TUCSON, Ariz. -- Bondholders of the parent company of Charles H. Keating Jr.'s failed Lincoln Savings and Loan Association will receive about $70 million under a reimbursement plan that all but winds up their lawsuit in federal court here. The American Continental Corp. creditors claimed that Mr. Keating, several associates, and lawyers defrauded them of about $288 million.
Funded by Out-of-Court Settlements
The creditors will be paid about 40 cents on the dollar. The reimbursement will begin next month from an escrow account holding money collected from out-of-court settlements in the case.
The settlements, won mostly from law and accounting firms, totaled $152.1 million. Since there are no major defendants remaining, it is not likely that much more money will become available.
The bondholders' lawyers, meanwhile, will receive $38 million. The largest share, about $17.7 million, will be split by the two lead co-counsels: Cotchett, Illston & Pitre and Milberg, Weiss, Bershad, Specthrie & Lerach.
"That's right in the range of what courts have been awarding" lawyers in class-action securities fraud cases, said Susan Illston, a lead lawyer in the Lincoln case.
Defendants in the civil case included the accounting firm of Ernst & Young, which settled for $63 million; the Cleveland law firm of Jones, Day, Reavis & Pogue, which agreed to pay $24 million; and the New York law firm of Kaye, Scholer, Fierman, Hays & Handler, $20 million.
The jury's judgment of more than $3 billion against Mr. Keating and three of his former associates, awarded in July, is not expected to be collected because the former American Continental Corp. chairman is serving a 10-year prison sentence and says he is insolvent
American Continental, which was based in Phoenix, is in bankruptcy proceedings.