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.
Keating was born on December 4, 1923, in Cincinnati, Ohio, into a devout Roman Catholic family. He was the son of Adele (née Kipp) and Charles Humphrey Keating. He grew up in the Avondale and Clifton neighborhoods of that city.
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 Activist, founding the organization Citizens for Decent Literature and serving as a member on the 1969 President's Commission on Obscenity and Pornography.
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 Navy Air Corps to become a carrier-based night fighter pilot flying F6F Hellcats.
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 the University of Cincinnati wherein it would accept for academic credit much of his Navy Service, then he would take six months of liberal arts courses before entering its law school.
This was the first ever national championship in any sport for the University of Cincinnati. He and teammate Roy Lagaly become the first-ever Bearcats to be named All-Americans. Keating was an imposing 6 feet 5 inches, a natural leader and co-captain of the team with Lagaly. Of Keating, Lagaly 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.
Keating received his law degree from the University of Cincinnati College of Law in 1948, and would later be named a member of the university's Athletic Hall of Fame.
Keating married Mary Elaine Fette in 1949. She was an athletically-minded Catholic from an established Cincinnati family. They had six children: daughters Kathleen, Mary, Maureen, Elaine, and Elizabeth, and a son, Charles Keating III.
In 1952, along with his brother, william, and a mutual 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 Carl Lindner, Jr. as a client. Lindner was rapidly accumulating ice cream stores, supermarkets, real estate, and savings and loans, and soon essentially became Keating's sole client. In 1956, he filed requests for Q clearances 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 fraudulent and launched an investigation of him, but no charges were made. Keating was admitted to the U.S. Supreme Court bar in 1958.
In 1956, Keating joined a priest leading a group of concerned Catholics in Cincinnati who were concerned about the dangers of pornography, and he began giving talks on the subject to parents and other groups. In 1958, Keating 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", and that it was closely tied to Juvenile delinquency, while also quoting a Senate Committee report that "part of the Communist conspiracy was to print (obscene materials)". Keating mentioned links between pornography and Communism at other times, but distanced himself from the more fervent anti-Communist groups of the early 1960s. He stated that 90 percent of obscene materials were produced for profit, not ideological reasons, and told Congress in 1960, "I had better say [...] that I am not blaming obscenity in America on the Communists."
Keating founded Citizens for Decent Literature (CDL) 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. It absorbed some other groups, such as National Citizens for Decent Literature and the Pittsburgh National Better Magazines Council. The structure of CDL was initially decentralized, but Keating grew frustrated with some local chapters taking aggressive actions he did not approve of, and so he gave it a more controlled focus with a national magazine, film production, and a greater role in legal actions.
In 1964–65, Keating produced Perversion for Profit, a film featuring announcer George Putnam. It was a survey of then-available prurient and obscene materials, and asserted that pornography led to moral decay. It, along with two lesser-known films produced or distributed by CDL, was screened frequently throughout the country and remained in print for a long time.
His daughter Mary married Gary Hall, who would go on to swim in the 1968, 1972, and 1976 Summer Olympics, winning a medal in each one. Charles Keating III swam in the 1976 Summer Olympics, finishing fifth in the 200-meter breaststroke. Keating's grandson Gary Hall Jr. competed in the 1996, 2000, and 2004 Summer Olympics as a Swimmer and won ten medals overall.
The commission involvement earned Keating 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 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 Keating and his organization's effectiveness that when the U.S. Supreme Court handed down the 1973 Miller v. California decision establishing that obscenity definitions be based upon local community standards, every adult bookstore and movie house in Cincinnati was closed within hours.
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 person in charge of firing employees from newly acquired companies. Within Business circles Keating gained a reputation for aggressiveness and arrogance. He took on an operational involvement in The Cincinnati Enquirer, the town's only morning newspaper. 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. Charles Keating was involved in American Financial's 1974 sale of Bantam Books, and its decision that year not to enter the investment banking field.
In 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 (SEC) launched a major investigation of the company and charged Lindner, Keating and others with having defrauded Investors 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 as to whether or not Keating and Lindner had remained close or whether they had fallen out.
Keating moved to Phoenix, Arizona 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.
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 stated in 1977 that he had "never come across a company that has so much strange paper on its books."
In 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 the role. Connally's campaign ended two weeks later, famously known for having spent $11 million and gaining only one delegate.
Some of Keating's 1980s judgment as a developer was later vindicated. 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.
A devout Catholic, Keating became a heavy donor 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.
In 1984, American Continental Corporation bought Lincoln Savings and Loan Association 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 associations 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 later was 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."
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 audited by the San Francisco office of 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, that office of the FHLBB had found that Lincoln had $135 million in unreported losses and had surpassed the regulated direct Investments limit by $600 million.
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 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. He 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 Times 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 de-emphasized his anti-pornography work when he moved to Arizona. Nevertheless, X-rated movies and Playboy magazine were banned from his hotels.
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 Jun K 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.
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. 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.
The Chicago Tribune's lengthy profile of Keating in 1990 said in summary:
In May 1992, Keating's son-in-law, Robert M. Wurzelbacher Jr., 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.)
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:
One case filed by the U.S. Securities and Exchange Commission was settled in 1994: Keating said he was 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 incarceration, 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 given the jury faulty instructions about the law regarding fraud. 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 freed after 4½ years in prison; he later said that staying tough during his incarceration was the thing he was proudest of. He was said to have gotten along well with other prisoners and served as best man at weddings for some that he met there.
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. The federal prosecutors dropped all other charges against him and his son, Charles Keating III. He was sentenced to time served.
During the 2000s, Keating worked as a Business consultant and as of 2008 was involved in some successful real estate developments in the Phoenix market. He kept a low profile in his Business operations, and declined comment during John McCain's 2008 presidential campaign when the Keating Five scandal was brought up again by the press. During his final years, Keating maintained good physical shape through swimming and walking and was able to go out in public without being recognized.
Keating steadfastly maintained 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 made the claim that regulators' actions were responsible for the Lincoln failure and presents Keating's actions in a favorable light. (The Milken Institute was founded by Michael Milken, the "junk bond" king also convicted on felony charges for violating U.S. securities laws.)
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."
Charles Keating died in a Phoenix hospital on March 31, 2014, at the age of 90, after an undisclosed illness for several weeks.
Another Keating grandson, Petty Officer 1st Class Charlie Keating IV, a Navy SEAL, was killed at age 31 in combat with ISIS in Iraq in 2016.