sexuality to the subversion of American civilization, and briefly draws a...
featuring announcer George Putnam
George Putnam (newsman)
George Putnam was an American television news reporter and talk show host based in Los Angeles. He was known for his catchy phrase "See ya at ten, see ya then" intro prior to a broadcast of the news.-Biography:...
. It was a survey of then-available pornography, and asserted that pornography was linked to juvenile delinquency and decline in culture.
In 1969, Keating's national reputation on the issue led to President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Richard Nixon
Richard Nixon
Richard Milhous Nixon was the 37th President of the United States, serving from 1969 to 1974. The only president to resign the office, Nixon had previously served as a US representative and senator from California and as the 36th Vice President of the United States from 1953 to 1961 under...
appointing him to the President's Commission on Obscenity and Pornography, which had been begun under his predecessor, Lyndon B. Johnson
Lyndon B. Johnson
Lyndon Baines Johnson , often referred to as LBJ, was the 36th President of the United States after his service as the 37th Vice President of the United States...
. The majority on the commission developed a controversial report which concluded that pornography does not degrade the morals of adults or cause crime, and recommended that all federal, state, and local laws preventing consenting adults from obtaining pornographic materials be repealed. Keating, Nixon's only appointee on the 18-person commission, was the leading commission dissident against this report. In September 1970, Keating gained a temporary restraining order
Restraining order
A restraining order or order of protection is a form of legal injunction that requires a party to do, or to refrain from doing, certain acts. A party that refuses to comply with an order faces criminal or civil penalties and may have to pay damages or accept sanctions...
from the D.C. Federal District Court
United States District Court for the District of Columbia
The United States District Court for the District of Columbia is a federal district court. Appeals from the District are taken to the United States Court of Appeals for the District of Columbia Circuit The United States District Court for the District of Columbia (in case citations, D.D.C.) is a...
to hold up publication of the report, on the grounds that he needed access to all the report's backing materials and more time in order to write a comprehensive dissenting report. The order put at risk any publication of the report at all, since the commission was about to expire. Several days later, Keating and the commission settled the case out of court, and Keating was given the desired materials and two weeks to write his report.
Keating then filed his dissenting report, stating, "At a time when the spread of pornography has reached epidemic proportions in our country and when the moral fiber of our nation seems to be rapidly unravelling, the desperate need is for enlightenment and intelligent control of the poisons which threaten us – not the declaration of moral bankruptcy inherent in the repeal of the laws which have been the defense of decent people against the pornographer for profit." Keating also wrote, "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." The Nixon administration tacitly supported Keating's legal efforts, and Counsellor to the President John Ehrlichman
John Ehrlichman
John Daniel Ehrlichman was counsel and Assistant to the President for Domestic Affairs under President Richard Nixon. He was a key figure in events leading to the Watergate first break-in and the ensuing Watergate scandal, for which he was convicted of conspiracy, obstruction of justice and perjury...
assigned White House speechwriter Pat Buchanan
Pat Buchanan
Patrick Joseph "Pat" Buchanan is an American paleoconservative political commentator, author, syndicated columnist, politician and broadcaster. Buchanan was a senior adviser to American Presidents Richard Nixon, Gerald Ford, and Ronald Reagan, and was an original host on CNN's Crossfire. He sought...
to help draft the dissenting report. The commission's majority report was denounced by congressional leaders of both parties as well as by the administration.
The commission involvement earned Keating even further national attention, which he used to push towards stringent behavior in Cincinnati. In 1969, Keating obtained an injunction preventing the showing in Cincinnati of softcore
Softcore
Softcore pornography is a form of filmic or photographic pornography or erotica that is less sexually explicit than hardcore pornography. It is intended to tickle and arouse men and women. Softcore pornography depicts nude and semi-nude performers engaging in casual social nudity or non-graphic...
sexploitation
Sexploitation
Sexploitation, or "sex-exploitation", describes a class of independently produced, low-budget feature films generally associated with the 1960s and serving largely as a vehicle for the exhibition of non-explicit sexual situations and gratuitous nudity. The genre is a subgenre of exploitation films...
master Russ Meyer
Russ Meyer
Russell Albion "Russ" Meyer was a U.S. motion picture director, producer, screenwriter, cinematographer, editor, actor and photographer....
's film Vixen!
Vixen!
Vixen! is a 1968 satiric softcore sexploitation film directed by American motion picture director Russ Meyer. It was the first film to be given an X rating for its sex scenes, and was a breakthrough success for Meyer...
, claiming it was obscene, and the film was seized by the police the first day it opened. Showing of the film was successfully stopped in other parts of Ohio as well, and Meyer spent $250,000 in defense against Keating legal actions. Keating said that Meyer had done more to undermine morals in the nation than anyone else; Meyer responded that "I was glad to do it." The Cincinnati Vixen! case was appealed and in 1971 the Supreme Court of Ohio
Supreme Court of Ohio
The Supreme Court of Ohio is the highest court in the U.S. state of Ohio, with final authority over interpretations of Ohio law and the Ohio Constitution. The court has seven members, a chief justice and six associate justices, each serving six-year terms...
upheld the prohibition. In 1970, Keating tried to block a closed-circuit showing of the musical Oh! Calcutta!
Oh! Calcutta!
Oh! Calcutta! is an avant-garde theatrical revue, created by British drama critic Kenneth Tynan. The show, consisting of sketches on sex-related topics, debuted Off-Broadway in 1969 and then in London in 1970. It ran in London for over 3,900 performances, and in New York initially for 1,314...
in Cincinnati, saying that "it appeals to a prurient interest in sex." During 1972, a Keating legal action kept a sex film theater shut as a "public nuisance". He tried to prevent newsstands near his office from selling Playboy
Playboy
Playboy is an American men's magazine that features photographs of nude women as well as journalism and fiction. It was founded in Chicago in 1953 by Hugh Hefner and his associates, and funded in part by a $1,000 loan from Hefner's mother. The magazine has grown into Playboy Enterprises, Inc., with...
and Oui
Oui (magazine)
Oui is a men's adult pornographic magazine published in the USA and featuring explicit nude photographs of models, with full page pin-ups, centerfolds, interviews and other articles, and cartoons.- Playboy years :...
magazines. He denounced the Ramada Inn chain for offering adult programming on cable television to guests. Other local actions involving shutting stores and removing books from public libraries were attributed by civil liberties advocates to the "oppressive" trend that Keating had set. Such was the effectiveness of Keating and his organization that when the U.S. Supreme Court handed down the 1973 Miller v. California
Miller v. California
Miller v. California, was an important United States Supreme Court case involving what constitutes unprotected obscenity for First Amendment purposes...
decision establishing that obscenity definitions should be established based upon local community standards, every adult bookstore and movie house in Cincinnati was closed within hours.
Keating also held a strong dislike for gays, saying "Homosexuals should be prosecuted and put in jail." Keating kept a large supply of pornographic examples in his law offices in Cincinnati, to show to any visitors who seem skeptical about the nature of the problem. He continued to testify to Congress about the dangers of pornography during the 1970s, often describing the materials in question in lurid detail.
In 1975, Oui
Oui (magazine)
Oui is a men's adult pornographic magazine published in the USA and featuring explicit nude photographs of models, with full page pin-ups, centerfolds, interviews and other articles, and cartoons.- Playboy years :...
magazine gave Keating the top spot on its "Enemies of pornography" list. Hamilton County
Hamilton County, Ohio
As of 2000, there were 845,303 people, 346,790 households, and 212,582 families residing in the county. The population density was 2,075 people per square mile . There were 373,393 housing units at an average density of 917 per square mile...
prosecutor Simon L. Leis, Jr.
Simon L. Leis, Jr.
Simon L. Leis, Jr. is a lawyer and local official from Cincinnati, Ohio. He has served as County Prosecutor for Hamilton County from 1971-1983, a judge in the court of Common Pleas , and has been the County's Sheriff since 1987....
, who was also a crusader against obscenity, put Ohio pornographer Larry Flynt
Larry Flynt
Larry Claxton Flynt, Jr. is an American publisher and the president of Larry Flynt Publications . In 2003, Arena magazine listed him as the number one on the "50 Powerful People in Porn" list....
on trial in 1976 for pandering obscenity and for engaging in a form of organized crime. Local public opinion ran against Flynt, largely because of Keating's denunciations of him. Flynt was convicted of both counts and received the maximum sentence of 7 to 25 years in prison. While the conviction was later overturned on appeal, the verdict again established Cincinnati's community standards in this regard, and even after Keating left for Arizona, his influence remained in Cincinnati being a center of anti-pornography fervor. In the 1996 Flynt biopic The People vs. Larry Flynt
The People vs. Larry Flynt
The People vs. Larry Flynt is a 1996 American biographical drama film directed by Miloš Forman about the rise of pornographic magazine publisher and editor Larry Flynt, and his subsequent clash with the law. The film stars Woody Harrelson, Courtney Love, and Edward Norton.The film was written by...
, which exaggerated Keating's role in the prosecution and trial, Keating was portrayed by actor James Cromwell
James Cromwell
James Oliver Cromwell is an American film and television actor. Some of his more notable roles are in Babe , for which he earned Academy Award nomination for Best Supporting Actor, Star Trek: First Contact , L.A...
. Attempts to show Vixen! in Cincinnati would continue, but by the late 1990s it was still illegal to do so.
American Financial Corporation
While officially an outside lawyer, Keating functioned as a public face for Carl Lindner and American Financial Corporation and the two were close associates on business as well as legal matters; Lindner would sometimes refer to Keating as a "founder" of American Financial. The company had easy access to credit lines, which allowed it to continually grow. The web of transactions involving the company and its subsidiaries was large and complex, and one stock analyst later said in 1977 that he had "never come across a company that has so much strange paper on its books."Keating left his law practice in 1972 and formally joined American Financial Corporation, by now a $1 billion enterprise, as executive vice president. Keating became Lindner's hatchet man
Hatchet man
A hatchet man was originally a pioneer or axeman serving in a US military unit. Towards the end of the 19th century, the phrase was used to describe a Chinese assassin who carried a handleless hatchet, which originated from New York's Doyers Street....
, in charge of firing employees from newly acquired companies. Within business circles Keating gained a reputation for aggressiveness and arrogance. Keating also took on an operational involvement in The Cincinnati Enquirer
The Cincinnati Enquirer
The Cincinnati Enquirer, a daily morning newspaper, is the highest-circulation print publication in Greater Cincinnati and Northern Kentucky. The Cincinnati Enquirer, a daily morning newspaper, is the highest-circulation print publication in Greater Cincinnati (Ohio) and Northern Kentucky. The...
, the town's only morning newspaper. To some on the paper, he interfered in editorial decisions, such as adding coverage to high school sports that he or Lindner's sons were involved in. The paper was then sold to a group including his brother William, who had been a Republican congressman from Ohio's 1st congressional district
Ohio's 1st congressional district
Ohio's 1st congressional district is currently represented by Republican Steve Chabot. This district includes parts of Cincinnati, and borders both Kentucky and Indiana.-Cities:Cincinnati Cheviot Deer Park Forest Park Harrison Mount Healthy...
in the early 1970s. Keating was involved in American Financial's 1974 sale of Bantam Books
Bantam Books
Bantam Books is an American publishing house owned entirely by Random House, the German media corporation subsidiary of Bertelsmann; it is an imprint of the Random House Publishing Group. It was formed in 1945 by Walter B. Pitkin, Jr., Sidney B. Kramer, and Ian and Betty Ballantine...
and its decision that year not to enter the investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
field.
By 1975 and 1976, several stockholder lawsuits were filed against American Financial, and Keating was under fire for aspects involving unsecured loans, stock warrants, and the sale of the Enquirer. The Securities and Exchange Commission launched a major investigation of the company and charged Lindner, Keating, and others with having defrauded investors for their own benefit and filing false SEC reports. At particular issue was a $14 million loan that the SEC said was made on preferential terms.
Keating resigned from American Financial in August 1976, with conflicting stories regarding the reason and whether he remained close to Lindner or had a falling out with him.
American Continental Corporation
Keating moved to Phoenix, ArizonaPhoenix, Arizona
Phoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...
, in 1976 to run the real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
firm American Continental Homes, a struggling, millions-losing homebuilding spin-off of American Financial that was given over to Keating for $300,000 as part of his departure package. The move was completed when his family followed him in 1978. In 1979 the SEC case with American Financial was settled, with Keating signing a consent agreement where he neither admitted nor denied guilt but agreed not to violate federal fraud and securities statutes. In practice, Keating was blamed for much of the irregular financial practices that had gone on and his reputation was significantly damaged.
Meanwhile, Keating benefitted from the move to Arizona, a wide-open territory in both a physical and business sense that allowed someone a fresh start. He turned the now-renamed American Continental Corporation
American Continental Corporation
American Continental Corporation was a Phoenix, Arizona-based real estate company of the 1970s and 1980s.It was created in 1978 as a spin-off of American Financial Group, meant to do residential home construction...
around, adding various operations and divisions in a structure somewhat reminiscent of American Financial. As chairman and controlling stockholder, Keating relied heavily upon family members, employing his son and four of his sons-in-law in prominent positions. His son Charles Keating III had an especially fast career rise within the company.
During 1979, Keating served as head of fundraising in the Southwest for John Connally
John Connally
John Bowden Connally, Jr. , was an influential American politician, serving as the 39th governor of Texas, Secretary of the Navy under President John F. Kennedy, and as Secretary of the Treasury under President Richard M. Nixon. While he was Governor in 1963, Connally was a passenger in the car in...
's campaign for the 1980 Republican Party presidential nomination
Republican Party (United States) presidential primaries, 1980
The 1980 Republican presidential primaries were the selection process by which voters of the Republican Party chose its nominee for President of the United States in the 1980 U.S. presidential election...
. Connally was a favorite of the business community, but his campaign had difficulty parlaying its fundraising successes into popular support. In early December 1979, Keating was named campaign manager, with the existing manager being demoted to campaign strategist. Keating's first action was as a "pruner" who immediately fired twenty workers at the campaign's Virginia headquarters. The campaign continued to struggle, and by late February 1980, Keating was out as manager, with Connally taking over the role himself. Connally's campaign ended two weeks later, famously known for having spent $11 million and gaining only one delegate.
Having won the 1980 election, President Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
contacted Keating about becoming U.S. Ambassador to the Bahamas
United States Ambassador to the Bahamas
The Ambassador Extraordinary and Plenipotentiary of the United States of America to the Bahamas, usually simply called U.S. Ambassador to the Bahamas, is an official position and title appointed by the President of the United States and confirmed by the U.S. Senate by majority vote...
, where Keating had spent considerable time. When Keating's run-in with the SEC resurfaced in press reports, however, he was dropped from consideration. This dismayed Keating, who subsequently said, "To keep people like me out of positions like that because of yellow journalism, I don't know what good it does."
By the early 1980s, American Continental's profits were in the millions and it had become the biggest single-family home builder in Phoenix and Denver. At its peak it would have $6 billion in assets, a large number of subsidiaries, 2,500 employees, and a headquarters complex on Phoenix's Camelback Road. It also had three corporate jets and a helicopter. Keating was a very hard worker and a strong presence to his employees; one later said, "It's almost magnetic. When he moves, things happen. The office would come alive when he walked in." He inspired both camaraderie and fervent loyalty in them, and while he demanded long hours they were often rewarded them very well financially and with gifts. Business people outside his company, however, often found Keating arrogant and difficult to deal with. Former Congressman William Keating
William J. Keating
William John Keating is a former American politician of the Republican party.Keating served in the United States House of Representatives from 1971 to 1974 representing Ohio's 1st congressional district. He was the brother of financier Charles H Keating Jr. and later was Chairman CEO & Publisher...
, who was as well liked as his brother was not, said: "Charlie is impatient, aggressive, always on the move. He has clearly defined goals. I don't think he worries about the popularity of his positions." A 1977 Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
magazine profile had reported that "It seems almost impossible to find anyone who actually likes Charlie Keating." The story long rankled Keating, who later had over five thousand large yellow "I Like Charlie Keating" buttons made up which he handed out to employees and visitors. Keating said, "There are a lot of people that would say nasty things, I'm sure, about me, but it ain't true that nobody ever liked Charlie Keating."
Still deeply religious, Keating became a heavy giver to charity when he moved to Phoenix, donating $100,000 to the Society of Saint Vincent de Paul
Society of Saint Vincent de Paul
The St Vincent de Paul Society is an international Roman Catholic voluntary organization dedicated to tackling poverty and disadvantage by providing direct practical assistance to anyone in need. Active in England & Wales since 1844, today it continues to address social and material need in all...
, more than $1 million to Covenant House
Covenant House
Covenant House is the largest privately funded agency in the Americas providing shelter, food, immediate crisis care, and an array of other services to homeless, and runaway youth. In addition to basic needs, Covenant House provides a continuum of care to homeless youth aged 16–21 designed to...
, and another more than $1 million to Mother Teresa
Mother Teresa
Mother Teresa , born Agnes Gonxha Bojaxhiu , was a Roman Catholic nun of Albanian ethnicity and Indian citizenship, who founded the Missionaries of Charity in Calcutta, India, in 1950...
's operations, including lending her his helicopter when she was in Arizona so that she could visit remote Indian reservations in the state. Covenant House's Father Bruce Ritter
Bruce Ritter
Rev. Bruce Ritter was a Roman Catholic priest and one-time Franciscan friar who founded the charity Covenant House in 1972 for homeless teenagers, from which he was forced to resign in 1990 after accusations that he had engaged in financial improprieties and had engaged in sexual relations with...
said of Keating, "He makes you believe in Providence."
In 1983, Keating and his companies made legal but unusually large campaign donations in races for the Phoenix City Council
Phoenix City Council
The Phoenix City Council includes the mayor and 8 councilmembers. Each councilmember is elected from a different district of the city of Phoenix. The councilmembers are elected to 4 year terms in a nonpartisan election.The Council:-External links:*...
, who were responsible for approving his building projects including water usage for residential developments built around artificial ponds. The scale of donations represented a change from past practice in local Phoenix politics; some council figures opposed the trend, while others readily asked for the funds.
Lincoln Savings and the Keating Five
In 1984, American Continental Corporation bought Lincoln Savings and Loan AssociationLincoln Savings and Loan Association
The Lincoln Savings and Loan Association of Irvine, California was the financial institution at the heart of the Keating Five scandal during the 1980s Savings and Loan crisis....
for just over $50 million. Up through the early 1980s, Lincoln had been a conservatively-run enterprise, with almost half its assets in home loans
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
and only a quarter of its assets considered at risk. It made slow growth at best, and had shown a loss for several years until it made a profit of a few million dollars in 1983. Once he took over, Keating fired the existing management. Savings and loan association
Savings and loan association
A savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...
s had been deregulated
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
in the early 1980s, allowing them to make high-risk investments with their depositors' money, a change of which Keating and other savings and loan operators took advantage. (When Keating was later asked why he got into savings and loans, he said, "I know the business inside out, and I always felt that an S & L, if they'd relax the rules, was the biggest moneymaker in the world.") Over the next four years, Lincoln's assets increased from $1.1 billion to $5.5 billion. Lincoln's particular investments took the form of buying land, taking equity
Ownership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
positions in real estate development projects, and buying high-yield junk bonds.
Beginning in 1985, the Federal Home Loan Bank Board
Federal Home Loan Bank Board
The Federal Home Loan Bank Board was a board created by the Federal Home Loan Bank Act of 1932 that created and oversaw the Federal Home Loan Banks also created by the act. It was superseded by the Federal Housing Finance Board and the Office of Thrift Supervision in the Financial Institutions...
(FHLBB) feared that the savings industry's risky investment practices were exposing the government's insurance funds to huge losses. It instituted a rule whereby savings associations could hold no more than 10 percent of their assets in "direct investments", and were thus prohibited from taking ownership positions in certain financial entities and instruments. Lincoln had become burdened with bad debt resulting from its past aggressiveness, and by early 1986, its investment practices were being investigated and audit
Audit
The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
ed by the FHLBB: in particular, whether it had violated these direct investment rules; Lincoln had directed accounts insured by the Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
into commercial real estate ventures. By the end of 1986, the FHLBB had found that Lincoln had $135 million in unreported losses and had surpassed the regulated direct investments limit by $600 million.
Keating had taken several aggressive measures to oppose the FHLBB, including recruiting a study from then-private economist Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
saying that direct investments were not harmful, trying to hire FHLBB members or their wives, and getting President Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....
to make a recess appointment of a Keating ally, real estate developer Lee H. Henkel Jr., to the FHLBB. By March 1987, however, the ally had resigned upon news of his having large loans due to Lincoln. It appeared as though the government might seize Lincoln for being insolvent.
Starting in January 1987, Keating looked for help from what became known as the Keating Five
Keating Five
The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators – Alan Cranston , Dennis DeConcini, John Glenn , John McCain , and Donald W. Riegle,...
: U.S. Senators
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Alan Cranston
Alan Cranston
Alan MacGregor Cranston was an American journalist and Democratic Senator from California.-Education:Cranston earned his high school diploma from the old Mountain View High School, where among other things, he was a track star...
(D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
-CA
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
), Dennis DeConcini
Dennis DeConcini
Dennis Webster DeConcini is a former Democratic U.S. Senator from Arizona. Son of former Arizona Supreme Court Judge Evo Anton DeConcini, he represented Arizona in the United States Senate from 1977 until 1995....
(D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
-AZ
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
), John Glenn
John Glenn
John Herschel Glenn, Jr. is a former United States Marine Corps pilot, astronaut, and United States senator who was the first American to orbit the Earth and the third American in space. Glenn was a Marine Corps fighter pilot before joining NASA's Mercury program as a member of NASA's original...
(D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
-OH
Ohio
Ohio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
), John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
(R
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
-AZ
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
), and Donald W. Riegle
Donald W. Riegle, Jr.
Donald Wayne Riegle Jr. is an American politician from Michigan, who served for five terms as a Representative and for three terms as a Senator.-Early life:...
(D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
-MI
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....
). Keating had, or would soon make, legal political contributions of about $1.3 million to the senators, and he called on them to help him resist the regulators. Keating had become a personal friend of McCain following their initial contacts in 1981, and McCain was the only one of the five with close social and personal ties to Keating. McCain and his family had made several trips at Keating's expense, sometimes aboard American Continental's jet, for vacations at Keating's opulent Bahamas retreat at Cat Cay.
Keating asked that Lincoln be given a lenient judgment by the FHLBB, so it could limit its high risk investments and get into the relatively safe home mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
business, allowing the business to survive. A letter from audit firm Arthur Young & Co. bolstered Keating's case that the government investigation was taking a long time. McCain initially refused to meet with Keating over the FHLBB matter and Keating called McCain a "wimp" behind his back. The two had a heated, contentious meeting in which McCain said he had not spent years in North Vietnamese prisoner-of-war camps
Early life and military career of John McCain
The early life and military career of John Sidney McCain III spans the first forty-five years of his life . McCain's father and grandfather were admirals in the United States Navy. McCain was born on August 29, 1936, in the Panama Canal Zone, and attended many schools growing up as his family moved...
to have his courage or integrity questioned; the friendship ended and they would not speak again. In April 1987, the group of senators met twice with FHLBB members who were investigating American Continental Corporation and Lincoln, in an attempt to end the investigation. Meanwhile Keating filed a lawsuit against the FHLBB, saying it had leaked confidential information about Lincoln. The outgoing head of the FHLBB deferred judgment on the matter, and the new head was more sympathetic to Keating; in May 1988, the FHLBB agreed to an unprecedented memorandum of understanding
Memorandum of understanding
A memorandum of understanding is a document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in...
that gave Lincoln a clean slate and forgiveness for any violations up to that point. (In 1991, the senators would be rebuked to various degrees by the Senate Ethics Committee, with Cranston receiving the harshest verdict and Glenn and McCain the least. McCain later testified against Keating in a civil lawsuit brought by Lincoln bondholders, while the other four refused to testify.)
Failure of Lincoln and American Continental
Lincoln stayed in business; from mid-1987 to April 1989, its assets grew from $3.91 billion to $5.46 billion. Following Keating's past practices with Lindner, American Continental also amassed a large collection of confusingly connected subsidiaries in real estate, banking, and insurance businesses; these numbered at least 54, and there were some overseas ones that auditors were not aware of. Keating was triumphant in having defeated the regulators, whom he despised as useless relics from an outmoded financial past, and defended his high salary and business practices. Keating spent about $500,000 on radio advertisements in the Phoenix area to improve his public image; the commercials stressed his real estate projects and his family-oriented values. A 1988 Los Angeles TimesLos Angeles Times
The Los Angeles Times is a daily newspaper published in Los Angeles, California, since 1881. It was the second-largest metropolitan newspaper in circulation in the United States in 2008 and the fourth most widely distributed newspaper in the country....
profile assessed Keating as "a businessman without apparent peer in Arizona in terms of riches, clout and color." While Keating had taken Citizens for Decency through Law with him, he had generally deemphasized his anti-pornography work when he moved to Arizona. Nevertheless, X-rated movies and Playboy magazine were banned from his hotels.
In October 1988, Keating opened his most extravagant real estate project ever, the 250 acres (1 km²), 600-room The Phoenician resort at the base of Camelback Mountain
Camelback Mountain
Camelback Mountain is a mountain in Phoenix, Arizona, United States. The name is derived from its shape, which resembles the hump and head of a kneeling camel. The mountain, a prominent landmark for the metropolitan Phoenix valley, is located in the Camelback Mountain Echo Canyon Recreation Area...
. Its construction cost $300 million, included many opulent, imported features, and saw a number of instances of Keating or his decorator wife making wholesale late design changes at great expense. Keating's other grand project was Estrella
Estrella, Arizona
Estrella is a master-planned community located in Goodyear, Arizona, United States, about west of downtown Phoenix.-Neighborhoods:The original Estrella master planned community was established in 1989, and is home to nearly 10,000 residents. Montecito is Estrella's newest neighborhood, established...
, a 20000 acres (80.9 km²) mixed-use development outside of Phoenix in Goodyear, Arizona
Goodyear, Arizona
Goodyear is a city in Maricopa County, Arizona, United States. According to the 2010 census, the population of the city is 65,275...
in the direction of the Sierra Estrella
Sierra Estrella
The Sierra Estrella is a mountain range located southwest of Phoenix, Arizona. Much of the range falls within the Gila River Indian Reservation, but of BLM land is protected as the Sierra Estrella Wilderness.-Description:...
. Incorporating homes, offices, industrial buildings, schools, shopping, a resort and a hospital, it was intended to eventually house 200,000 people and become a model 21st century city. American Continental wrote rules saying that Estrella homeowners could not "intentionally terminat[e] a human pregnancy" or possess "adult material", but removed them once Keating was informed that such covenants were unconstitutional. A late 1980s downturn in the Sun Belt
Sun Belt
The Sun Belt or Spanish Belt is a region of the United States generally considered to stretch across the South and Southwest . Another rough boundary of the region is the area south of the 36th parallel, north latitude. It is the largest region which the U.S government does not recognize officially...
real estate market put Estrella in jeopardy before much building could be done.
Asked in an interview if he ever worried about going broke, Keating responded, "All the time, every day. I come into the office with this hollow feeling in my stomach lots of time.... You get trapped almost. You get too many responsibilities. It's a bellyfull to carry. It's risky. Dangerous. There's the possibility of failure with it every day and every night. But in a way, it's a challenge. It's invigorating. There isn't any point in not being a player – you're here.... It's not only the money. It's the disgrace, yourself, your manhood. I'm not sure I'd have a big problem with that. On the other hand I'm not sure I wouldn't."
As Lincoln grew, money was siphoned from Lincoln to the parent American Continental Corporation under a variety of schemes, and American Continental spent lavishly on speculative investments and personal expenses. A new regulatory investigation began in July 1988. After Arthur Young indicated doubts about some accounting practices, Keating fired them in September 1988 and switched to Touche Ross. American Continental was desperate for cash inflow to make up for losses in real estate purchases and projects. Lincoln's branch managers and tellers convinced customers to replace their federally-insured certificates of deposit with higher-yielding bond certificates of American Continental; the customers later said they were never properly informed that the bonds were uninsured and very risky given the state of American Continental's finances. Indeed, the regulators had already adjudged the bonds to have no solvent backing. Federal Deposit Insurance Corporation chair L. William Seidman
L. William Seidman
Lewis William "Bill" Seidman was an American economist, financial commentator, and former head of the U.S. Federal Deposit Insurance Corporation, best known for his role in helping work to correct the Savings and Loan Crisis in the American financial sector from 1988-1991 as head of the related...
would later write that Lincoln's push to get depositors to switch was "one of the most heartless and cruel frauds in modern memory." In late 1988, Keating began desperate attempts to sell Lincoln; regulators rejected one $50 million potential sale due to the buyers not meeting federal requirements. A December 1988 audit by the FHLBB found Lincoln in violation of many regulations and in danger of default. The following month they ordered Keating to stop transferring cash from Lincoln to American Continental, which imperiled the latter's survival strategy and caused its stock price to nosedive. Keating tried to arrange junk bond deals with Michael Milken
Michael Milken
Michael Robert Milken is an American business magnate, financier, and philanthropist noted for his role in the development of the market for high-yield bonds during the 1970s and 1980s, for his 1990 guilty plea to felony charges for violating US securities laws, and for his funding of medical...
and place bets in the global currency markets to generate cash, but the moves failed and he lost $11 million in one month alone. Keating got Senators DeConcini and Cranston to pressure the regulators to let a sale go through, but this time the lawmakers were ignored.
American Continental went bankrupt
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
in April 1989, and Lincoln was seized by the FHLBB. About 23,000 customers were left with worthless bonds. Many investors, often ones living in California retirement communities, lost their life savings, and later claimed to have suffered emotional trauma
Psychological trauma
Psychological trauma is a type of damage to the psyche that occurs as a result of a traumatic event...
for having been duped on top of their financial devastation. The total bondholder loss came to between $250 million and $288 million. The federal government was eventually liable for $3.4 billion to cover Lincoln's losses when it seized the institution. In talking to reporters in April 1989, Keating maintained that he was the victim of a federal government that had spent years trying to destroy him, and then said, "One question, among many raised in recent weeks, had to do with whether my financial support in any way influenced several political figures to take up my cause. I want to say in the most forceful way I can: I certainly hope so."
In September 1989, Keating was hit with a $1.1 billion fraud and racketeering action, filed against him by the regulators. He proclaimed that, "We've lost everything in this thing, my wife and I. It's devastating." In November 1989, Keating was subpoena
Subpoena
A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
ed to testify before the House Banking Committee, but refused to answer questions, invoking his right against self-incrimination under the Fifth Amendment
Fifth Amendment to the United States Constitution
The Fifth Amendment to the United States Constitution, which is part of the Bill of Rights, protects against abuse of government authority in a legal procedure. Its guarantees stem from English common law which traces back to the Magna Carta in 1215...
. Also in November, his Phoenician Resort was seized by the FBI; under their operation it became known as "Club Fed" before later being sold to a Kuwait
Kuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
i group. The vastly ambitious Estrella project would remain desert and was sold in 1993 to an investment group.
By November 1989, the estimated cost of the overall savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
had reached $500 billion, and the media's coverage often highlighted Keating's role as part of what became a feeding frenzy
Media feeding frenzy
A media feeding frenzy is intense media coverage of a story of great interest to the public.The O. J. Simpson trial in the U.S. was a well-noted example....
. Indeed, Keating and Lincoln Savings became convenient symbols for arguments about what had gone wrong in America's financial system and society, as well as for 1980s greed in general, and were featured in popular culture references. A deck of playing cards would be marketed, called "The Savings and Loan Scandal", that featured on their face Charles Keating holding up his hand, with images of the Keating Five senators portrayed as puppets on his fingers.
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. By then, Keating's legal fees were running at $1 million a month.In September 1990, Keating and his associates were indicted
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
by the State of California on 42 counts related to having duped Lincoln's customers into buying worthless junk bonds of American Continental Corporation; Keating went to jail when he could not post a $5 million bond. He was convicted in December 1991 of 17 counts of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, racketeering, and conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
. Mother Teresa
Mother Teresa
Mother Teresa , born Agnes Gonxha Bojaxhiu , was a Roman Catholic nun of Albanian ethnicity and Indian citizenship, who founded the Missionaries of Charity in Calcutta, India, in 1950...
asked the court to show leniency to Keating, in recognition of the considerable sums he had donated to her charitable operations. However, in April 1992, California Superior Court Judge Lance Ito
Lance Ito
Lance Allan Ito is an American Los Angeles County Superior Court judge, best known for his presiding decision during the O. J. Simpson murder trial. He currently hears felony criminal cases at the Clara Shortridge Foltz Criminal Justice Center.-Early life and career:Ito was born to Jim and Toshi Ito...
gave Keating the maximum 10-year prison sentence, quoting Woody Guthrie
Woody Guthrie
Woodrow Wilson "Woody" Guthrie is best known as an American singer-songwriter and folk musician, whose musical legacy includes hundreds of political, traditional and children's songs, ballads and improvised works. He frequently performed with the slogan This Machine Kills Fascists displayed on his...
's line that "More people have suffered from the point of a fountain pen than from a gun." Keating went to the medium-security Federal Correctional Institution, Tucson
Federal Correctional Institution, Tucson
The Federal Correctional Institution, Tucson is a prison operated by the Federal Bureau of Prisons in the state of Arizona. Located 10 miles southeast of Tucson near Interstate 10 and Wilmot Road, the medium security institution is part of a larger Federal Correctional Complex that also includes a...
to serve his time.
In May 1992, Keating's son-in-law Robert M. Wurzelbacher Jr. (married to his daughter Elizabeth), a senior vice president of American Continental, and chief executive of an investment firm owned by Lincoln Savings, was also implicated, pleaded guilty to three federal fraud counts in connection with the collapse of the Lincoln Savings and Loan Association and agreed to testify against Keating. (In December 1993, Wurzelbacher was sentenced to a 40-month prison term.)
In January 1993, a federal conviction followed, on 73 counts of fraud, racketeering and conspiracy. In July 1993, Keating was given a 12½ year sentence. The judge also ordered Keating to pay restitution of $122 million to the government, but Keating said he was $10 million in debt and had no assets to sell.
One 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
Summary judgment
In law, a summary judgment is a determination made by a court without a full trial. Such a judgment may be issued as to the merits of an entire case, or of specific issues in that case....
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
Appeal
An appeal is a petition for review of a case that has been decided by a court of law. The petition is made to a higher court for the purpose of overturning the lower court's decision....
in 1999, on grounds that Keating could not be held personally liable to the government without a specific criminal conviction or some other decision at trial.)
Throughout his imprisonment, Keating maintained his innocence, saying he was a "political prisoner
Political prisoner
According to the Longman Dictionary of Contemporary English, a political prisoner is ‘someone who is in prison because they have opposed or criticized the government of their own country’....
" of the U.S. government and a scapegoat for the largest banking scandal in the nation's history.
In April 1996, the 9th U.S. Circuit Court of Appeals in San Francisco ruled that state trial judge Ito had mistakenly allowed the jury to convict Keating by giving them faulty instructions as the law as regarding fraud. Thus, the conviction was overturned. In December 1996, the same Court of Appeals ruled that some of the jurors
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
in the federal case might have been influenced by their knowledge and discussion of the results of the state case, and threw out the federal conviction. Keating was now a free man after having spent 4½ years in prison; he later said that staying tough during his incarceration was the thing he was proudest of that he had done.
In April 1999, on the eve of the retrial of the federal case, Keating entered a plea agreement
Plea bargain
A plea bargain is an agreement in a criminal case whereby the prosecutor offers the defendant the opportunity to plead guilty, usually to a lesser charge or to the original criminal charge with a recommendation of a lighter than the maximum sentence.A plea bargain allows criminal defendants to...
. He admitted to having committed four counts of wire
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
and bankruptcy fraud by extracting nearly $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 over four years time he had already served.
In October 2000, the U.S. Supreme Court refused to hear the government's appeal of the overturning of the state conviction. This left Keating without any convictions on his record of the core charge that he had duped and defrauded investors by having them switch from insured accounts for junk bonds. State prosecutors declined to move for a retrial, saying it would bring no more than a six-month jail sentence and that many witnesses had died in the interim or were in bad health. In reaction, Keating said that if the government had left him alone, investors "would all be rich."
Legacy
The Chicago TribuneChicago Tribune
The Chicago Tribune is a major daily newspaper based in Chicago, Illinois, and the flagship publication of the Tribune Company. Formerly self-styled as the "World's Greatest Newspaper" , it remains the most read daily newspaper of the Chicago metropolitan area and the Great Lakes region and is...
s lengthy profile of Keating in 1990 said in summary:
To say that Charles Keating is a complex man seems a gross understatement. Some see him as an aggressive man who got desperate when the real estate market bottomed out and crossed the line between "business as usual" and fraud. Others see him as a con artist who finally got caught, a hyprocrite who masked his greed with phony piety.
Michael Binstein and Charles Bowden
Charles Bowden
Charles Bowden is an American non-fiction author, journalist, and essayist based in Las Cruces, New Mexico. He is a former writer for the Tucson Citizen and often writes about the American Southwest...
's 1993 book, Trust Me: Charles Keating and the Missing Billions, also presents Keating as a complex individual with contradictory tendencies, and concludes:
Charlie Keating built things, and, at some level that haunts anyone who looks over his records, he thought his schemes would work. He did not simply rob a bank. He broke a bank with his dreams. If he is simply a thief, why did he put the money into deals and projects instead of into his own pocket? If he is just a hardworking businessman simply trying to make a profit and create jobs, why the need for jets, fancy meals, big paychecks to his family? If he is such a devout communicant of his faith, why did he peddle hundreds of millions of dollars' worth of junk bonds to old people when he knew his empire was in serious jeopardy?
Keating steadfastly maintains that it was not his mistakes or criminal deeds but regulators' actions that were responsible for the major losses. A 2004 Milken Institute
Milken Institute
The Milken Institute is an independent economic think tank based in Santa Monica, California that publishes research and hosts conferences that apply market-based principles and financial innovations to a variety of societal issues in the US and internationally.The mission of the Institute, founded...
study also makes the claim that regulators' actions were responsible for the Lincoln failure and presents Keating's actions in a favorable light.
Some of Keating's 1980s judgement as a developer was later validated. The Phoenician became a successful hotel in the luxury segment, and the Estrella project achieved at least some of Keating's vision and was acquired again in 2005.
Following his release from prison, Keating moved in with one of his daughters in the Paradise Valley neighborhood of Phoenix. During the 2000s he began working as a business consultant and as of 2008 was involved in some successful real estate developments in the Phoenix market. He keeps a low profile in his business operations, and he declined comment during John McCain's 2008 presidential campaign
John McCain presidential campaign, 2008
John McCain, the senior United States Senator from Arizona, launched his second candidacy for the presidency of the United States in an unsuccessful bid to win the 2008 presidential election. His candidacy, in the works for a number of years, was informally announced on February 28, 2007 during a...
when the Keating Five scandal was brought up again by the press.