Bank Robber Meets Corporate Criminal
The last time I saw Charles Keating, he was naked except for a skimpy white towel that hung from his waist. His pink flesh stretched tight over his gaunt frame, his wrists cuffed in front, he was escorted to his cell from the showers at the Metropolitan Detention Center in downtown Los Angeles.
Several men pounded on their cell doors as the former savings and loan magnate passed, whistling and humming strip-dance melodies. He held himself erect, staring straight ahead. Before his arrest on fraud, conspiracy and racketeering charges, his money had protected him behind walls and gates from desperate men like us. Now his smile was frozen.
He looked nervous, but also a little arrogant. His high-stakes crimes, after all, made my bank robberies seem like petty theft.
Guys like Keating and Ivan Boesky and Michael Milken rarely ended up in the prisons where guys like me did our time. Instead, they were housed at "Club Feds," fenceless facilities where crooked senators, Wall Street hucksters and bad law enforcement officials live in dorms, protected from violent prisoners who would resent their privilege. Keating was at Metropolitan for a time in 1992, because he was still fighting his case in federal court here.
A few days after Keating's shower parade, I was sent to the federal penitentiary at Lewisburg, Pa., and our paths never crossed again.
Today, when I tell the Keating story to friends, they feel sympathy for him. And this, I think, is telling.
Middle-class Americans have traditionally been disinclined to send crooked CEOs and bank executives to real prisons to do hard time. Now, in the wake of Enron, WorldCom and Adelphia, people say that things will be different. Even President Bush is crying for blood: "No more easy money for corporate criminals," he railed recently from the White House. "Just hard time."
But I doubt that middle-class Americans will ever disassociate themselves from the ambition of the wealthy long enough to crack down on them.
In 1986, Boesky, the infamous Wall Street arbitrageur, pleaded guilty to a single count of securities fraud -- despite admitting he earned an estimated $100 million by using insider information. In 1990, Milken pleaded guilty to securities fraud and related charges. He was fined more than $1 billion and sentenced to prison for 10 years.
In the end, Boesky was allowed to keep secret foreign bank and brokerage accounts. He served two years in prison and paid $100 million to settle federal civil charges. Milken, who reportedly earned $1.8 billion with Drexel Burnham Lambert during his criminal heyday, served only 22 months, kept at least $125 million, and is now a revered Los Angeles philanthropist.
Keating spent nearly five years in prison in Arizona on federal fraud charges, some of which were later thrown out.
Keating, Boesky and Milken collectively swindled Wall Street out of more than $500 million. Yet together they served less than 10 years. I know a man serving 20 years for an $800 heist.
Americans say they want to see greedy, dishonest CEOs punished. But in truth, most Americans are more afraid of boys from the housing projects holding them up in an alley for 20 bucks than they are of having their pensions and portfolios gutted by Wall Street scoundrels.
Jurors and judges see something of themselves in the fallen rich. Men like Keating and Milken and former Enron CEO Kenneth Lay reflect the deepest dream of the middle-class -- wealth. Main Street finds Wall Street highly seductive. The average prisoner understands this instinctively, which is why the men at the Metropolitan Detention Center delighted in intimidating Keating.
The moral panic about corporate America will subside. The average American will finally notice that the CEOs don't resemble the drug pushers, child abductors or terrorists on the nightly news. And just that quickly, CEOs will be fined nominally, given a year or two in Club Fed and allowed to keep their fortunes. One day, some of them may even become famous philanthropists.
If today's corporate criminal does time, will it be in a prison, or "Club Feds" -- fenceless facilities where inmates live in dorms and are protected from violent convicts?
Joe Loya's memoir is due to be published by HarperCollins in the fall of next year. A different version of this article originally appeared in the Los Angeles Times.