Charles Keating Trials: 1991-99 - Litigation Abounds

A myriad of civil litigation and criminal prosecutions followed the collapse of ACC and Lincoln S&L. Civil and criminal trials, followed by countless appeals, went on for nearly a decade. Civil class action suits were filed by the purchasers of ACC bonds against Keating; other officers and directors of ACC; and the banks, lawyers, and accountants who shielded them from regulatory scrutiny for so long. Federal and state criminal charges were filed against Keating and others. There were regulatory actions by the OTS against the same banks, lawyers, and accountants being sued in civil court. In March 1992, the OTS shocked the legal world when it froze the assets of the huge, 400-lawyer law firm Kaye, Scholer, Fierman, Hays & Handler, which had represented Keating. After bringing the firm to its knees, the OTS imposed a $41 million settlement on it.

The only criminal case against Keating occurred when the state of California prosecuted him for 18 separate counts of securities fraud in connection with the sale of ACC junk bonds under the misrepresentation that they were federally insured. This trial took place in Los Angeles before Judge Lance A. Ito. The chief defense lawyer was Stephen C. Neal and the prosecutor was Deputy District Attorney William Hodgman.

The trial began on November 18, 1991. Many of the elderly investors who had purchased ACC junk bonds attended the trial, and yelled angrily at Keating both in the courtroom and as he was being escorted to and from trial. One spectator managed to punch Keating in the arm.

Keating's defense lawyers tried to argue that Keating had no control over what salesmen were telling investors about federal insurance coverage for ACC junk bonds, but after hearing all the evidence, the jury returned its verdict finding Keating guilty of 17 of the 18 counts.