Profit without Honor

His face should grace a three-dollar bill. He's the flimflam financier with the towering physique and pygmy scruples, the bunco artist who tried to buy Washington while bleeding Lincoln to death.

A few short years ago, when Charles H. Keating, Jr., stood at the top of the financial heap, his thrift-and-real-estate empire seemed to be worth billions. In Phoenix, his home base since 1976, he built the Phoenician, a resort hotel that he touted as the world's finest. His corporate fleet of stretch limos, sleek jets and a helicopter---all painted beige or virginal white---whooshed him from one business conquest to the next. When he ran into political squalls, he turned to a Rolodex that read like a Senate roll call.

Now his empire is worth less than the paper its books were cooked on, and the collapse of the Lincoln Savings and Loan Association will cost U. S. taxpayers $2.6 billion, more than any of the hundreds of other S&L failures of recent years. Keating---who at the age of 68 already stands convicted of defrauding investors in Lincoln's parent company, American Continental Corporation---still faces enough new charges of racketeering, bank fraud and insider trading, among others, to put him in the slammer for 510 years.

As more details emerge of his maneuverings, we see a picture of a veteran swindler from Cincinnati who recognized the Reagan era as Camelot for the rapacious. Charlie Keating seized his main chance when the federal government deregulated the savings-and-loan industry. He didn't invent the S&L crisis, but he defined it by the magnitude of his scandalous behavior---Time magazine dubbed him its "most visible villain"---and by the ferocity with which he fought anyone who got in his way.

Before the Eighties, savings-and-loan associations, or thrifts, as they were quaintly called in a thriftier era, were mostly neighborhood institutions; Jimmy Stewart ran one in It's a Wonderful Life. They were insured by the federal government, but they were also limited by law to giving depositors a modest return on savings and to lending money for such sound investments as private homes. It wasn't an exciting industry, but until the government relaxed the rules, it was a stable one. Then suddenly, thrifts could invest in risky businesses like land development, office buildings and shopping malls, and people like Charles Keating rushed in, filling a regulatory vacuum with an ethical void.

When Keating bought Lincoln Savings in 1984, it was an ordinary S&L based in Irvine, California, and he was Arizona's most flamboyant developer and home builder. In the superheated spirit of the times, he promptly turned Lincoln into a personal casino and used its assets, according to thrift regulators, to feed his family's baronial lifestyle and to finance elaborate corporate ventures and real-estate schemes that were dubious at best, fraudulent at worst.

When Keating's luck started heading south, thrift regulators claim, he siphoned more cash from Lincoln Savings to cover his losses. When they got on his case, he rallied five U. S. Senators to his cause. Later known as the Keating Five, they were Alan Cranston of California, John McCain and Dennis DeConcini of Arizona, John Glenn of Ohio and Donald Riegle of Michigan, and they had been favored by Charlie Keating with more than $1,000,000 in campaign funds.

Such was Keating's power that he could summon these Senators to private meetings and send them off to subsequent discussions with the head of the Federal Home Loan Bank Board and its regulators, where they represented their benefactor as a worthy citizen being harassed by overeager bank examiners. When transfusions from Lincoln Savings failed to revive American Continental, he raised cash by selling hundreds of millions of dollars in what turned out to be worthless ACC junk bonds to tens of thousands of unsophisticated investors who bought them through Lincoln's branches and thought they were buying securities insured by the federal government. This past fall, in a Los Angeles courtroom, two of Keating's elderly victims attacked him physically. But it was too late for them, since they had already lost their life savings, and no sweat for him, since they were too frail to do him any harm.

Many aspects of his far-flung ventures remain hazy: How much influence did he actually buy? How did he manage to stay so far ahead of the law for so long? Where did all the money go? But there's another mystery: Who is this man behind the flinty facade and why did he do what he did?

Keating has been many things to many people, but never a common thief. He has been an ostensible gentleman of great, if intermittent, personal charm. He's a husband and father dedicated to his family. (Although dedication can go only so far: The day before Christmas 1991, when Keating's family and friends were trying to raise bail for him and his son, Charles H. Keating III, who was in jail on similar charges, they could come up with only enough cash for one or the other. Poppa promptly sprung himself and left the fruit of his loins to ripen further behind bars.) He's also a devout Roman Catholic, a philanthropist (when Mother Teresa toured the Southwest, Keating lent her his helicopter) and a relentless bluenose who, during a 40-year crusade against what he deemed to be pornography, sought to have this magazine, among others, banned from newsstands across the nation.

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Money talks, but it can also laugh and smile and charm. And Charlie Keating, Jr., wasn't just a humorless moralizer. He was an effective glad-hander, a lanky developer in shirtsleeves who would refer to someone he liked as "the genius"; a father figure with a voice that could be soft and lilting or big and booming, who told his help at American Continental to call him Charlie (though he remained Mr. Keating to most), and who, on holy days, would remind his Catholic secretaries to go to church.

Above all else, though, Charlie Keating got things done. He built houses, created jobs and bought himself a shiny California S&L called Lincoln Savings. Long before the Keating Five, he laid hundreds of thousands of dollars on local politicians, gave millions to the Church and spread cash around Arizona like Johnny Cactusseed making the desert bloom.

Loving to be liked, he lavished gifts on people around him. One time he gave a Corvette to a female mail-room worker for doing a good job. Another time he took all the women in his legal department to a shopping mall, gave each one $500 and told them they had 20 minutes to spend it on something nice to wear or the money would be taken back.

He based some of his hires on hunches rather than résumés and won deep loyalty in the process. Many employees, like Ruben Muñoz, who became American Continental's advertising director, look back on their work for Keating with unapologetic pride. Keating paid terrific salaries---even secretaries earned $60,000 a year, sometimes more---and then demanded ceaseless effort in return. When 60 Minutes came calling, he summoned one young woman into his office and gave her a raise right there on camera, making her, as Keating proclaimed, the company's first $100,000-a-year employee who had started as a secretary. The technique was straight out of televangelism, but the message was as clear as the engraving on a dollar bill---stick with me, all you struggling wage slaves, hungry investors and humble depositors, and I'll make you rich.

Yet, Keating's shimmering vision had its dark side, even before the bubble finally burst. Working conditions were draconian at American Continental's headquarters on Camelback Road in Phoenix. No pictures on office walls unless approved by management. Nothing to be left on desktops at night, not so much as a pencil or box of paper clips. Prussian order imposed on supplies (white-out bottles lined up like little soldiers on storage-room shelves) and on personnel (fresh-scrubbed secretaries with Stepford smiles clipping newspapers, whenever they had to, over wastebaskets, for fear that scraps might fall on the floor).

At an enormous subdivision called Estrella that American Continental planned to build on 20,000 acres southwest of Phoenix, Keating even tried to extend his control into the private lives of home buyers. Until members of the press found out and set up a howl, Keating wanted covenants that would prohibit residents from viewing pornography or having abortions. (After construction of a few houses and access roads, the project itself was aborted.)

But the darkest side was financial, since the obverse of Keating's tight control was his wild, untrammeled tactic of robbing Lincoln to pay Paul and defrauding new investors to keep his doomed corporation afloat.

Keating used American Continental to acquire the 58-year-old Lincoln Savings for $51,000,000. Within two years, the thrift was under close scrutiny by thrift regulators, and its parent company, American Continental, had been hemorrhaging cash. To stanch the flow, Keating began, in November 1986, selling $200,000,000 in American Continental debentures.

The bonds looked impressive, as bonds do, and the salesmen peddling the handsomely designed certificates sat at desks in Lincoln branches. Since the S&L was insured by the federal government, the surroundings functioned as a theme park of integrity. Little wonder, then, that Lincoln Savings' customers---many of them elderly and disinclined to read fine print---bought the ACC bonds and assumed that their investments were as solid as the U. S. Treasury.

Of course, the bonds were not insured at all, and ACC lacked the resources with which to back them. Keating most likely knew this when he put the first issue on the market in 1986, but he went ahead with the sale anyway; a thug at heart, he was also a thug in deed. And when he floated an additional $300,000,000 worth in 1988, he probably knew ACC was headed for bankruptcy. Here again, though, he never let honor interfere with his need for cash. Keeping the explosive knowledge of ACC's plight to himself, he encouraged his salesmen at Lincoln's branches to keep selling worthless paper and to keep telling prospective investors: "Trust me."

Keating also kept up a prosperous front at his corporate headquarters, spending lavishly and making bold plans. Still, even those who admired and believed in him began to worry, when, as Ruben Muñoz recalled recently, Keating would "come into his office at three or four in the morning to have his own concentration time." Did they think anything was seriously wrong? Muñoz nodded pensively: "It crossed our minds."

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Consider a brief moment from Keating's first trial in Los Angeles. The date is November 5, 1991, and the time is shortly before four p.m. The prosecution has just rested its case, the defense has moved for dismissal without putting Keating on the stand and the motion has been promptly rejected. Through it all, Charlie Keating has sat motionless, like a display at Madame Tussaud's, his hair dyed reddish-blond, his long, furrowed face with its sunbaked lizardly skin registering absolute zero on a scale of human emotion.

But now, another long day in court is at an end, and the time has come for Keating's ritual trooping past the media line. He strides out of the courtroom behind his lawyer, Stephen Neal, and then stands silent in the corridor as Neal agrees to make a brief statement. Nothing special about this so far. Lawyers often speak for their clients during trial; that's why they're called mouthpieces. The startling part is what happens to Keating's expression when the TV lights go on.

At the first moment of halogen dazzle, his jaw snaps to attention, his eyes sparkle, his thin lips separate to reveal a gleaming set of choppers. What had seemed half a second ago to be a botched job of embalming becomes a smile of remarkable jauntiness, an entirely convincing simulation of kindness, sweetness or Grant Wood goodness---you name it, or merely feel it, and you can project it onto Keating's face.

While Neal launches into an earnest sound bite---We're disappointed that the (continued on page 86)Without Honor(continued from page 70) judge chose to deny our . . . but we're confident that the jury will agree with our . . . ---Keating takes the camera like some great old star of the silent screen. You begin to understand why people believed him when he promised to make them rich.

Then Neal subsides, the lights switch off and lawyer and client step into a waiting elevator. As the doors glide shut, Keating's face goes dead again, as if a small internal battery with a shallow charge had just crapped out.

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When prosecutors brought their first indictments against him a year and a half ago, they warned that no smoking gun would be found; the evidence was almost entirely circumstantial. Yet their case proved solid enough for the Los Angeles jury, the first of several he would have to face. In delivering a guilty verdict last December on 17 counts of state securities fraud, jurors rejected the defense's portrait of Keating as a benign, hands-off boss whose evil underlings took it upon themselves to lie and cheat.

If the boss sought to keep his fingerprints off his financial dealings, he left them all over the Phoenician, the desert resort that he built---with Kuwaiti backers---at a cost of more than a quarter-billion dollars. Seized by the feds in 1989, a year after it opened, and recently sold to the Kuwaitis at a loss to taxpayers of $66,500,000, the hotel was one enterprise that Keating ran with unconcealed and unrestrained obsessiveness.

He lived on the premises for more than a year while the 130-acre project was going up. He micromanaged every detail of design and construction and vented his feelings in splenetic memos. These days, the Phoenician is trying hard to live down its reputation as Lincoln's memorial to the madness of the Eighties. Still, the resort came into being as Keating's supreme ego trip, and you can find the tripper's traces at every turn.

The architecture is subtropical czarist-Stalinist---a love of luxury at war with a loathing of taste. In the public rooms, soaring ceilings are slathered with 23-carat gold leaf and hung with crystal chandeliers the size of ice storms. Vast expanses of beige-and-white marble floors, stairways and walls suggest the cozy charm of the Ceausescus' government palace in Bucharest.

To be fair, coziness wasn't Keating's goal. He wanted to attract a rich clientele, so he used the most expensive materials he could find. He liked to boast, when he was still in his boasting mode, that the marble in the main lobby came from the same quarry from which Michelangelo "got his Pietà" (which Keating pronounced with the same slouching rhythm as "potato"). Unfortunately, the message of all the hard, cold stone surfaces and of the mausoleum decor seems to be that the rich are truly different from you and me; they're more depressed.

Even though the Phoenician's fashionable Scottsdale address turns out to be, like most of Keating's claims, a bit of a scam (it's Scottsdale-adjacent, plunk in plebeian Phoenix), and the mother-of-pearl swimming pool is actually stepdaughter-of-pearl (iridescent Japanese tiles), Keating didn't stint on the physical scale. Just as Frank Lloyd Wright was a little guy who designed houses with low ceilings, Keating, a long drink of water at 6'5", made sure each of his 604 rooms had an eight-foot ceiling, plus a minimum area of 600 square feet (covered in beige carpet to match the beige walls), and that each of the bathrooms boasted a marble tub big enough to accommodate his frame.

Every guest room also offers a small safe-deposit box tucked in one of the walk-in closets. Although the accompanying sign would have improved from proofreading---"The Only Guest Key For This Wall Vault Is Now In It's [sic] Lock"---depositing money in the box would have been safer than investing it in American Continental's subordinated debentures.

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Charles H. Keating, Jr., was born in Cincinnati in 1923. He attended Ursuline Academy and Annunciation Grade School, then Saint Xavier High School. Like his younger brother, Bill, he became an excellent athlete and won an N.C.A.A. swimming championship in the butterfly. Little has been written about the boys' parents, but it's known that their father, who died in 1974, was a dairy executive who came to southern Ohio from Kentucky, and who was disabled throughout Charlie's life, first by the loss of a leg in a hunting accident and later by Parkinson's disease.

After flunking out of the University of Cincinnati, Charlie enlisted in the Navy at the age of 17. Once he was discharged, he went to Ohio State on an athletic scholarship, transferred back to the University of Cincinnati to be closer to home, earned a liberal arts degree and went to law school. During the early Fifties he charted an unexceptional course in corporate law. By the end of the decade, however, he was a man to be watched.

For one thing, he had hooked up with a powerful mentor, Carl Lindner. Lindner is the founder of American Financial Corporation, a holding company of a vast corporate empire that Keating helped put together, and an astute, archconservative entrepreneur who would give Keating lessons in how to amass real estate and capital.

For another, Keating founded Citizens for Decency in Literature, an organization dedicated to upholding "traditional family values" and turning back the pornographic tide. C.D.L. quickly became a formidable force in Cincinnati's life. More than 30 years later, when the city's old guard of reactionary politicians took the Contemporary Arts Center to court for its Robert Mapplethorpe exhibit, Keating was remembered as the man who had started it all with his self-styled holy war against obscenity.

Like many wars, this one started small. One day in the late Fifties, according to an unusually revealing interview that Keating gave Charles Bowden and Richard S. Vonier in Tucson's City Magazine in 1988, he noticed a little shop across from a Cincinnati school selling what he called "rubber pricks and deeldos." As the lawyer for the Fraternal Order of Police, he took part in a police raid on the store; then he involved himself extensively in the prosecution. Next, Keating trained the C.D.L.'s guns on pornographic literature, along with such targets as Playboy, which he tried to ban from a newsstand near his office.

Later, when Keating decided that literature was only a small part of what threatened the American way of life, he changed the name of his organization to Citizens for Decency Through Law and built it into a national organization with headquarters in Los Angeles. The new C.D.L. went after homosexuals, who, Keating said, should be prosecuted and put in jail. It was instrumental in hounding Abe Fortas off the U.S. Supreme Court and also campaigned against X-rated entertainment like Oh! Calcutta! and Vixen.

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Charles Keating was a man to be watched in more ways than one, and the FBI was doing its share of the watching. As early as 1956, federal (continued on page 151)Without Honor(continued from page 86) agents had him under investigation for possible fraud and espionage. Nothing was known about this extraordinary chapter in the Keating saga until last fall, when a banking industry trade publication, National Mortgage News, obtained FBI documents on two separate probes into Keating's activities in the Fifties, plus internal memos in which the Cincinnati office sent warnings about Keating to FBI director J. Edgar Hoover.

Agents first focused on Keating's role as a lawyer for Research Laboratories of Colorado, a shadowy company that described itself to the Internal Revenue Service as "a group of chemists, physicists and scientists doing various types of research and discovery." Research Labs may have been nothing more than a bush-league stock swindle, but the FBI took notice when Keating petitioned the Atomic Energy Commission to give special "Q" security clearances to company employees. According to these newly uncovered FBI documents, Keating may have made fraudulent claims in his petition and may have released classified AEC information to unauthorized persons; hence, the suspicion of espionage.

From today's perspective, the FBI's fraud case was tenuous and its suspicion of espionage probably silly, a product of the same Cold War climate that lent urgency to Keating's moral crusades.

Yet the FBI files provide a fascinating preview, 30 years before the Keating Five, of Keating's eagerness to curry favor with public figures who might help or protect him.

In 1960 the object of his seduction was no less than J. Edgar Hoover himself. Keating invited Hoover to speak at an antipornography rally in Cincinnati and accompanied his invitation with a letter from the city's Catholic archbishop urging the FBI director to accept. When Hoover's office sought guidance from FBI agents in Cincinnati, they advised the director to keep his distance---Keating couldn't be trusted, and the rally, rather than being sponsored by an established group, appeared to be "Keating's own personal idea." Three years later, Hoover's office received another invitation, which prompted another warning: "Cincinnati further suggests that Keating not be dignified in any manner by apparent FBI backing."

Still, Keating's idea seemed full of promise. By 1969 the smut-smiter from Cincinnati had made so much noise and rallied so many influential conservatives to his cause that President Nixon appointed him to fill a vacancy on the Commission on Obscenity and Pornography. And when, the following year, the commission's majority delivered a moderate report that came out against laws that restricted sexual materials for consenting adults, Keating issued his own dissent.

"Never in Rome, Greece or the most debauched nation in history," he declared, "has such utter filth been projected to all parts of a nation." In the course of a perfervid treatise that might have warmed Cotton Mather's heart, Keating warned that the country's moral fiber seemed to be "rapidly unraveling"; linked pornography to abortion, marital infidelity, divorce and suicide; side-swiped the sexuality of Marcel Proust; and demanded "a return to law enforcement, which permits the American to determine for himself the standards of acceptable morality and decency in his community."

What a guy---willing to let his conscience be everyone else's guide. And what a spiritual and fiscal journey, from egregious regional scold to preeminent national scoundrel in 30 years. Not that it took him that long to polish his art of saying one thing while doing another. In the early Seventies, when he was still pursuing his antipornography crusade like some Ben-Hur in a chariot---Keating claimed to have traveled 200,000 miles on the lecture circuit in 1970 alone---evidence surfaced that the C.D.L. served mainly to sustain its own bureaucratic bloat; several states denied it the right to solicit funds because of what one official in Pennsylvania described as "sky-high fund-raising expenses."

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Four years after Keating joined Lindner's American Financial Corporation, he ran into his first serious problem with federal regulators. In 1976 stockholder suits questioned a $600,000 bonus that Keating received from the three-billion-dollar holding company, supposedly for his part in the sale of the Cincinnati Enquirer by American Financial. Soon afterward, the Securities and Exchange Commission charged Lindner, Keating and others with defrauding stockholders and filing false or incomplete statements with the federal government. Among the charges was an SEC contention that American Financial funds were manipulated to provide Keating, the company's executive vice president, with $4,500,000 in bank loans---$3,600,000 of it unsecured.

Lindner eventually settled with the government, without admitting guilt, by agreeing to pay his own corporation $1,400,000. Keating got off even lighter: The SEC made him sign a consent decree in which he promised not to engage in fraudulent conduct. The incident cost him a political plum when President Reagan scuttled plans to nominate him as U.S. Ambassador to the Bahamas. By this time, though, Keating had already come out of the Cincinnati cold to Phoenix, where he was building a Sun Belt empire of his own.

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At least once in recent memory, Charles Keating spoke from what passes for his heart. Asked if his huge contributions to the campaign coffers of the Keating Five prompted them to intervene with thrift examiners on behalf of Lincoln Savings, Keating replied, "I certainly hope so."

Most of the time, however, Keating has been to the unvarnished truth what the Sex Pistols were to the sentimental ballad. For a vignette of the Great Prevaricator at the top of his form, there's nothing better than the night in 1990 when he explained to Ted Koppel on Nightline how to measure a hotel's profitability.

The exchange started when Koppel asked a simple question: How much net profit had the Phoenician made in the previous year?

"Well," Keating replied blithely, "it earned about $80,000 . . . $75,000 to $80,000 gross receipts per room for the 604 rooms. That would have ranked it about fifth for resorts of its size in the United States and Hawaii, probably the most unique feat in history."

Sticking to his guns, Koppel asked: "Net profit last year?"

"Net profit?" Keating repeated, as if the phrase were Sanskrit. "All I know is that with that kind of income per room, the resort had to be a very, very successful resort."

Koppel kept at it, suggesting several times in several ways that gross receipts per room might not be the best index of a hotel's profitability. But his guest was adamant, even indignant: "Ted, you can insist on that all night, but that's the criteria by which you judge a hotel."

As Keating restated his revolutionary theory of accounting, first with a straight face and then with his seductive trust-me-pardner smile, simple logic got so thoroughly scrambled that black could well have been an optional shade of white, or an American Continental bond a gilt-edged security. And when Koppel wondered why Keating paid his 31-year-old son a salary of $900,000 a year, the old schemer sounded like a Korean immigrant describing his corner grocery:

"I have six children, a wife of forty years, twenty-two grandchildren, and probably three of those people were paid meaningful wages. The rest of them worked like dogs, including my grandkids, and never took a nickel. It was a family effort to make this thing work."

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On the first page of a 1988 status report listing proposed advertising and promotional projects for ACC's hotel operation, Keating scrawled a comment next to the first item:

"I'd execute whoever thot of this."

"Thot" was obviously the boss's shorthand for thought, but it's less obvious why the item in question---a straightforward proposal for hotel picture postcards---should have prompted such verbal violence.

Could "execute" have been a joke? Hardly likely, since Keating wrote "same" on the next suggestion (for a children's menu), described 23 other proposals as "a waste" (writing out the two-word phrase 23 times), dismissed one as "crazy" and another as "insane." He then declared on the penultimate page of the report, "I'm sick!" and on the last page, "I'm real sick."

No, the violence of Keating's language reflects a real sickness, a conviction that he was surrounded by enemies, incompetents and fools. In the financial arena, his nemeses were those ruthless thrift regulators, whom he still blames for the downfall of Lincoln Savings and for the disappearance of his personal fortune. (The supposed disappearance. Only Keating knows how much of his money still lurks in foreign bank accounts.) At the Phoenician, his enemies list included design consultants, wine experts and purveyors of overpriced foodstuffs.

During three years of planning, Keating hired and fired four design teams. He finally set up his own in-house design shop and installed, as the Phoenician's interior decorator and chief aesthetician, his tightly wound, stiffly coiffed wife, Mary Elaine.

This was the pattern throughout the hotel's gestation period. As one of the nation's leading entrepreneurs, Keating could have had his pick of the finest talent in the world to help him realize his dream---creating a resort that would outstrip even the great hotels of Europe. But because he trusted no one outside his small circle of friends and family, he ended up as producer, director and host of a big-budget amateur show.

Day after day, in endless meetings and countless memos, he stewed over such details as where the Phoenician logo should be sewed on hotel bathrobes, how many and what brand of miniature bottles of shampoo would be set out in the bathrooms and which stools to buy for the bars. He even wondered what sort of paper doilies would rest beneath the room-service cups.

He once decided that he didn't like a curve in a long concrete walk. In a scene that could have come straight from Bugsy, he had the entire thing torn up and repoured. It took three more tries for contractors to get the walk right. When he crossed paths with an elderly tile-setter who happened to be whistling while he worked, Keating fired him on the spot for insufficient seriousness.

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If someone wanted to put a positive spin on this behavior---who that someone could be is another matter: "It seems almost impossible," wrote Fortune magazine, "to find anyone who actually likes Charlie Keating"---he might try to portray him as a man who cared passionately about all aspects of his work. But being charitable to Keating is a reach. Most of his passions have been angry responses to an abiding fear that things were slipping out of control.

Take a rambling, seven-page memo he sent his staff at the end of April 1988, five months before the Phoenician's grand opening. Keating had just finished reviewing menus, booklets, brochures and advertising materials for the world's finest resort hotel, and his reactions included the following:

As I pour [sic] through this maze of material, there is no question that our executives, our marketing, our PR, etc., have completely lost sight of the only goal a hotel should have---to produce profit. . . . Nothing else counts. . . .

Buy wines like you buy everything else, with common sense and with an eye toward turnover. Do not hire a specialist or wine steward to buy wines. Do not permit salespeople to sell us wines (or anything else for that matter). . . .

The entire brunt of the menus, design included, should be marketing, i.e., to cause the customer to buy and consume. . . . Menus should consist of basic good food, very little "fancy" stuff and nothing that is not high turnover, e.g., rattlesnake meat, duck, except as a special, etc. . . .

There's a strong controlling intelligence at work here, but one that would have been better suited to a fast-food outlet or a G.M.C. truck dealership. Even though cost control and common sense are indispensable elements of any business operation, and rattlesnake meat is an acquired taste, Keating sounds like George Babbitt or the prototypical 19th Century innocent abroad---an indecently rich American rube who finds Europe so bewildering that he scorns all manifestations of culture and takes refuge in a grumpy puritanism.

What, then, was his staff to do? "I do not know exactly where to turn, but I would not look for this expertise in former hotel employees. The best bet would probably be a housewife who can cook and has common sense. In this regard, I am like Potter Stewart on the Supreme Court referring to pornography. He said, 'I cannot describe it, but I sure know what it is.'"

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One balmy evening in the Forties, when Charlie Keating was a young Navy pilot, he brought his Grumman Hellcat in for a landing at a south Florida airfield after night-training maneuvers. As far as he was concerned, getting back on the ground was the most important part of the exercise, since a date with a lovely woman awaited him. In his excitement, however, he forgot to put down the landing gear and he couldn't hear frantic warnings from the control tower because a Harry James trumpet solo was blaring on the radio in his headphones.

Sparks sprayed the darkness as the fighter hit on its belly and a ground loop ensued, but Keating leaped from the cockpit while his airplane was still skidding down the runway. Rescue workers found him sitting on his parachute at the edge of the airstrip, watching the Hellcat burn to ashes.

Decades later, Keating enjoyed telling this story and journalists enjoyed using it as a metaphor for his resilience. "Keating still conducts himself with the same single-mindedness that nearly claimed his life on that military airstrip in Vero Beach toward the end of World War Two," wrote a business reporter in 1988 in the Los Angeles Times. "Just as he lived through that crash, Keating has survived many scrapes in the business world without major damage---at least so far."

All of which was perfectly true, at least at the time. These days, though, one can draw another moral from the Hellcat story: Even as a young man, Charlie Keating was going down in flames, walking away from the wreckage and letting the taxpayers foot the bill.

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Keating brought an evangelist's power to his public performances, whether he was denouncing the evils of pornography or promising financial grace. Because of this, some have likened him to Jim Bakker or Jimmy Swaggart, sinners who also yammered endlessly about sin and who tried to control other people's lives because they couldn't control their own impulses. Others see Keating as a deeply disordered, monstrously intelligent predator.

Disordered he may be, a personality cobbled together from pieces that don't fit. Yet there's nothing to suggest that he's crazy in a clinical sense. And he's surely not the genius he has so cavalierly called others.

Take the months he spent slaving in the Phoenician stables like some loopy Hercules. For the countless distortions that can be laid at Keating's door, there's no evidence that he conceived the hotel as a scam. He wanted to make the place work, but he didn't know how, and he may not have known that he didn't know until it was too late.

If anything, the Phoenician reveals Charlie Keating as a screwup who sandbagged himself with such idiotic concerns as paper doilies while the entire fabric of his financial kingdom was coming apart. People often obsess over tiny details when they can't cope with the menacing whole, and, as the Eighties staggered to a close, Charlie Keating was running scared.

He wasn't the only one, for he hadn't been alone in building pyramids on the decade's shifting sands. He was only practicing on a smaller scale what the federal government was doing in broad daylight, with the voters' eager assent---stealing from the poor to enrich the rich. If he held out his hand and said, "Here, look at these magic beans. I'm going to plant them and grow a beanstalk that will let all of us climb to the clouds," no one else shouted, "Nonsense, that's just an ordinary bunch of garbanzos," because climbing to the clouds had become a national passion.

But poor Jack of the original beanstalk was a self-deluded fool. Charlie knew better, constantly preached better, while doing his devious worst---to the small investors who thought his word was his bond, to the employees who bought his blather about boundless success and to all the rest of us, who'll be paying for his sins long after he's gone.

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As part of the Keating legacy at the Phoenician, the maids who turn back guests' covers at night still leave little booklets, entitled Stories for Bedtime, propped against the pillows (Charlie preferred light reading to foil-wrapped chocolates). On the last page of a recent issue, under "Thoughts to set sail by," the final entry reads:

"In today's uncertain and deceptive world, it's good to be a man of principal---and to put it in the right bank."

"The architecture is subtropical czarist-Stalinist---luxury at war with taste."