Charles Keating died recently. His death marked a milestone in American political history. His crimes and those of my nephew illustrate an American truism often attributed to Al Capone. “If you’re going to steal, steal big.”
Keating, the one-time multimillionaire, is infamous for climbing to the heights of the American pyramid of power and wealth. His influence in banking policy and his soft bribes led to the Keating Five scandal—and to one of the greatest banking frauds in US history.
I’d have said “the” greatest banking fraud, but of course his crimes were chump change relative to the banking scams that led to the 2008 financial collapse.
I remember Keating’s hype. I was travelling in Europe with a very sophisticated engineer who, for his company, had investigated whether they should work with Keating. As we drove across Europe, from one wind turbine to another, he explained how Keating’s scheme worked. On his advice, his company didn’t do business with Keating. He said, “I’d never put my money there.” And he predicted it would end badly.
Most may remember Keating for his historic quote on influence-buying in American politics. He was asked whether he expected US Senators to whom he had contributed heavily would be influenced by his contributions. His answer was characteristically arrogant and at the same time insightful. Keating famously answered, “I want to say in the most forceful way I can: I certainly hope so.”
Keating took down Lincoln Savings & Loan in 1989 and with it the life savings of 20,000 Americans. Yes, they were certainly gullible and some may well have been greedy, chasing the high earnings Keating promised. He ruined the lives of his depositors who never realized they were, in fact, not “depositors” but investors in a giant Ponzi scheme.
They were defrauded said the jury, convicting Keating in 1993 of 73 counts of fraud, racketeering, and conspiracy. The court sentenced Keating to serve 12.5 years in prison.
Of the 2008 financial collapse, none of the US banking titans that led the world to the brink of another great depression has been sentenced to prison. (Tiny Iceland at least locked up a few of the bankers that they could get their hands on.) For causing all the suicides, broken marriages, failed businesses—worldwide—that American banking excesses created, none have served time.
Keating ran a giant Ponzi scheme and like all architects of Ponzi schemes he blamed the government for his crime. “They’d all be rich,” he said about his swindled clients, if only the government hadn’t enforced the law and closed him down.
Keating never admitted his guilt, and he could afford the best lawyers in the land to prove his innocence.
And his attorneys were good. They got the conviction overturned on a technicality. Keating in the end agreed to a plea bargain of defrauding one of his companies of $1 million and was released after serving only 4.5 years.
Yes, only 4.5 years.
His scam cost the American taxpayer $3.4 billion. Of course, it was just the tip of the savings-and-loan iceberg that eventually cost all of us $500 billion when it was over.
Contrast Keating’s treatment, as a onetime idol of the banking industry’ with my nephew.
My nephew has been convicted of burglary and using illegal drugs. He broke into and stole goods from one of his customers’ homes, all-in-all probably worth a few hundred dollars, to feed his habit. There’s no question he did it. He admitted his guilt.
Today my nephew was sentenced to 20 years in prison.
Keating served 4.5 years for defrauding 20,000 investors of $3.4 billion.
4.5 years versus 20.
Something’s amiss in the land of the free and the brave.