WASHINGTON - Lee Henkel, a former thrift regulator who sat on the Federal Home Loan Bank Board, has been banned from banking for his help to Charles H. Keating Jr.'s failed Lincoln Savings and Loan.

The Office of Thrift Supervision said Mr. Henkel agreed to the ban and to pay a $50,000 fine in a settlement. He had been accused of unsafe banking practices, conflict of interest, breaches of fiduciary duty, and violations of federal ethics rules.

A Two-thrift Proposition

Mr. Henkel neither admitted nor denied the accusations, which stem from his legal work for Lincoln as its venture partner. The charges also involved Mr. Henkel's activities for Lincoln when he sat on the FHLBB, which regulated thrifts before the 1989 bail-out law reorganized thrift regulation.

The OTS said Mr. Henkel proposed that the FHLBB modify a regulation on direct investments. The change would have helped only Lincoln and one other thrift'

Mr. Henkel sent the draft rule to Lincoln's attorneys in December 1986 before submitting it to the board. The regulation was rejected, the OTS said.

Two years before taking the board seat in November 1986, Mr. Henkel was a lawyer for Lincoln while at an Atlanta law firm.

Counsel Went Unheeded

Mr. Henkel's ethics attorney advised him to sever all ties with Lincoln and sell his shares in Lincoln's real estate venture firm, Continental Southern Inc., before taking the thrift regulatory post, the OTS said.

But Mr. Henkel ignored this advice, the agency said, selling his Continental Southern shares at an inflated price back to Lincoln, and ultimately to Mr. Keating, without getting an independent valuation.

Mr. Henkel also won release from loan guarantees on his $8 million in total debt to Lincoln for less than their true value, the OTS said.

He charged Lincoln for the cost of severing his personal business ties with the California thrift, the collapse of which was among the costliest and most sensational during the thrift-industry debacle.

"Henkel's actions created the appearance of using public office for private gain. . . . Henkel compromised his independence and impartiality as a member of bank board and adversely affected the confidence of the public in the integrity of the bank board and its members," the OTS said in announcing the settlement.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.