Election Section

LOS ANGELES — Prosecutors reluctantly told a judge Thursday they will not retry financier Charles Keating on state fraud charges in a case that made him a symbol of the savings and loan scandals of the 1980s. 

Superior Court Judge Lance Ito, who presided over the 1992 state trial, granted a prosecution request for dismissal of the case in which Keating was convicted but won a reversal on appeal due to improper jury instructions. 

“We take no satisfaction in the request we made today,” Deputy District Attorney Bill Hodgman told the judge as the case quietly came to an end. 

Keating, who remains convicted on some federal charges, planned to celebrate the end to his years of legal troubles involving his Lincoln Savings and Loan, which collapsed at a cost to taxpayers of $3.4 billion, and its parent, American Continental Corp. 

“I’m sure in the hell going to have a party,” Keating said outside court. 

If the government had left him alone, he said, the investors “would all be rich.” 

Hodgman said dismissal was sought because pursuing a conviction could result in just a six-month sentence if Keating was found guilty.  

He also said that many witnesses who testified in the 1992 trial have either died or are in bad health. 

Keating’s attorney, Stephen Neal, said his client was “every bit as innocent as anyone in this courtroom.” 

Last month the U.S. Supreme Court, without comment, let stand rulings that threw out Keating’s California fraud convictions because of faulty instructions to the jury. 

The 9th U.S. Circuit Court of Appeals last year agreed with a federal judge’s 1996 ruling that Keating’s Superior Court convictions on charges of defrauding investors in American Continental Corp. were tainted because Ito’s instructions improperly allowed the jury to convict Keating without deciding whether he intended to swindle them. 

Investors lost nearly $200 million when American Continental Corp.’s unsecured “junk” bonds turned out to be worthless.  

Many of the investors were elderly Lincoln Savings customers who claimed they were duped. 

In separate state and federal trials, prosecutors alleged that Keating looted Lincoln of its assets to prop up American Continental.  

They claimed that bond buyers were not told of the risky nature of their investments. 

“He knew American was on the edge and he continued to sell bonds,” said Deputy District Attorney Paul Turely. 

“American didn’t have any liquid assets.” 

Keating was sentenced to 10 years in prison on the original state charges. 

He was then convicted in the 1992 federal case and served nearly five years of a 121/2-year prison sentence before the federal conviction was reversed on grounds that some jurors learned of his state court conviction and discussed it in the jury room. 

Federal prosecutors said they would retry that case but in 1999 they accepted his guilty pleas to three counts of wire fraud and one of bankruptcy fraud in a deal that allowed him to remain free, with no fines or restitution required.  

Investors won a $1.5 billion judgment against Keating in a civil suit, but his lawyer has said he can’t pay it. 

When asked if he had learned any lessons from the lengthy legal battle, Keating said, “Stay the hell out of the government’s way.”