Cole told Keating he understood the condition of keeping the money separate. Cole, who majored in accounting, worked 15 years as a lawyer and ten years as a developer, later testified in the bondholders' trial that Keating's demand to keep the money separate "was something I really wasn't focusing on."
Cole said the key thing in his mind was making a $2.5 million profit and the only way that would happen was if Keating supplied the $5 million loan to free up other R.A. Homes funds for the down payment on Continental Ranch.
"We had our money committed for other purposes, and there was no way to purchase it without the $5 million operating line," Cole said.
Even though Ober admits the deal wouldn't have gone forward without Keating's $5 million operating line, he says the money did not constitute the down payment. Ober says the company could have decided not to go forward with its other obligations and used that money to make the down payment. But once Keating offered the operating loan, it made sense to accept it, he says.
Before the meeting was over, Cole raised several more questions, irritating Keating, who wasn't used to being challenged. Besides the down payment, Cole wanted to be sure there was a development agreement between R.A. Homes and AMCOR that specified in writing Keating's guarantee that AMCOR would be the responsible party for any future development on the property.
Keating promised that a development agreement would be drawn up with the closing papers that would be ready for signing before the end of the month, which was also the end of American Continental's third quarter. An expected development agreement, along with Keating's promises to control the land, sell the property, pay R.A. Homes $2.5 million for holding the title and Keating's guarantee that R.A. Homes wouldn't have to make any payments on the $25 million in loans until the land was sold, satisfied Cole.
"Based on those assurances, we were really looking to accommodate Lincoln Savings and American Continental and Charlie Keating," Cole testified.
Thus, the biggest land deal in R.A. Homes' history by more than eightfold was negotiated in less than a half-hour. No appraisals were conducted. No soil testing ordered. There were no extensive negotiations in regard to the total amount of acreage, the terms or the price. A deal that would typically take three months to close would be ready for signing in less than eight days. In effect, no true down payment was required nor were monthly installments anticipated. If the deal failed, Keating would have no recourse against Ober and Cole for the $20 million loan. And if that weren't enough, Ober and Cole expected to make $2.5 million for doing nothing.
Despite the unusual circumstances surrounding the deal, Cole said in a deposition he never suspected that R.A. Homes was engaging in a shady deal with Keating even though he understood the terms of the transaction meant Keating was trying to move the Continental Ranch land temporarily off Lincoln's books.
Ober says he didn't "have the slightest idea" that Keating was attempting to move the property off Lincoln's books.
"I don't know what Charlie Keating's motivations or his intentions were," Ober says. "Ours were to enter into a business transaction where we were going to make a profit."
At the conclusion of the meeting, Keating, who enjoyed playing craps in the world's fanciest casinos, shook Cole's hand on the way out the door, stopping to say, "You don't know me, but I'm deeply indebted to you, and you have my marker."
If Cole somehow didn't suspect anything was afoul at first, his suspicions might have been aroused a week later when Ron Ober signed the purchase agreement even though key parts of the deal were not included.
The nine-page Continental Ranch sales agreement signed by Ober and Keating failed to contain crucial provisions promised by Keating during the September 23, 1986, meeting including:
Keating's promise that R.A. Homes would be holding the land for no more than a year.
Keating's pledge that AMCOR would develop the property and act as owner while R.A. Homes retained title to the land.