On the other end was Ron Ober, his business partner in R.A. Homes.
Ober had urgent news.
Cole must return immediately to Phoenix and be prepared to cut by far the biggest business deal in their homebuilding company's history. Arizona's most influential financier had called and time was short.
"Ron indicated that it was going to be necessary to immediately come back from Hawaii to meet with Charles Keating," Cole said in a sworn 1991 deposition.
On Tuesday, September 23, 1986, Cole and Ober met with Keating at his American Continental Corporation headquarters on East Camelback Road in Phoenix. In 25 minutes, a deal was cut with Keating that would forever link Cole, Ober and R.A. Homes to the collapse of Lincoln Savings and Loan--which, at $2.6 billion, is the most expensive thrift failure in U.S. history.
In a complicated series of transactions, some of which were not documented in the purchase agreement signed by Ober a week later, the two men agreed, in Cole's words, to "accommodate" Keating by purchasing 1,400 acres in Lincoln Savings' Continental Ranch development north of Tucson for $25 million.
The government would later allege the sale was not a true sale. It was, in the view of prosecutors, a "sham."
The deal was typical of scores of other real estate transactions Keating was conducting in 1986 and 1987 in which Keating would make the deals appear to be sales on paper, but, in fact, they were accounting tricks designed to improperly book profits. To make the deal work, it was essential to find "buyers" of real estate who would consent to a set of side agreements that would not later appear in the written contracts.
Among the unwritten side agreements Ober and Cole cut with Keating was that Keating would continue controlling the property and, in fact, sell it within a year. R.A. Homes knew it was incapable of developing the property and never even assigned an employee to monitor the largest land purchase in its history.
R.A. Homes' job was only to hold legal title to the property. Cole said in a 1991 deposition that he understood that such an arrangement meant that Keating was trying to move the land off Lincoln's books. The tactic is known as "land parking" and, in this case, was used by Keating to book a false $8 million profit in an effort to deceive regulators and investors.
While there is no evidence proving that Ober and Cole knew Keating was planning to book an illegal profit on the deal, Keating provided a strong inducement for R.A. Homes to enter the transaction. Keating promised to pay the company $2.5 million from profits Keating expected to generate by selling the land he had supposedly just sold to R.A. Homes.
Michael Manning, the lead government attorney in the Resolution Trust Corporation's suit against Lincoln Savings, said the R.A. Homes deal was another example of "borrowers that we alleged Keating used to accommodate his looting of Lincoln."
Mike Hawkins, a former U.S. district attorney who represented R.A. Homes, said Ober and Cole believed Keating had the "Midas touch" and that the deal appeared to be a low-risk one with a nice profit. Hawkins said Ober and Cole had no idea of how Keating would record the deal on Lincoln's books or why Keating was willing to offer the lucrative deal to R.A. Homes in the first place.
"The transaction had every appearance of appearing to be a legitimate transaction from R.A. Homes' end of things," Hawkins says.
While Cole and Ober might claim the deal was on the up and up, the Continental Ranch transaction later became key evidence in Keating's federal criminal trial held last year in Los Angeles and in the American Continental bondholders' class-action civil suit. The deal contributed to the conviction of Keating, who was ultimately found guilty on 73 federal counts of fraud, racketeering and conspiracy. Keating was sentenced to 12.5 years in prison on July 8. He's already serving a ten-year prison sentence stemming from a state conviction.
Keating's top lieutenant, American Continental president Judy Wischer, would also plead guilty to one count of bank fraud stemming from the land sale to R.A. Homes. Wischer faces sentencing later this year. Lincoln Savings president Bruce Dickson also pleaded guilty to creating fraudulent documentation related to a $5 million operating loan Lincoln provided R.A. Homes as part of the Continental Ranch deal.
In a separate case, bondholders charged the R.A. Homes deal helped Keating create false profits at American Continental, allowing him to illegally dupe investors into purchasing $266 million in American Continental bonds that became worthless when the company filed for bankruptcy in April 1989. Ober, Cole and R.A. Homes were named defendants in the class-action civil case, which they settled out of court, neither denying nor admitting wrongdoing, but agreeing to pay $200,000.