People v. Keating
| Decision Date | 03 June 1993 |
| Docket Number | No. B067329,B067329 |
| Citation | 19 Cal.Rptr.2d 899,16 Cal.App.4th 280 |
| Parties | Previously published at 16 Cal.App.4th 280, 21 Cal.App.4th 1109, 26 Cal.App.4th 1613, 31 Cal.App.4th 1688 16 Cal.App.4th 280, 21 Cal.App.4th 1109, 26 Cal.App.4th 1613, 31 Cal.App.4th 1688, 61 USLW 2796 The PEOPLE, Plaintiff and Respondent, v. Charles H. KEATING, Jr., Defendant and Appellant. |
| Court | California Court of Appeals Court of Appeals |
Kirkland & Ellis, Stephen C. Neal, Philip S. Beck, Jeffrey S. Powell, Chicago, IL, and Scott D. Devereaux, Los Angeles, for defendant and appellant.
Daniel E. Lungren, Atty. Gen., George Williamson, Chief Asst. Atty. Gen., Carol Wendelin Pollack, Sr. Asst. Atty. Gen., John R. Gorey, Supervising Deputy Atty. Gen., and Sanjay T. Kumar, Deputy Atty. Gen., for plaintiff and respondent.
In a 46-count second amended indictment, the Grand Jury of Los Angeles County accused Charles H. Keating, Jr., and codefendants Judy J. Wischer, Robin S. Symes, and Ray C. Fidel of committing 20 counts of sales of securities by means of false statements or omissions, in violation of Corporations Code sections 25401 and 25540; 20 counts of sales of securities without qualification, in violation of Corporations Code sections 25110 and 25540; 3 counts of making false statements to the corporations commissioner, in violation of Corporations Code sections 25166 and 25540; and 3 counts of failing to file advertising with the corporations commissioner before use, in violation of Corporations Code sections 25300 and 25540. It was further alleged that the statute of limitations had been tolled, within the meaning of Penal Code section 803, as to the violations in counts 3, 5, 10, 17 through 19, 23, 25, 30, 32, 37 through 39, and 41 through 46. The district attorney alleged that the violations had occurred, and the second amended indictment was filed in the superior court on November 19, 1990.
Keating pleaded not guilty to the second amended indictment on January 11, 1991. Counts 1, 19, and 21 through 46 were dismissed either at the prosecution's request or upon the grant of Keating's motion pursuant to Penal Code section 995. Keating's motion to set aside the second amended indictment was denied. Keating's motion for severance from the codefendants was granted on July 26, 1991.
The matter proceeded to trial on the remaining 18 counts on August 6, 1991. Keating's Penal Code section 1118.1 motion for judgment of acquittal was denied. The jury found him not guilty as to count 7 and guilty as charged in counts 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, and 20, all violations of Corporations Code sections 25401 and 25540. The jury further found the statute of limitations had been tolled as to counts 3, 5, 10, 17, and 18. Keating's motion for a new trial was denied.
Sentence was imposed on April 10, 1992. The trial court sentenced Keating to state prison for a term of 10 years. Count 9 was selected as the base term, for which the high term of five years was imposed; as to counts 4, 8, 10, 12, 15, 18, and 20, terms of one-third of a two-year mid term (or eight months) were imposed, to run consecutively to the five-year base term; as to count 11, the court again imposed a consecutive one-third of a two-year mid term, but stayed four months of that sentence; and as to counts 2, 3, 5, 6, 13, 14, 16, and 17, the court imposed a two-year mid term for each count, to run concurrently with the five- Keating filed a timely notice of appeal on April 23, 1992.
year base term. 1 In addition, Keating was ordered to pay the maximum fine, $250,000
Charles Keating was the chief executive officer of American Continental Corporation ("ACC"). The court notes that he was also a member of the bar. ACC was founded in 1969 as a subsidiary of American Financial Corporation, and until 1976 was primarily a residential home builder. In late 1976, Keating and others purchased control of ACC. Keating focused ACC's home building operations on fewer markets and diversified into mortgage banking, land development, commercial real estate, and insurance services. On October 18, 1983, ACC applied to the California Department of Savings and Loan and to the Federal Home Loan Board for approval to acquire Lincoln Savings and Loan Association, an institution with several branches in Southern California. Following a four-month review of ACC's application, both agencies approved the acquisition of Lincoln on February 21, 1984. Keating exercised the powers of ownership, including naming his son, Charles Keating III, chairman of the board.
Keating named Judy Wischer as president of Lincoln, Robin Scott Symes as executive vice-president, and Raymond Charles Fidel was named senior vice-president of branch administration. Fidel reported directly to Symes. Symes reported to Wischer or Andy Neibling, chairman of the board of American Continental Mortgage Corporation, who became chairman of the board of Lincoln in 1986.
According to the testimony of Symes, Keating changed the emphasis of Lincoln from home loans in the California market to large construction contracts in Arizona. Keating directed that Lincoln headquarters be moved from Monterey Park to Irvine. Of 150 employees in the headquarter offices at the time Keating took over, fewer than 20 were still employed when the move to Irvine was completed in August 1984. In June 1984, the loan servicing, purchasing, accounting, and legal functions had been immediately transferred from Monterey Park to ACC headquarters in Phoenix, where those functions were consolidated under the joint control of ACC management.
While never an officer or a director of Lincoln, Keating appeared to be firmly in control of all phases of the operations. He and his wife personally approved all the interior decorating and furnishings in the Irvine offices, even down to individual personal photographs that went on the walls. Lincoln grew from $1 billion in assets at the time of acquisition to over $5 billion over the course of the next five years. As the value of ACC assets in Denver and Phoenix deteriorated, Lincoln became the prime asset of ACC by March of 1986, representing more than of 80 percent of ACC's total assets. By early 1988, due to Lincoln's growth and the continued deterioration of ACC's other assets, Lincoln represented more than 90 percent of all assets, thus becoming the primary operating entity of ACC.
In March of 1986, the Federal Home Loan Bank ("FHLB") of San Francisco conducted a routine examination of Lincoln. On July 3, 1986, Keating attended a meeting with the examiners, who expressed some concerns to him. Keating became hostile, his voice was raised and his face flushed. In August 1986, Keating attended another meeting with both state and federal examiners. In that meeting the state regulatory agency indicated that the requirement that Lincoln have an officer in Michael Patricarca was employed by the FHLB of San Francisco as one of the lead regulators in the examination of Lincoln. He personally pointed out to Keating in December 1986 that Lincoln's risky investments in Arizona realty required greater capital and higher net worth. He further made clear to Keating that previously in November he had expressed 14 points of concern, including two with which Lincoln was failing to comply, the direct investment regulation and not meeting its net worth requirement. Keating remarked, "Gees, we didn't understand what that was all about." Patricarca sent a letter to Lincoln's board of directors on December 15, 1986, documenting the failures and again stating that Lincoln was precluded from paying any dividend to ACC.
California was not being met. Keating thereupon cavalierly pointed to Symes and said, "How would he do?" The examiner said that Symes would certainly be appropriate, and [16 Cal.App.4th 1696] Keating responded, "That's done. We'll make him the managing officer." Keating thereafter stated his belief that the San Francisco FHLB was deliberately out to get him and that he intended "to take a bite out of [someone at FHLB]." This belief was further enhanced when Lincoln's requested authorization to pay dividends to ACC was denied by FHLB of San Francisco in the fall of 1986
In November 1986, Symes was the senior-most corporate officer of Lincoln at the Irvine headquarters, all the others being at the ACC Phoenix corporate headquarters. Symes would set the interest rates for certificates of deposit at the direction of Keating. That month Symes and Fidel were summoned to Phoenix by Keating and advised that ACC had decided to sell corporate bonds 2 through Lincoln branches. Keating expressed his desire to have the bonds sold as quickly as possible and instructed Symes and Fidel, as well as the legal staff, to do everything necessary to see that it happened.
Symes was troubled by the fact that the bonds were to be sold in the branches to customers who would come into the Lincoln facility to buy a Lincoln certificate of deposit, but would end up with a bond in the holding company instead, thereby causing Lincoln to lose that deposit. Fidel was designated by Keating to supervise the bond sales efforts. Fidel immediately implemented a program to inform the 27 branch managers of the bond sales and to select from Lincoln employee ranks individuals who were to become bond representatives. Most were college graduates fresh out of school who were from 22 to 40 years of age. The alacrity of the effort is noted in that the first bonds were sold in late November 1986, just after Thanksgiving Day.
The debentures were negotiated from a separately designated desk within each branch. An area of 110 square feet was leased by Lincoln to ACC in each office. Symes monitored the volume and type of bond...
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Keating v. Hood
...to the jurors, that Keating was being tried on the theory that he aided and abetted in the sales of the `junk bonds.' " People v. Keating, 19 Cal.Rptr.2d at 916, 920. The court also denied Keating's claim regarding the failure to give the instruction limiting the jury's considerations to th......
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