Leah Kane: The Victim

When she was a little girl in the 1930s, Leah Kane watched helplessly as a bank collapse wiped out her father's savings. "My parents lost everything they had," she recalls. "It was humiliating for them. My father never really recovered. He had been running a building-supplies store, but he never was able to go back to work. He got very ill and eventually died. I vowed that if something like that ever happened to me, I wasn't going to just stand still and take it. I was going to fight it any way I could."

In 1989, her moment arrived.

By that time, Kane was a retired secretary, with $15,000 invested in American Continental bonds. She had bought those bonds at her local savings-and-loan association, not fully realizing that both the S&L and the bond issuer were controlled by financier Charles Keating Jr. She thought the bonds were safe. Then, just six months after she bought them, American Continental went bust.

For the next 10 years, Kane led a tireless crusade to get her money back -- and to bring Keating to justice. What began as a simple quest turned into an epic -- and eerie -- journey through the courts, the political system, and the whims of the media. It wasn't always fun, and she still seethes about various outrages that she suffered. Yet as she retells the story of her fight, there are moments that she really treasures.

These days, thousands of other people feel victimized by a fresh crop of financial scandals, led by the collapse of Enron and Global Crossing. Some are sullen and depressed. Others are fatalistic and eager to forget about the whole mess so they can make a fresh start. And some want to fight back as hard as they can. For all such people, Kane's odyssey is full of intriguing and unexpected lessons.

When trouble hit in April 1989, Kane's first reaction was stunned disbelief. "I remember coming home," she says, "and someone asked me, 'Did you see the news on the TV? American Continental has gone bankrupt.' " She couldn't believe it at first. And then she realized that a major chunk of her savings was in trouble.

To Kane's horror, dozens of her friends and neighbors were stuck with big holdings of similar bonds. American Continental had preyed on the elderly, frequently pushing bonds through its main S&L, Lincoln Savings, whose branches were set up just across the street from retirement communities.

Kane recalls, "People would call me, saying, 'Please help us. My husband has Alzheimer's. Our money is running out, and our savings are lost. I don't know how we're going to survive.' When you hear something like that from other seniors, you feel that you've got to do something."

So Kane found a lawyer who specialized in class-action suits against companies accused of defrauding investors. By June 1989, she had rallied more than 150 people in her southern-California retirement community -- all of whom had financial losses related to the Keating bonds. It was unclear how much money Keating himself had left. So her lawyer advised her to sue American Continental's auditors, Arthur Young & Co, instead. When court papers were filed in Orange County Superior Court later that year, she became the lead plaintiff in Kane v. Arthur Young.

Before long, Kane began reading every scrap of news relating to the Keating investigation. She got angry at the auditors. She got angry at Keating himself. And she got angry at five U.S. senators who had accepted Keating campaign contributions. The senators "must be made to resign and to pay back some of this money from their own pockets," she told the Los Angeles Times in February 1991. It irked her to no end that the senators were only reprimanded.

When other legislators took steps in November 1991 that she thought might delay a Keating trial, she rallied 26 of her retirement-community friends and brought them all by bus to a legislator's office. They stood outside and picketed, holding signs that declared, "Justice now, not after we're dead."

One of her brightest moments came in December 1991, when Keating was convicted in Los Angeles Superior Court on 17 counts of securities fraud. "I'm happy, I'm happy," Kane told a newspaper reporter. "I want a shot of whiskey right now, and I don't even drink."

Keating subsequently was sentenced to 10 years in prison on state charges and 12 and a half years in prison on federal charges. Both convictions were overturned on appeal, though, and a new trial was ordered in the federal case. In 1999, the cases were largely resolved when Keating pled guilty to three federal counts of wire fraud and one count of bankruptcy fraud. It was decided that he wouldn't serve any further time in prison; he had already been incarcerated for about four years, from 1992 to 1996.