U.S. Seeks to Add 14 Defendants to Keating Suit : Thrift collapse: Law firms, individual lawyers, accounting firms and developers are named in an amended complaint that was expected to be filed Monday night in Phoenix.

The federal government was expected to add the nation’s second-largest law firm and other lawyers Monday to its $2.7-billion fraud and racketeering lawsuit against former Lincoln Savings & Loan owner Charles H. Keating Jr.

The amended complaint, which was expected to be filed Monday night in U.S. District Court in Phoenix, seeks court approval to include, among others, the Cleveland-based firm of Jones, Day, Reavis & Pogue and two of its lawyers as new defendants.

Jones, Day, which has more than 1,200 lawyers, is among 14 law firms, lawyers and developers that the Resolution Trust Corp. is seeking to add as new defendants to the 18-month-old suit. None of the new defendants is accused of racketeering. The RTC is a government agency that manages and liquidates thrifts.

The RTC has until April 12 to add more than eight other law firms, accounting firms and others who advised Irvine-based Lincoln and its parent firm, American Continental Corp. of Phoenix.

Among the possible defendants is the accounting firm of Ernst & Young, which has agreed to pay a settlement of more than $40 million. The RTC still has not approved that agreement, however.

The RTC’s amended suit accuses Jones Day and lawyers Ronald Fein and William Schilling of malpractice in aiding and abetting Keating and others in a 1986 file-stuffing scheme to defraud Lincoln and deceive regulators by improperly adding supporting documents to loan files long after the loans had been made. Fein is no longer with the firm.

Last week, a former Lincoln attorney, Mark S. Sauter of Cincinnati, pleaded guilty to a federal conspiracy charge of file-stuffing and has agreed to testify against Keating and other former executives. The criminal charge arose from a continuing federal grand jury inquiry into the 1989 collapse of Lincoln.

Robert A. Long, a Los Angeles lawyer representing Jones Day, said there is “no factual or legal basis” for the suit against his client. Long said the law firm advised Lincoln on the adequacy of its loan files only between early March and late April, 1986, as regulators began the now-infamous yearlong audit of Lincoln.

“There were certainly deficiencies in some files; but in regard to others, the decision was made that they were no more deficient than what you would expect in any review of this kind,” Long said.

Long said he and his client have been talking with RTC lawyers for more than a month to try to persuade them that Jones Day did nothing wrong. The firm turned over 15 boxes of material gathered from its work and provided additional information, he said. But the agency reneged, he said, on its promise to review with them its rationale for any legal action against the firm.

Regulators seized Lincoln in April, 1989, and last month sold its branch network to Great Western Bank. The collapse came a day after Lincoln’s parent firm, American Continental Corp. of Phoenix, filed for bankruptcy. The corporation is now being liquidated.

Lincoln’s failure is the biggest thrift failure ever; regulators estimate the eventual cost to taxpayers will be $2.6 billion.

The RTC amended action also seeks to add as defendants the Phoenix law firm of Mariscal, Weeks, McIntyre & Friedlander, which advised Lincoln on a real estate sale that regulators contend was a sham transaction.

Three Ohio lawyers--Richard M. Bertsch, James T. Millican II and Margaret W. Wong--also are among those named as new defendants. Those lawyers were administrators for American Continental’s employee stock option plan, which bought company shares from Keating and his family.

To finance the purchase, the plan administrators obtained a loan from another financial institution and Lincoln guaranteed to repay it in case of default. After the collapse, the loan went into default, and the thrift must pay more than $12 million back, according to regulators.

The amended complaint also adds Phoenix-based Emerald Homes Inc., three related partnerships and three Emerald principals, Phillip Polich, Eugene Baker and Randall Birdwell. They are accused of acting as a straw buyer in a sham transaction for some overvalued Arizona desert land owned by Lincoln.