ANALYSIS : Cranston Was Most Active of ‘Keating 5’

WASHINGTON —  Sen. Alan Cranston (D-Calif.) played a more active and independent role than any of the other so-called Keating Five senators in assisting the former owner of Lincoln Savings & Loan, according to evidence gathered by the Senate Ethics Committee.

While there is no indication that Cranston acted improperly in two key meetings that have been the central focus of the committee’s lengthy hearings, the case against him is clearly different--and perhaps stronger--than the evidence against the other subjects of the inquiry.

Cranston’s alleged involvement with Lincoln owner Charles H. Keating Jr. differs in four ways:

--None of the other four senators has admitted--as Cranston has--soliciting contributions from Keating during the same meetings at which contacts with federal regulators on Lincoln’s behalf also were discussed.

--More documentary evidence has been gathered in Cranston’s case to substantiate allegations that actions were taken on Keating’s behalf in exchange for campaign contributions. Three memos written by Cranston fund-raiser Joy Jacobson appear to make such a connection.

--While the allegations against the other senators center primarily on their actions at two meetings with federal regulators in April, 1987, Cranston’s contacts with federal regulators appear to have been more persistent, spanning a period of several years.

--The amount of money that Cranston solicited from Keating far exceeds the amounts received by the other senators. The California Democrat received $60,000 in campaign contributions, $85,000 for the California Democratic Party and $850,000 for voter registration activities.

Moreover, Cranston appears to have had a warmer friendship with Keating than the other senators, at least between 1986 and 1989, when the Federal Home Loan Bank Board was investigating mismanagement at Lincoln. As Jacobson has observed:

“There was a certain amount of admiration, I think, that developed between the two men in the sense that they are both very tenacious individuals; they don’t give up easily. And I think Mr. Keating admired Alan, and I think Alan admired Mr. Keating.”

Keating, who has been indicted on securities fraud charges in California, sought assistance from Cranston and other members of Congress in 1986 when federal regulators were investigating Lincoln’s financial affairs.

Keating’s tenacious political and legal battles with regulators appear to have had the effect he desired, delaying the government’s takeover of the ailing institution until April 14, 1989. By that time, Lincoln had racked up $2 billion in unrecoverable losses.

For the last four weeks, the Senate Ethics Committee has heard hours of testimony concerning allegations that Cranston and the four other senators--Dennis DeConcini (D-Ariz.), John McCain (R-Ariz.), John Glenn (D-Ohio) and Donald W. Riegle Jr. (D-Mich.)--improperly took part in a scheme to delay federal enforcement actions while losses at Lincoln piled up.

Although all five senators face similar accusations, the committee has focused most of its attention on the acts of Cranston and DeConcini, who have been described by special counsel Robert S. Bennett as major players in Keating’s efforts to manipulate federal regulators.

Moreover, while there has been a lively debate within the committee over the question of whether DeConcini’s conduct was improper, sources say that panel members are finding it much harder to dismiss the evidence against Cranston.

The most potent allegation against DeConcini is that he made improper requests of federal regulators on Keating’s behalf during the two meetings in April, 1987. Cranston attended one of those meetings only briefly, and he said very little at the other.

The committee’s case against Cranston hinges primarily on alleged violations of a standard of conduct outlined in a 1952 report on political ethics by then-Sen. Paul Douglas (D-Ill.), who wrote that campaign contributions should never be solicited by a senator at the same time a favor is being done for the prospective contributor.

“Furthermore,” Douglas added, “a decent interval of time should be allowed to lapse so that neither party will feel that there is a close connection between the two acts.”

On Jan. 8, 1988, Cranston and Keating had dinner together at a restaurant in Los Angeles with Cranston’s son, Kim, and Kim’s then-girlfriend, actress Shelley Duvall. Kim Cranston apparently was invited to the dinner because he was running one of the groups founded by his father to register new voters, particularly minorities and young people.

During the dinner, by Sen. Cranston’s own account, he and Keating first discussed the thrift executive’s future contributions to the voter registration effort and Keating then described problems he was having with federal regulators. Before they parted, the senator promised to make two telephone calls to the Federal Home Loan Bank Board on Keating’s behalf.

“What happened was that (Keating) indicated he would continue to support the registration thing,” he later recalled. “We discussed that a bit and then (Keating) went into his usual tirade about the behavior of the regulators.” Among other things, he said, Keating asked him: “How are we ever going to get this resolved?”

After the dinner, Jacobson wrote Cranston a memo to remind him that he had promised Keating that he would telephone bank board member Donald I. Hovde and Chairman M. Danny Wall. Cranston later made both phone calls and persuaded Wall to meet with Keating.

Committee investigators contend that there was not a “decent interval” between the discussion of campaign contributions and senatorial favors at the dinner meeting.

But in his closing argument before the Ethics Committee, Cranston lawyer William W. Taylor III is expected to assert that Cranston did nothing improper because he never explicitly said that he would make the calls in exchange for the contributions. Taylor will also assert that the “decent interval” standard is not a binding rule for Senate members.

Nevertheless, a link between Keating’s contributions and Cranston’s actions also appears in two other memos written by Jacobson.

In a Sept. 6, 1987, memo designed to prepare Cranston for an upcoming meeting with Keating, Jacobson observed that the appointment of Wall to the bank board was surely “good news” to Keating, who maintained that he had been unfairly persecuted by Wall’s predecessor. In the next sentence, she added: “You should ask Keating for $250,000.”

And in a memo to Cranston on Jan. 2, 1987, Jacobson listed Keating as one of several people “who have been very helpful to you who have cases or legislative matters pending with our office (and) who will rightfully expect some kind of resolution.”

In an effort to minimize the importance of Jacobson’s three memos, Taylor will assert that Cranston cannot be held responsible for what his aide might have written. In addition, Jacobson has testified that neither she nor Cranston ever made a direct link between Keating’s contributions and the senator’s favors for Keating.

Just as Cranston’s meetings with Keating were many, so were his contacts with federal regulators on behalf of the controversial thrift owner. In fact, Wall has described the frequency of Cranston’s contacts with the bank board on behalf of Keating as “unusual.”

Cranston contacted Wall on Keating’s behalf at least five times before the collapse of Lincoln Savings & Loan in April, 1989. In addition, Carolyn Jordan, Cranston’s Banking, Housing and Urban Affairs Committee aide, appears to have had frequent contacts with the regulators about Lincoln.

In his contacts with regulators in 1987, Cranston urged a speedy conclusion to the bank board’s investigation of Lincoln. In 1988, Jordan told bank board officials that the senator was concerned that the board had decided to closely monitor Lincoln. And in early 1989, the senator urged the board to permit Keating to sell Lincoln.

Throughout this period, Cranston apparently never doubted Keating’s contention that he was being unfairly harassed by the bank board or that Lincoln was being run in a sound manner. Even when he learned that the Justice Department was investigating Lincoln, he was assured by Jordan that a criminal inquiry was just further evidence of the harassment of Lincoln.

Taylor is expected to argue that none of Cranston’s requests to the bank board were improper because he never sought special treatment for Lincoln. He also will assert that Cranston had every reason to believe that Keating’s complaints of harassment were accurate.

The contributions that Cranston solicited from Keating during this period totaled nearly $1 million.

By comparison, the other senators received considerably less from Keating. Glenn got $234,000; DeConcini, $51,000; McCain, $112,000, and Riegle, $78,250. Unlike Cranston, none of these senators was raising money for voter registration.

Cranston has insisted that he did not benefit personally from these contributions. Indeed, none of the money went into the senator’s pocket. Nor did Cranston’s son, Kim, receive any salary from the voter registration groups to which Keating contributed.

But committee members appear to doubt Cranston’s contention that he did not benefit from the money.

Sen. Warren B. Rudman (R-N.H.) has emphasized that the voter registration effort was designed to keep Senate Democrats in the majority. As assistant majority leader, Cranston clearly had a stake in maintaining Democratic control of the Senate.

Furthermore, committee investigators have pointed out that Cranston wrote to Keating after the 1986 election, saying that the thrift executive’s $85,000 contribution to the California Democratic Party had been crucial to his reelection.

“Without your great help,” Cranston told Keating, “I know that this victory would have been impossible.”