RTC Sells Former Keating S&L; Property for Less Than 10% of Listed Value

LOS ANGELES â€”  A water-rich desert ranch once owned by Charles H. Keating Jr.’s Lincoln Savings has been sold for $3.2 million--9.3% of its listed value--by the federal agency that inherited the failed Irvine-based thrift.

The 13,542-acre Crowder Water Ranch is about 100 miles west of Phoenix in La Paz County, Ariz., where land once fetched high prices from people seeking rights to underground water. Those prices sank, however, as Arizona moved toward barring cities from buying rural land for water rights, a law passed in 1991.

The Resolution Trust Corp., the cleanup agency for failed S&Ls;, said Wednesday that Crowder was purchased by William and Carol Cramer of Anaheim. The $3.2-million selling price was $31.2 million less than the property’s value as carried on the RTC’s books. And it was only 3.5% of what Keating once maintained that it was worth.

Crowder Water Ranch figured prominently in Keating’s federal trial, which ended in January with his conviction on 73 racketeering, fraud and conspiracy counts. Crowder was one of several properties whose value Keating was accused of inflating through sham sales, kickbacks and side deals.

Lincoln’s Amcor Investments subsidiary sold a one-third interest in the ranch in Sept. 26, 1986, to Keating protege C.V. (Jim) Nalley III for $20 million. Keating had spent just $11.7 million assembling the entire property in 1985 and 1986. Amcor and Lincoln booked a $15.2-million gain.

To reach the $20 million, Nalley paid $5 million and borrowed $15 million from Lincoln.

The same day, Lincoln subsidiaries bought Nalley’s stock in a real estate company for $3.5 million--cash that prosecutors said went straight into his down payment. Lincoln later indirectly lent him the final $1.5 million, they said.

Keating allegedly promised secretly that Nalley would never have to pay interest on the $15-million note and to buy out his interest at a profit later.

Nalley never made a cash interest payment, agreeing instead to cut his stake in Crowder. In January, 1989, when values for Arizona real estate and especially water ranches were plunging, Keating bought Nalley’s remaining 25% stake for $7.5 million and cancellation of the $15-million note.

That would suggest a total value for Crowder of $90 million or more--28 times its purchase price by the Anaheim couple.

Lincoln was seized 3 1/2 months after Keating bought out Nalley. Regulators estimated the bailout cost to taxpayers at $2.6 billion.

Keating, who headed Lincoln’s parent company, American Continental Corp. in Phoenix, is serving a 10-year sentence on California fraud charges. He will be sentenced on his federal conviction April 26 in Los Angeles.

Now in federal prison in Tucson, he is preparing to defend himself against a civil racketeering lawsuit brought by the RTC.