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Attorneys Say Keating Will Refuse to Testify

July 10, 1991

LOS ANGELES (AP) _ Charles H. Keating Jr. will refuse to testify at a hearing looking into whether he and six others looted $130.5 million from Lincoln Savings, attorneys said today.

Attorneys for both Keating and federal regulators indicated Keating would sign a declaration exercising his right to refuse to testify on grounds of self-incrimination.

However, there is a provision in the declaration that would allow Keating to testify later, if the judge agrees.

The written statement is a compromise of sorts, since it avoids the headlines that would be generated if Keating took the witness stand and repeatedly refused to answer questions.

Keating’s attorneys had hoped he could put off a decision on testifying until after a lengthy break in the hearing beginning the end of this week. During the break, Keating will be prosecuted on criminal charges.

It was not immediately clear whether Keating’s six co-respondents, as they are called at the civil hearing, would sign similar declarations. Two of them, both former officers of Keating’s companies, are scheduled to take the witness stand Thursday.

Their refusal to testify could not be used against them at a criminal trial, but could be grounds for administrative law Judge Paul J. Clerman to draw a negative inference about them at the non-jury civil action brought by the federal Office of Thrift Supervision.

Keating’s family owned the Arizona land development company American Continental Corp., which in turn owned Irvine, Calif.-based Lincoln Savings.

He blames vindictive regulators for hounding Lincoln into collapse, a failure that cost taxpayers $2.6 billion, the biggest such bailout in history.

Keating and his former top aide, Judith J. Wischer, are to be tried on 21 criminal charges of securities fraud. The trial is set to begin Aug. 2 or soon after and is expected to last at least six months.

Keating’s attorney, Stephen C. Neal, said before the start of the civil hearing today that the tentative agreement had been reached with the OTS.

Bruce Rinaldi, chief attorney for the Office of Thrift Supervision, confirmed the agreement during a conversation with Clerman.

″Mr. Neal and I have reached an agreement in principle,″ Rinaldi said.

On Tuesday, Clerman had rejected an offer that would have had Neal sign a similar declaration. But Rinaldi opposed the offer, insisting that Keating and the others sign the statements themselves.

Neal and Rinaldi met after Tuesday’s hearing to negotiate the compromise.

In an interview after Tuesday’s hearing, Neal refused to say what Keating, a strident critic of regulators, would do. However, he and other defense attorneys have suggested strongly over the course of the hearing that six respondents will refuse to testify, at least at this early stage in the proceeding. The seventh, former Lincoln Chief Executive Andre A. Niebling, is gravely ill with an undisclosed illness.

If he is physically able to appear as scheduled Thursday, ″I don’t believe he’ll take the Fifth,″ said his attorney, Charles Hartman.

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