Former Lincoln Savings President Testifies Against Keating
LOS ANGELES (AP) _ Former Lincoln Savings & Loan President Raymond C. Fidel testified that Charles Keating Jr. personally changed the company from a family-owned thrift into an institution bent on rapid growth and aggressive marketing.
Keating, who bought the Irvine, Calif.-based thrift in 1984, stressed hiring liberal arts graduates fresh out of college because they easily adapted to Lincoln’s sales-oriented approach, unlike business graduates or employees of other thrifts, Fidel said.
″We found not very many of them successful in our approach,″ said Fidel, who has pleaded guilty to securities fraud and is testifying at Keating’s fraud trial in hopes of getting a light sentence.
Fidel, 34, is an example of how Keating, an Arizona land developer, promoted young people to positions of responsibility.
Fidel received an MBA from the University of New Mexico in December 1982, at 25 and joined a Keating-owned brokerage the next month. By early 1984 he was the second-highest Lincoln officer in California, though Keating and his aides in Phoenix controlled the thrift, he said.
Fidel said hiring, the setting of interest rates and approval of bonuses for employees who brought in long-term CDs were all controlled by Keating from Phoenix, where he ran Lincoln’s parent company, American Continental Corp.
Fidel appeared nervous as he testified Monday, leaning forward in his seat, sitting on his hands at times, pursing his lips, repeatedly answering the questions of Deputy District Attorney William Hodgman with a high-pitched, ″Yes, sir.″
Keating, 67, who faces up to 10 years in prison if convicted, stared grimly at him from across the courtroom.
Prosecutors say Fidel and former Lincoln Chief Executive Robin Symes were puppets for Keating, who tightly controlled all aspects of the thrift’s operations and the junk bond sales from Lincoln’s parent company.
Symes, who also pleaded guilty in a bargain with prosecutors, already has testified to how Keating required daily reports on the bond sales and personally determined interest rates, maturity dates and other details of the bonds.
Fidel is the second half of a one-two punch of final star witnesses as prosecutors wind up their two-month case against Keating.
Last Friday they called to the stand U.S. Sen. John McCain, who told the jury that Keating called him a wimp and turned red with rage when McCain refused to negotiate with thrift regulators on his behalf.
McCain’s testimony was designed to show the jury that Keating knew that regulators believed Lincoln was heading for insolvency as early as 1986. The prosecution maintains he failed to fulfill his duty to warn bond sellers and, through them, bond buyers, of the severity of the regulators’ worries and the depth of his companies’ problems.
At $2.6 billion, Lincoln’s failure was the costliest ever for taxpayers. It was seized and American Continental filed for bankruptcy protection in April 1989.
Keating, 67, is charged with 20 counts of duping investors about the safety of American Continental junk bonds sold at Lincoln branches. The bonds became worthless when his companies collapsed. He faces up to 10 years in prison if convicted.