Longform

DeConcini & Keating

Page 11 of 12

In March 1988, R.A. Homes agreed to assume a $7.4 million loan from another company that had become dissatisfied with a 600-acre land purchase at a Keating real estate project in Hidden Valley, an undeveloped stretch of desert southwest of Phoenix.

R.A. Homes bailed Keating out. It was another of Keating's sham real estate deals.

In this case, R.A. Homes agreed to assume the $7.4 million loan to purchase land that was appraised at only $4.7 million. This deal made little economic sense. It would be like assuming a $74,000 mortgage on a house worth only $47,000. Ober says he wasn't aware of the difference between the appraised value and loan amount.

Lincoln made the loan to R.A. Homes even though, by this time, Ober's homebuilding company was saddled with total liabilities 59 times greater that its capital base. But by manipulating the books, Lincoln was able to overstate its income on the transaction by $7.7 million.

Ober characterized the Hidden Valley deal as "a win transaction for us" because it allowed the company to spread out its risk between the Tucson and Phoenix markets. The trade also brought a major homebuilder into Continental Ranch, Ober says.

R.A. Homes later defaulted on the loan.

By this time, Keating was desperately trying to keep his thrift afloat any way possible. He was hoping that the new bank board chairman, M. Danny Wall, a former Senate Banking Committee staffer known for being timid, would go easier on Lincoln Savings than Gray had. Keating's hopes came true. On May 20, 1988, the bank board signed an agreement with Lincoln granting the thrift a reprieve from an impending criminal referral to the Department of Justice.

Just as DeConcini had hoped in his letter the year before to Keating celebrating Gray's departure, Keating was given new life, but just for a while.

Wall ordered a new examination of Lincoln in July 1988 that also included American Continental. The examination wrapped up in December 1988 and found massive problems. A month later, Texas Representative Henry Gonzales, the newly named House Banking Committee chairman, held hearings on Lincoln Savings in San Francisco. It was clear the end was near for Keating's ownership of Lincoln Savings.

With Keating's control of Lincoln Savings hanging by a thread, Keating called on the one senator whom he knew might help. Keating wanted to sell Lincoln Savings and he needed to do it fast. Keating asked Earl Katz if DeConcini could help.

DeConcini promptly called federal thrift regulators, including an early morning call to the home of former Federal Home Loan Bank Board member Roger Martin. DeConcini also pressed William Seidman, chairman of the Federal Deposit Insurance Corporation, for assistance. The senator, his press secretary says, asked that Keating's application to sell the thrift to a group of California investors led by a former congress member be given serious consideration.

But bank regulators rejected the proposed sale of the thrift.

It was December 1988. The lucrative borrowing-and-contribution game with Lincoln Savings was just about finished. And according to DeConcini spokesman Bob Maynes, this was when Ober finally told DeConcini that he had business ties to Keating.

Ober says he was visiting Lincoln Savings in December 1988 when he became aware that Lincoln was having a problem with regulators. "They asked me if I would talk to Dennis DeConcini and get them some help and I said no. I told them that I was a borrower and could not and would not do that for them," he says.

After the meeting at Lincoln Savings, Ober says he told DeConcini about his business ties with Keating. DeConcini reportedly thanked Ober for telling him about the financial dealings with Keating and went on with his business.

Ober says he didn't tell DeConcini about his business relationship with Keating earlier because he never informed DeConcini about any of his financial dealings.

"My business didn't have anything to do with his business as a United States senator," Ober says.


Four months later, the ax finally fell on Lincoln Savings. Keating took American Continental into Chapter 11 bankruptcy, one day before federal regulators seized Lincoln Savings on April 14, 1989.

With the government in control of the thrift, Ober's access to easy cash was over. Keating's contributions to DeConcini were terminated. A new game plan was needed. Rather than battling regulators to keep Lincoln open and the money flowing to Ober's homebuilding company and DeConcini's campaign coffers, the strategy shifted to damage control.

And it worked.

As usual, it was the taxpayers who were left holding the bag. Losses stemming from Lincoln Savings' loans to R.A. Homes, even after the RTC settlement with Ober, Katz, et al., may exceed $70 million.

KEEP PHOENIX NEW TIMES FREE... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
John Dougherty
Contact: John Dougherty