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Sunday, January 17, 1993 - Page updated at 12:00 AM

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LOS ANGELES - The trading scandal cases of Michael Milken and Charles Keating Jr. provide a study in contrasts.

Milken spent nearly $100 million defending himself before cutting a final deal. Now, after 22 months in a prison camp, he's free and on his way toward rebuilding his life at age 46.

Keating fought the law, and the law won. Now he faces the prospect of life behind bars.

Milken's plea bargain kept his brother Lowell free. It also allowed him to preserve vast wealth despite paying $1.1 billion in settlement money.

Keating, 69, was at the center of the biggest thrift failure of the savings-and-loan fiasco. Beside the impact on him, his son, Charles Keating III, faces decades in prison as well.

In high-profile government prosecutions, "If you can get out, you get out," said Harry Horowitz, a friend of Milken's since grade school and a colleague for 10 years at Drexel Burnham Lambert Inc.

"I disagreed vehemently when he didn't fight. But I also understood what he was facing with his family."

Keating once was a top customer for Milken's junk bonds. Like Milken, he was an intensely competitive businessman who nevertheless professed to value his family above all else.

Yet Keating proved incapable of doing what Horowitz says Milken did - make a "business decision" that would protect his family.

Stephen Neal, Keating's lawyer at criminal trials that ended in a state conviction in 1991 and the federal one recently, declined to describe any conversations with Keating about making a plea bargain.

Neal did say that Keating never negotiated with prosecutors or offered to settle.

Long before Keating was first indicted on state securities fraud charges in September 1990, though, some of his lawyers were advising him and his family to cooperate with prosecutors. The idea was, at the least, to spare his son prison time or fines, and to bring Keating some measure of good will.

Keating steadfastly refused to enter any such agreement - a decision his family said was the result of a proud man convinced of his own innocence.

Ira Lee Sorkin, a former Securities and Exchange Commission regional administrator who is now a criminal defense lawyer in New York, said Keating's age may have kept him from negotiating.

"A guy who's 70 years old has to be thinking about dying in prison. So he says, `Why not take a shot at walking away from it with nothing,' " Sorkin said.

Others had less charitable explanations. Paul Turley, a prosecutor in the state case that ended in Keating's conviction for swindling Lincoln investors who traded certificates of deposits for junk bonds, said Keating was arrogant, not proud, pathologically unable to admit he ever did wrong.

"The first requirement of any request for leniency begins with a recognition of guilt," Turley said. "To the contrary, Charlie Keating is so warped that he and his lawyers persist to this day in saying this man has done nothing wrong."

In comparing the cases, Turley also contrasted the elderly depositors who lost money on Keating's bonds with the sophisticated investors listed as Milken's victims in the barrage of civil and criminal litigation against him.

They include junk-bond customers such as Keating's Lincoln Savings, and Columbia Savings, whose former chief Thomas Spiegel also is charged with looting the thrift. Spiegel faces a theoretical maximum of 275 years in prison compared with Keating's 525 years and his son's 475 years.

"I think Tom Spiegel and Charlie Keating are very good examples of why you wouldn't want to go through that kind of thing," said Horowitz. "If Keating got off tomorrow, or Spiegel got off tomorrow, scot free, their lives will still have been ruined."

Turley said the inequity is that Milken got too little time, not Keating too much.

Sorkin, a veteran of both sides of white-collar prosecutions, said they are inevitably messy and produce imperfect justice, because they must rely so much on making deals with potential defendants.

Still, he asked by way of example, isn't it better for the government to let inside trader Ivan Boesky off lightly rather than lose his testimony against Milken?

"The government and the defense do prostitute themselves. But the government can't prosecute one of these cases unless someone on the inside decides to cooperate. The government has to cut deals to make these kinds of cases," he said.

Copyright (c) 1993 Seattle Times Company, All Rights Reserved.

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