Ethics counsel clears 2 senators in Keating case


WASHINGTON -- The influence-peddling case of the so-called "Keating Five" apparently turned into the case of the "Keating Three" yesterday, when a special counsel for the Senate Select Committee on Ethics said his evidence exonerates two of the five senators under investigation -- John Glenn, D-Ohio, and John McCain, R-Ariz.

But counsel Robert Bennett zeroed in on the remaining three -- Sens. Dennis DeConcini, D-Ariz., Alan Cranston, D-Calif., and Donald W. Riegle Jr., D-Mich. -- with detailed evidence linking them to possible ethical transgressions.

The five senators, who all deny any wrongdoing, are accused of pressuring federal banking regulators in 1987 to go easy on Arizona businessman Charles H. Keating Jr. in exchange for political contributions. Along with relatives and associates, Mr. Keating gave the senators' political committees more than $1.3 million while he was running the now-defunct Lincoln Savings and Loan.

Mr. Keating sought leniency from the regulators, but when his thrift shut down two years later, in 1989, its losses totaled $2.3 billion of what has become a $500 billion debt resulting from the nation's savings and loan mess. Taxpayers will supply the money to pay the debt.

"It is clear from the paper [evidence], and it will be clear from the testimony, that Senators Cranston and DeConcini were important players in Mr. Keating's strategy," Mr. Bennett said yesterday. The evidence, he said, showed "many instances" when acts on Mr. Keating's behalf "were discussed at the same time" as the possibility of political contributions from Mr. Keating to some of the senators.

"Hundreds of thousands of dollars in the case of Senator Cranston passed in an office in this building," he said.

Mr. Bennett also singled out Mr. Riegle, who earlier told the committee that his role in the affair was "minor and largely passive."

Despite that assertion, Mr. Bennett said, "I must reluctantly state there is substantial evidence that Senator Riegle played a much greater role than he now recalls." He said, though, that Mr. Riegle's efforts seemed to be limited to "the early stages" of contact between the senators and federal regulators on Mr. Keating's behalf.

Since the Keating case came to light last year, would-be reformers have made it a symbol of all that is wrong with the way lawmakers solicit campaign money from representatives of the interests they regulate.

And when the ethics committee took its case before the public for the first time yesterday, the spectacle of five senators fighting for their political lives created the anticipatory drama of a courtroom trial. More than 150 reporters showed up to watch, and cable television broadcast live coverage.

Conspicuously absent was Mr. Cranston, who said in a letter to the committee that he will only attend the hearings today to read an opening statement in his defense and then will leave for California to begin seven weeks of radiation treatment for prostate cancer. He has announced he will not seek re-election in 1992, and he has resigned his leadership post as Senate majority whip. He cited his illness, not the investigation, in both decisions.

The focus of the case, and of yesterday's presentation by Mr. Bennett, is April 1987, when four of the senators met April 2 with Edwin J. Gray, who was then chairman of the Federal Home Loan Bank Board, and when, a week later, all five senators met with five officials from the bank board's San Francisco office.

Mr. Bennett said evidence strongly indicated that Mr. Riegle set up the first meeting and that Mr. DeConcini then led the charge against the bank board president, Mr. Gray, in an attempt to get the bank board to allow Mr. Keating's thrift to continue making a large number of riskier investments.

At the second meeting, Mr. Bennett said, the bank board regulators told the senators of "certain criminal wrongdoing" by Mr. Keating's company. After that, Senators McCain and Glenn dropped the matter, and no evidence suggests that campaign contributions led to their involvement in the first place. Mr. Riegle also took no further action, he said.

But he said that Senators Cranston and DeConcini "continued to contact regulators on behalf of Mr. Keating and continued to accept political contributions from him."

As part of the investigation, Mr. Bennett said he and his staff interviewed 140 people, taking 44 sworn affidavits and 16 depositions along the way. But he said his best witness in the days to follow would be the 10,000 documents that he and his staff reviewed during the past year.

"Ernest Hemingway once said that paper doesn't bleed," Mr. Bennett said. "And what I think he meant by that is that paper isn't subject to the normal human frailties. Paper isn't worried about what the newspapers are going to write tomorrow. . . . Paper doesn't have faulty recollections. . . . And there is something very special about some of this paper that gives it an extra credibility, and it is this: The paper never thought it would be here. . . . It's highly credible, this paper."

Mr. Bennett also offered a brief sermon on the nature of "constituent services" performed by lawmakers. All five senators have said that's all they were performing when attempting to help Mr. Keating.

He asked, "In the name of constituent service, do the likes of Charles Keating get special treatment or special access at the expense of other constituents or the public good?"

The eventual recommendation of the ethics committee on what action, if any, the Senate should take against any or all of the five senators could set guidelines that will affect the performance of constituent services for years to come. Several panel members said yesterday they will be reluctant to restrict such services.

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