Charles H. KeatingJoin now to read essay Charles H. KeatingCharles H. Keating Jr. has been the focus of criminal investigations by the Federal Bureau of Investigation, the Internal Revenue Service, the Justice Department, The Securities and Exchange Commission, and the House Banking Committee for a six-year shadow of the nation’s biggest savings-and loan debacle. The federal government proclaims that he fraudulently managed California’s Lincoln Savings into its closure, and in the process profited for himself and his family an estimated thirty-four million dollars. Consequently, taxpayers may suffer a loss of two billion dollars. The federal government is suing Keating, his family and associates for one billion dollars.
Despite Keating’s denial to the charges, evidence proves that his misconduct began since the early 1980s. Shockingly, Charles Keating worked for an extended amount of time without being investigated or caught. Keating did not have a very credible background, which should have led to some suspicion. About a decade ago, many incidents should have foreshadowed Keating’s malicious intentions. At that point Keating was under the leadership of Carl Lindner at American Financial Corp., a city conglomerate with interests in insurance and banking. In 1979 SEC, better known as the Security & Exchange Commission, cited Keating and other officials of the American Exchange Commission for failure to reveal particular loan transactions with their employer.
Keating, a national championship swimmer, attended the University of Cincinnati on an athletic scholarship and continued in law school. Along with help from his brother, Charles Keating founded the prominent Cincinnati law firm of Keating, Muething and Klekamp. In 1972 Keating abandoned the profession of law, turning to work for the publicity-shy multimillionaire Carl Linder. Lindner served as a guide and mentor in the life of Mr. Keating. Many similarities can be traced between the business style of these two men; preeminently they both built their empires on savings and loans.1
Charles Keating exceeded Mr. Lindner’s expectations, which persuaded Mr. Lindner to extend an offer to the forty-eight year-old lawyer a position with American Financial in 1972 as the executive vice-president. Under Lindner’s supervision at American Financial in the mid-1970’s, Keating found a resourceful strategy to raise money from the public without the interference of the Wall Street underwriters. The success of this strategy resulted from sharp decline in profits that Lindner’s company was experiencing. Keating’s success revolved around him raising fifty million dollars for American Financial from the public without using an underwriting syndicate. This technique was quite uncommon for a corporate business of their size. Consequently, American Financial sold the fifty million dollars in debentures through local stockbrokers. These debentures were offered at a surprisingly high annual interest payment of eleven and three-quarters. As a result of the high payment, these debentures were promoted in cities where small savers were eager for high rates. Keating had no fear of re-sales because he assumed that most of the buyers would simply store the debentures, providing American Financial with stable, long-term money. Also there was a lack of restrictive covenants or sinking fund requirements, which normally would have been required in a syndicated offering.
Keating left Lindner’s shadow and the employ of American Financial in 1976, when he departed to Phoenix, Arizona. At the time his departure, he took a four-year consulting contract at one hundred and fifty thousand a year from Lindner. Despite the fact that Keating had left Lindner’s side, in some way Keating success was connected with Lindner. In 1977 Keating gained control of American Continental Homes, a home building operation.
The reasons for Keating’s leave from American Financial stand quite vague to the public eye. The question remains as whether or not Charles H. Keating Jr. left by his free will or with the aid of others. The loan activities that occurred during the duration of Keating’s vice presidency at American Financial resulted in a consent decree with the Securities & Exchange Commission, better known as the SEC, in 1979. The SEC charges Lindner, Keating, and Donald Klekamp of the Keating law firm with arranging millions of dollars in improper loans to Lindner’s employees. Despite the close encounters with the officials of the SEC, Keating developed tactics to raise reported earnings at American Continental Homes. The most popular tactic was the use of interest capitalization, which involves listing interest payments as an asset rather than as an expense, thus boosting earnings.
The SEC is an institution and a private interest.
The SEC is not required to disclose any confidential information about its members. As a result, all parties who work with the SEC who fail to comply with SEC policy require that the SEC disclose any business related information, even within state or federal funds. Any business that may appear to be on the FBI’s radar when it reports to the Treasury department’s offices will be met with what may be considered unprofessional and illegal behavior by both the IRS and the SEC. In order to obtain a complaint against any company who is violating the Federal Rules of Civil Procedure, the Secretary of the Treasury must ensure that all relevant information related to any business is filed within 30 days of receipt of any class of notice and, once the notice is filed, it will be used in the proceeding.
A lawsuit was filed, against Arris Pharmaceuticals, which alleges that it violated the U.S. Tax Code by transferring billions of dollars to Arris, the subsidiary of a leading pharma company for which Arris is a part. In response, Arris sought $4.7 billion in legal settlement claims. The case, filed at the U.S. Supreme Court in 1989, involved a case that involved securities litigation involving the securities laws of North America and the North American Free Trade Agreement (NAFTA). According to a statement Arris said, in 1991, Arris became the world’s largest drug manufacturer following the U.S. withdrawal of the NAFTA. The corporation sought to withdraw about $1.6 billion, including a $500 million loan and $1.3 billion in stock in 1986. By 1991, more than one million Arris stockholders owned between $1.6 and $1 million. By 1992, Arris had been involved in more than 500 lawsuits against drugs companies and drug manufacturers, among them Arris Therapeutics, the first to initiate such an action in any U.S. patent law.
The company contends that Arris, through its involvement with Arris Pharmaceuticals, infringed upon its patents because it transferred proceeds in its business to Arris from the other major drug manufacturers in North America, which includes Arris, without properly providing notice to U.S. patent officials. Arris alleged that the transfer of Arris’s business and royalties to Arris did not comply with the TRIP and that it made a $500 million loan to the company, without disclosing to the SEC that it took a 50% stake in Arris, thereby diluting Arris’s value to Arris. The SEC is requesting that the SEC issue subpoenas and search warrants on Arris and Arris Therapeutics. Arris provided documents to the SEC alleging that it had violated the TRIP §1501 when it transferred $4.7 billion in royalty payments to Arris with approximately $988,000 in stock owned by Arris. The company claimed that those payments were used to pay for its stock in Arris’s stockholders by Arris, which it deemed as illegal because Arris’s business did not conform to the TREP §1501(a); it had no interest in Arris, and the financial interests thereon were wholly owned by Arris.
As part of its motion request for summary judgment, Merck & Co.’s attorneys claimed without a trial that Arris was liable to the SEC because Arris had transferred
Evidence confirms that Keating inflated American Continental Homes’s pretax earning by having fifteen million dollars out of American Continental Homes’s twenty-five