FINANCIER KEATING RELEASED ON BAIL.

Byline: Jaxon Van Derbeken and Steve Gorman Daily News Staff Writers

Charles H. Keating Jr., the Arizona financier convicted of swindling millions from the elderly as chief of failed Lincoln Savings and Loan, walked out of a federal prison on bond Thursday pending a hearing for a new trial.

U.S. District Judge Mariana Pfaelzer earlier set $300,000 bail for Keating, 73, who has served more than four years of a 12-year, seven-month term for racketeering, fraud and conspiracy.

Pfaelzer's order came after lawyers met behind closed doors Thursday to question jurors who convicted Keating three years ago. Keating is seeking a new trial, claiming that some federal jurors unfairly considered his earlier state fraud convictions in deciding the federal case.

The hearing on whether he will get a retrial is scheduled for Nov. 25.

Shortly before 5 p.m., Keating walked out of federal prison in Tucson, Ariz., and was greeted by two women. He put his arm around each of them, walked to a waiting van and drove off.

Paul Abrams, a federal deputy public defender who represents Keating's son, Charles Keating III, and who was present at the closed-door sessions in U.S. District Court in Los Angeles, said the judge did not give a reason for reversing an earlier decision not to grant bail.

``She just ordered the bail, $300,000 justified by property,'' Abrams said.

Stephen Neal, Keating's lawyer, said: ``The standards for bail on appeal are whether you have raised a significant issue on appeal and whether you are a flight risk.''

San Fernando Valley residents who were among the 2,300 bondholders swindled out of some $282 million in the Lincoln Savings and Loan failure expressed anger at news that the judge ordered Keating released on bond.

``I think it's outrageous that this convicted felon should be given his freedom,'' said Michael Lappin, 81, of Sherman Oaks, who lost $35,000 of his savings.

``He should serve out his full term after what he's done to hundreds of people, including myself,'' Lappin said. ``This man is a thief and a liar.''

At issue is whether jurors knew of Keating's earlier state securities fraud convictions and what role any such knowledge of that case played in their decision making.

According to Keating's attorneys, four jurors have said they knew about the state conviction before the federal trial and one reported hearing jurors discuss the conviction during the federal case.

Keating's securities fraud conviction was thrown out by U.S. District Judge John Davies who found that Los Angeles Superior Court Judge Lance Ito's instructions to jurors were improper.

Keating's state conviction stemmed from charges that he defrauded 17,000 investors, mostly elderly victims, and he was ordered to pay $122 million in restitution.

Keating became a symbol of the nation's savings and loan collapse after his American Continental Corp. bought Irvine-based Lincoln and invested its taxpayer-insured deposits in high-risk land, hotel and securities deals.

The government estimated losses to taxpayers at $3.4 billion after Lincoln was seized by regulators, one of the worst S&L failures of a crisis whose costs are now put at $480 billion.

Thomas Shelley, 51, of West Hills, one of the co-founders of the Lincoln ACC Bondholders Action Committee, a group representing Keating's victims, said the judge's decision Thursday defied comprehension.

``These technicalities cannot stand up in the face of the clearest-cut case of banking fraud in U.S. history,'' said Shelley, whose losses were limited to $7,000 of the $77,000 he invested because one of the bonds reached maturity just a few days before Lincoln's bankruptcy.

``It's really going to be very hard to explain to these seniors what is going on,'' he said. ``They just won't understand.''

He noted that the bondholders recovered just 64 cents on the dollar for their losses from a legal settlement reached with the lawyers, accountants and other professionals caught up in the scandal.

The jury award of $1.75 billion against Keating himself was ``symbolic'' because there were no assets left to recover.

``It's just a travesty of justice,'' lamented Sam Epstein, 84, of North Hollywood, who lost $65,000 of his savings that he transferred from his CD account into American Continental debentures.

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PHOTO (color) Charles Keating Jr.

Awaits hearing on new tri al