James M. Fail, the Arizona businessman whose 1988 purchase of 15 Texas savings and loan associations is under scrutiny by a Senate subcommittee, told the panel yesterday that federal regulators knew of his 1976 legal troubles when they approved the transaction.

Fail, testifying before the Senate Judiciary antitrust subcommittee, acknowledged that documents he filed with the Federal Home Loan Bank Board on May 31, 1988, were inaccurate. However, he insisted that when federal regulators approved his purchase of the thrifts in December 1988 they had full knowledge that he had been indicted for securities fraud in 1976 and that one of the firms he controlled had pleaded guilty to essentially the same charge.

That conviction, federal regulators testified last week, would have been enough to disqualify Fail from acquiring the savings and loan associations.

"We went out of our way to see that this was properly disclosed," Fail told the subcommittee. Hiding information that was so well known to various federal and state regulators, he said, "would be like trying to slip an elephant into a girls' dormitory."

Fail's defense of the transaction, which he said would cost taxpayers another $600 million if reversed, came as the subcommittee chaired by Sen. Howard M. Metzenbaum (D-Ohio) continued its investigation into the acquisitions, which have cost the Treasury up to $3 billion in subsidies.

Fail acquired the Texas thrifts as federal regulators were disposing of scores of insolvent savings and loan associations in the Southwest in 1988. He later consolidated the S&Ls into Bluebonnet Savings of Dallas, now one of the most profitable thrifts in the nation.

Also yesterday, a lobbyist who helped Fail acquire the thrifts and who has become a focus of the inquiry -- in part because he has fought the panel's subpoenas -- appeared before the subcommittee and provided it with hundreds of pages of documents.

The lobbyist, Robert J. Thompson, a former aide to President Bush when he was vice president, defended the propriety of his work for Fail and the compensation he received, which Metzenbaum has sharply criticized as an exercise in high-level influence peddling.

"These transactions were authorized and supervised by federal authorities, and I observed the rules established for this process," said Thompson, who as part of his compensation agreement is in line to receive 2 percent of the profits from any future sale of Bluebonnet. "This compensation was proper -- and it was earned," added Thompson, who is scheduled to appear again before the panel early next month.

The subcommittee also continued to delve into the complex financing behind Fail's acquisitions of the 15 thrifts, which he obtained with $1,000 of his own cash and $70 million in borrowed funds, much of it from an insurance company he owns.

Thomas K. Pennington, the former president of the firm, Mutual Security Life, said the company's $35 million investment in Bluebonnet "completely devastated our cash position" and that he had resigned from the company in September 1989 because of concerns over the investment.

Fail, conceding he had used his insurance companies to pay a $5 million interest payment to an unaffiliated life insurance company that provided some of the financing, defended the deal's structure. Fail said the loans were fully collateralized with his business holdings.

Documents released by the panel yesterday show that it was not until the day the S&L acquisitions were approved that Fail received a commitment for $25 million of the financing from the unaffiliated insurance company, and that the commitment letter left the interest rate and repayment terms to be negotiated later.

However, Fail did concede that he had signed a document sent to the Home Loan Bank Board which obscured the true nature of his 1976 legal troubles, in which a company he owned, United Security Holding Co., pleaded guilty to fraud. As part of that settlement, Fail agreed not to conduct insurance business in Alabama, and his own indictment was dismissed.

"I have had a very bad habit in the past, which I can assure you I will not have in the future, of signing a great many things which are placed before me," Fail said. In that document, Fail did not disclose that his company had been convicted and that he had been the subject of civil suits over his Alabama insurance activities.

However, Fail said he had made full disclosure of his legal record in documents filed with federal regulators immediately before his acquisitions were approved on December 22, 1988. A senior federal regulator testified earlier than he was unaware of that disclosure.