Now that the biggest fish in the S&L pond, Charles Keating, is sitting behind bars, a little-noticed state agency thinks it's time to go after the minnows, too. While Keating's attorneys file appeals aimed at getting the former millionaire developer out of the hoosegow in L.A., the Arizona Board of Accountancy has quietly begun a probe into the dozens of Valley-certified public accountants who kept the books for the Phoenix headquarters of the bankrupt American Continental and its subsidiary thrift Lincoln Savings and Loan. The seven-member board, which licenses and monitors the state's accountants, is currently in the fact-finding stage of what its attorney calls a "broad and wide-ranging" investigation that could result in disciplinary action against the Keating accountants--including members of two of the Valley's most prominent accounting firms. While the board doesn't have authority to file criminal charges, it could decide to revoke their licenses to act as CPAs in Arizona.

The investigation is based on charges made by federal regulators in 1989 that American Continental had--in addition to tricking depositors at Lincoln into buying unsecured bonds from the parent company--"cooked the books" to deceive government auditors probing the S&L's questionable, high-risk investments. American Continental was accused of allegedly manipulating accounting records to make the S&L appear financially robust.

In reality, Lincoln was teetering on the brink of collapse and was seized by regulators in April of that year. American Continental filed for bankruptcy, leaving 25,000 investors who purchased the bonds stuck with $250 million worth of worthless paper, suitable only for lining bird cages. Keating's bean-counting minions should shoulder some of the blame for this costly scam, some close to the investigation say. Ruth Lee, the board of accountancy's executive director, would not comment on the names of the accountants involved in the investigation. But any inquiry about accountants close to Keating is expected to involve the high-powered Valley accounting firms of Ernst, Young, and Company and Deloitte and Touche both of which, under MD120 Col 1, Depth P54.02 I9.03 different company names, served as accountants and auditors for Keating and American Continental during the late 1980s. Ernst, Young refused comment on the investigation. Kathy Gash, a spokesperson for the firm, hung up the phone at the first mention of Keating and American Continental. Jerry Mayer, managing parter of Deloitte and Touche, says he has not been notified of any investigation.

Montgomery Lee, an assistant attorney general and board adviser, says the board's investigation could take three months, as investigators pore through stacks of American Continental documents seized by a federal judge. "They've got a whole room full of documents to go through," he says. "This thing is just a complicated, convoluted maze."

The board, which normally disciplines about ten Arizona accountants a year for a variety of offenses ranging from ethical violations to nonpayment of fees, decided at their September meeting to look into the Keating affair after receiving what Lee called "several requests for action from the accounting community."

"For so long," says one Phoenix banking expert, "the S&L crisis hasn't received the attention it deserves because it was so difficult to pin down who is to blame. Well, lately we've found Keating to point to as the lead assassin of people's savings.

"Now it's time to start ferreting out the ones who did his bidding; the smaller guys who helped him pull the trigger on the gun.

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Darrin Hostetler