BONDHOLDERS UPSET TO SEE KEATING FREE.

Byline: Janet Gilmore Daily News Staff Writer

They invested in Charles Keating Jr. and lost millions when his savings and loan empire collapsed. Then, for a decade, they battled to recover what they could from the disgraced Arizona financier.

But last week, after a federal judge threw out Keating's 73 fraud and racketeering convictions and he emerged tanned and smiling from the Los Angeles courthouse, there appeared to be little fight left among bondholders ensnared in this country's largest savings and loan debacle.

``It's a bit different than it was before. (It's) almost a fed-up situation,'' said Tom Shelley, a former bondholder from North Hills who helped forge an alliance to fight Keating in civil court.

``People don't want to see Keating rear his ugly head on TV again,'' Shelley said. ``They want to put it behind them.''

That isn't likely to happen.

The government last week suggested it would retry the case after U.S. District Judge Mariana Pfaezler ordered a new trial for Keating, 73, on allegations that jurors deliberating the case in 1993 were contaminated by news of his earlier state convictions.

Earlier this year, a state appellate court tossed out Keating's state convictions, for which he was sentenced to 10 years in prison, because of a bad jury instruction.

In all, Keating served more than four years in prison.

The April 1989 bankruptcy of American Continental Corp. and the collapse of Lincoln cost thousands of Lincoln bondholders, many of them elderly, nearly $289 million.

The collapse fueled a $2.6 billion government bailout. As Keating was prosecuted, bondholders went to court themselves, ultimately winning only a small percentage of their original investments.

Shelley, who has held meetings with area bondholders for years, said many investors are so infuriated with the criminal justice system and so beaten down by the Keating saga that they have lost their fight.

``With these people, largely senior citizens, many are not working, and there's not much they can do. Their days are truly numbered,'' Shelley said. ``I'm seeing and hearing comments like, `Leave me alone, I don't want to see or hear about the case.' ''

Some are as disappointed with the system as they are with Keating.

``Money talks,'' reasoned investor Maxine Boyce of North Hollywood.

``Our justice system is based on technicalities and not on evidence,'' she said. ``They (attorneys) can find something if they work hard enough. . . . I'm disgusted as well as disappointed with our justice system.''

Boyce, who is in her 70s, is especially saddened by the impact on older and weaker investors.

``A lot of them just want to turn their backs on it. They waited so long, and they're getting to the point where a lot of them are in rest homes. What can they do? It's pitiful to take advantage of people like that.''

They number into the thousands.

Over the years, bondholders have heard reports of suicides among aging investors unable to cope with their financial problems. Even those who recouped some money remain cynical.

``I've developed a real thick core,'' Boyce said. ``I'm just trying to forget about it.''

Ivan Schwarz, 66, of Camarillo and other bondholders have taken the opposite approach.

At the forefront of the battle years ago, Schwarz has already begun drafting a letter to the federal prosecutor on the case - pledging his support and assistance.

Schwarz said that years ago he was driven by a need to protect his own investment but, through that process, became protective of all the other investors who have grown too weary or too tired to fight.

He says that drive, and his faith in the justice system, has not waned: ``I don't give up easily,'' Schwarz said.

Shelley himself remains optimistic that at least some investors will gather together to voice the concerns and frustrations of others.

Wanda Wright of Granada Hills, for instance, said she can live with the idea that Keating has spent only four years in prison. But the idea that he may remain free with no conviction on his record does not sit right with her.

``I don't mind that he got out,'' Wright said. ``I just don't like the fact that all of a sudden he's clean and pure. I don't have any big, strong bitterness. I hope he just goes away somewhere and lives quietly.''

Schwarz's wants are different: ``I can't contemplate anything other than him being locked up again. He did so much damage to a lot of people. There were people who took their lives because of him. It is not right for that man to be out and capable of doing this to someone else.''

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PHOTO Tom Shelley, who lost his investment when Charles Keating's savings and loan collapsed in 1989, continues to fight to recoup his losses.

David R. Crane/Daily News