By Helen Dewar
Washington Post Staff Writer
Friday, February 8, 1991 8:47 AM
The Senate Select Committee on Ethics yesterday found "substantial credible evidence" of ethics violations by Sen. Alan Cranston (D-Calif.) but concluded that four other senators broke no specific rules in their dealings with savings and loan executive Charles H. Keating Jr.
In a unanimous conclusion to a rancorous 14-month investigation that opened the Senate's ethical standards to unprecedented public scrutiny, the panel criticized Sens. Dennis DeConcini (D-Ariz.) and Donald W. Riegle Jr. (D-Mich.) and used relatively mild language in describing the dealings of Sens. John McCain (R-Ariz.) and John Glenn (D-Ohio).
The committee said it could not condone the conduct of DeConcini and Riegle, which it said "gave the appearance of being improper" and was marked by "insensitivity and poor judgment." It said McCain and Glenn "exercised poor judgment" in some of their actions.
No further disciplinary action against the four senators was warranted, the committee said, effectively closing the case against them.
But the committee's findings could result in Cranston, the 76-year-old former Senate Democratic whip, who is in California recuperating from treatment for prostate cancer, being censured by the full Senate later this year.
The committee said it found grounds to believe that Cranston "engaged in an impermissible pattern of conduct in which fund-raising and official activities were substantially linked," citing several cases in which Cranston solicited funds from Keating while helping Keating in dealing with federal thrift regulators.
The panel's investigation of the so-called Keating Five centered on whether they violated Senate rules in intervening with regulators on behalf of Keating's Lincoln Savings and Loan Association during a period in which Keating was raising more than $1.3 million for their political campaigns and causes.
All five senators have denied any wrongdoing, and most of them reiterated their claims of innocence yesterday. The angriest statement came from Cranston, who said, "It's clear that I have been unfairly singled out despite the evidence in all five cases."
Riegle called the decision "fair and constructive" and said he "accepts the committee's view that there was an appearance of impropriety."
Said DeConcini: "I stand by my record. I think my appearance has been proper."
"I see it as a full exoneration," McCain said.
"I have been vindicated, just as I said I would be from the very outset of this investigation," said Glenn.
In finding that DeConcini and Riegle violated no specific rules even though their conduct gave an appearance of impropriety, the panel brushed aside the conclusion of its special counsel, Robert S. Bennett, that an appearance of misconduct violates the Senate's principal ethics rule, which calls for disciplining of members who bring discredit on the Senate. Senators could and should be disciplined for improper appearances, Bennett said.
Common Cause, the lobbying group that brought the charges against the senators before the ethics committee, denounced its recommendations as "a cop-out and a damning indictment of the committee." The group said the panel's failure to recommend further disciplinary action against DeConcini and Riegle was "indefensible and inexcusable" and that its refusal to find that Glenn and McCain engaged in improper conduct "cannot be justified."
Another lobbying group, Public Citizen, accused the committee of a "whitewash."
Committee members denied that they had been lenient and defended their actions as consistent with Senate rules, which are vague in spelling out how far senators can go in intervening for constituents who are also political supporters and contributors.
"I don't think you would think that you'd been judged lightly if your peers had judged you as these men have been judged," said Sen. Jesse Helms (R-N.C.), who had been regarded as one of the panel's strongest advocates of stern disciplinary action.
In its findings, the committee acknowledged that there were no specific written standards governing intervention with regulators but said it followed "general guidelines" that are on the books but unknown to many senators. For the future, it urged that the Senate adopt written rules spelling out permissible activities. It also urged the Senate and House to "work together in a bipartisan manner" to pass a comprehensive overhaul of campaign finance laws.
While the six members of the committee had split along party lines at various times over how to handle McCain, the lone Republican among the five, senators from both parties denied yesterday that politics played a major role in their final decision. "There was some partisanship, but in the endgame, politics was not a factor," said Sen. Trent Lott (R-Miss.).
In the case of Cranston, the committee said that on at least four occasions he or his staff contacted regulators on Keating's behalf "in close connection with the solicitation or receipt of contributions" from Keating. It also said his office practices show "an impermissible pattern of conduct in which fund-raising and official activities were substantially linked," including use of an outside fund-raiser in arranging meetings where legislative and regulatory issues were discussed.
The committee found that Riegle helped Lincoln with its regulatory problems while Keating was raising "substantial campaign funds" for Riegle.
Although finding that aggressive conduct in dealing with regulators may be appropriate at times, the committee found that DeConcini's "aggressive conduct with the regulators was inappropriate."
It also faulted Glenn for arranging a luncheon between Keating and then-House Speaker Jim Wright (D-Tex.), even after learning that criminal action might be taken against Lincoln officials. In McCain's case, it said his judgment was poor in intervening with the regulators.
The Keating Five investigation was the Senate's second major ethics case in less than a year, and the panel is nearing a critical point in a third probe, which involves Sen. Alfonse M. D'Amato (R-N.Y.).
Last July the Senate voted unanimously to denounce Sen. Dave Durenberger (R-Minn.) for financial misconduct stemming from book promotion and condominium rental deals. Still pending are charges that D'Amato improperly presssured federal agencies on behalf of relatives, friends and contributors.
Only 10 senators, including Durenberger, have received some form of censure from the Senate in its 200-year history; 15 have been expelled.
Public hearings in the Keating case began in November and lasted until Jan. 15. Committee members then closeted themselves in the Hart Building for a total of 11 days in an attempt to resolve what reportedly started as a largely partisan split over whether to reprimand McCain and Glenn as well as DeConcini and Riegle.
At one point, Democrats were pressing for more or less equal treatment for McCain and DeConcini, while Republicans wanted to come down more heavily on DeConcini and Riegle than McCain and Glenn, according to sources close to the deliberations.
Even before the deliberations began, there were strong indications that Cranston would receive the harshest treatment. Cranston reacted angrily to the reports, suggesting he was being made a "scapegoat" and contending he had done nothing more culpable than the others.
Cranston, a senior member of the Senate Banking Committee, was by far the largest beneficiary of Keating's largess among the five, receiving nearly $1 million from Keating and his corporation, most of it for voter registration groups that he sponsored.
Actual campaign contributions from Keating totaled $49,000 for Cranston, $80,100 for DeConcini, $34,000 for Glenn, $78,250 for Riegle and $112,000 for McCain, although Riegle and DeConcini returned some or all of Keating's contributions to them.
American Continental, Lincoln's parent company, went bankrupt in April 1989, and the Federal Home Loan Bank Board seized control of Lincoln at an estimated cost of $2 billion to taxpayers, making it a centerpiece of the savings and loan disaster that was then beginning to sweep the country.
Staff writer Tom Kenworthy contributed to this report.
1978: Charles H. Keating Jr.'s American Continental Corp. is organized in Phoenix.
1984: American Continental buys Lincoln Savings and Loan, a thrift in Irvine, Calif.
1985: The Federal Home Loan Bank Board imposes new regulations curtailing the direct investments in real estate and other risky enterprises a thrift institution can make.
1986: San Francisco-based regulators begin an examination of Lincoln because of risky investments and Keating accuses Edwin J. Gray, then bank board chairman, of a vendetta against Lincoln.
1987: Sens. Alan Cranston (D-Calif.), Dennis DeConcini (D-Ariz.), John Glenn (D-Ohio) and John McCain (R-Ariz.) meet on April 2 with Gray to discuss Lincoln's problems and are joined by Sen. Donald W. Riegle Jr. in a meeting April 9 with San Francisco regulators.
The April 9 meeting ends with a warning from regulators that they are referring the Lincoln case to the Justice Department for a criminal investigation; Glenn, McCain and Riegle take no further action on Lincoln's behalf. M. Danny Wall succeeds Gray as bank board chairman; San Francisco regulators recommend government seizure of Lincoln.
1988: Bank board accepts resolution of the case, supported by Lincoln, that includes transfer of supervision out of San Francisco office. New examination of Lincoln is begun. American Continental begins efforts to sell Lincoln.
1989: American Continental files for reorganization under the bankruptcy code on April 13; the bank board seizes control of Lincoln April 14 and puts it into receivership in August. On Oct. 13, Common Cause asks the Senate ethics committee and the Justice Department to investigate the five senators' intervention on behalf of Lincoln in light of $1.3 million in contributions they or their causes received from Keating. The ethics panel launches a preliminary inquiry into the case on Dec. 22.
1990: Keating is indicted on state fraud charges in California in connection with junk bond sales. On Sept. 10, Robert S. Bennett, special counsel to the ethics committee, submits his report, including a recommendation that the panel continue its probe of Cranston, DeConcini and Riegle but take no action against Glenn and McCain. Unable to agree, the committee schedules public hearings, which begin Nov. 15 and continue through Jan. 16, 1991.