Former Lincoln President Pleads Guilty to Fraud : S&L; scandal: The action by Ray C. Fidel is part of a secret plea agreement. He is the first of the thrift’s former executives to admit to criminal wrongdoing.

LOS ANGELES â€”  Former Lincoln Savings & Loan President Ray C. Fidel pleaded guilty to securities fraud Monday in U.S. District Court here in a significant case tied to a wide-ranging investigation into the $2.6-billion failure of the Irvine-based thrift.

Fidel, who was once closely linked to former Lincoln owner Charles H. Keating Jr., is the first of the thrift’s former executives to admit to criminal wrongdoing. The plea agreement is secret, but it most likely recommends leniency for Fidel in exchange for his testimony against Keating.

Fidel, a Newport Beach resident, faces a maximum sentence of 10 years in prison, a $500,000 fine and payment of undetermined restitution. Sentencing is scheduled for May 20.

In entering his plea, Fidel, 33, told U.S. District Judge Harry L. Hupp that he misrepresented the safety of bonds sold to Lincoln customers. The junk bonds were issued by American Continental Corp., the parent company of Lincoln, and sold in the S&L;’s branches.

Thousands of investors lost money--more than $200 million--when American Continental filed for bankruptcy in April, 1989. Federal regulators seized Lincoln the next day. The thrift collapse is the most costly to date.

Fidel also, along with Keating and two other former Lincoln officials, faces state charges of securities fraud. He is expected to reach a plea agreement as early as today in the state securities fraud case against him.

Sources close to the cases said it is most likely that the plea bargains offer lenient treatment for Fidel in return for testimony about the inner workings of American Continental and the actions of Keating.

Keating, who has been vilified for the allegations of financial skulduggery against him, is the target of an 18-month-old federal grand jury investigation into Lincoln’s failure. He has pleaded not guilty to state securities fraud charges and has steadfastly denied other wrongdoing.

Prosecutors are hoping that Fidel’s guilty plea and the testimony he is expected to give will help in their efforts to convict Keating. Defense attorneys, however, discounted the effect the plea and testimony will have. Any testimony Fidel could give, they said, still would not link Keating or other executives to securities fraud or other wrongdoing.

“I don’t think his testimony could be damaging to us,� said Stephen C. Neal, Keating’s attorney.

Abbe David Lowell, attorney for Judy J. Wischer, Keating’s former top aide, said: “It’s not unexpected that the government will try to pick off somebody by the sheer weight of their investigation.�

But attorneys for bondholders also figure that the sheer weight of the investigation is just what will help them in their civil cases against Keating, his associates and their legal and accounting advisers.

“The defendants cannot withstand the onslaught,� said William S. Lerach, one of the bondholders’ attorneys. “They cannot defend the indefensible. It’s only a matter of time before those people break down.�

Under Keating, Lincoln grew rapidly and invested in risky real estate projects and junk bonds. Regulators said its failure will cost taxpayers a record $2.6 billion. On Friday, regulators sold its deposits and 28 branches to Great Western Bank.

Fidel is the second individual to plead guilty to Lincoln-related charges. The other is Ernest C. Garcia II, a Tucson developer and major Lincoln borrower who pleaded guilty in October to bank fraud.

In court Monday, Fidel conceded that he “and others� marketed American Continental’s bonds as a “safe, conservative investment� from a “financially sound and secure� company when they knew that the bonds were a “risky and speculative investment� and that the corporation was struggling to survive.

Fidel was one of the top executives most intimately involved in the day-to-day sale of the company’s bonds at Lincoln. He also said he knew that American Continental was considering a bankruptcy filing in January, 1989, and that it was nevertheless continuing to sell the bonds, the only source of income for the company at the time.

The charges Fidel pleaded guilty to were based on the sales of a $10,000 bond on Feb. 10, 1989, and a $15,000 bond on Feb. 13, 1989. The charges were filed on Friday in an information, which is similar to an indictment but is not issued by a grand jury.

Fidel’s is now one of the more than 150 convictions of board chairmen, presidents, chief executives, directors and other officers in thrift institutions nationwide to be obtained in a two-year period, U.S. Atty. Gen. Dick Thornburgh said.

“Transactions by Lincoln and (American Continental) are being examined in fine detail as part of the continuing and wide-ranging effort to clean up the savings and loan mess,� Thornburgh said.

Thrift failures nationwide bankrupted one federal deposit insurance fund, prompted the 1989 federal law reorganizing the industry and have resulted in a taxpayer bailout expected to exceed $500 billion over 30 years.