Sen. Donald W. Riegle Jr.'s (D-Mich.) relationship with savings and loan executive Charles H. Keating Jr. continued in the months after federal regulators warned Riegle and four other senators in 1987 that they were seeking a criminal investigation of Keating's Lincoln Savings and Loan.
Information gathered by the Senate Select Committee on Ethics shows that Riegle met Keating in September 1987 and again in February 1988. The second meeting was a few weeks before a Riegle aide filled out an internal office document Feb. 22 saying Keating was willing to sponsor a $100,000 fund-raising event for Riegle in New York in May. "We know Keating can produce this," the form said.
Keating had raised nearly $100,000 for Riegle at a Detroit event on March 23, 1987, just a few weeks before Riegle joined other senators in intervening for the executive.
Riegle met yesterday with the ethics committee, which is probing the senators' dealings with Keating. Keating is now jailed in California on fraud charges, following Lincoln's collapse, which could cost taxpayers an estimated $2 billion.
Riegle has said he never contacted regulators about Lincoln after hearing their concerns in an April 9, 1987, meeting.
Riegle's office declined comment yesterday, citing the confidentiality of the investigation.
Sources familiar with the investigation gave different versions of why Riegle and Keating stayed in contact. One said Riegle met with Keating not to discuss Lincoln but to discuss the Detroit economy, where Keating was an investor. Riegle immediately rejected the Keating offer of a second fund-raiser because of the concerns regulators expressed about Lincoln, this source said.
Another source, who is familiar with Keating's description of events, said the meetings were held to keep Riegle up to date on Keating's battle with federal regulators, noting that Keating met thrift regulators on those two dates. The offer for a second fund-raiser was not rejected until a Feb. 28 Detroit News story detailed the circumstances of the 1987 fund-raiser and the senator's 1987 meeting with regulators, this source said.
Shortly after the News story, Riegle refunded $78,250 in Keating-related donations from the 1987 event.
Informed sources have said the ethics committee is considering a recommendation by a special counsel to continue the investigation of Riegle, and Sens. Alan Cranston (D-Calif.) and Dennis DeConcini (D-Ariz.), while dropping the inquiries of Sens. John Glenn (D-Ohio) and John McCain (R-Ariz.).
Keating's American Continental Corp., parent company of the California-based Lincoln, has its headquarters in Phoenix. The company also has investments in Michigan. All five senators have denied any wrongdoing in relation to Keating, saying that their dealings with him fell into the category of legitimate actions for constituents.
Cranston and DeConcini continued to push Keating's cause with regulators right up until the government seized Lincoln in April 1989. The Washington Post reported earlier this month that a fund-raising aide wrote Cranston a memo in early 1987 saying Keating was among supporters who "rightfully expect" resolution of pending requests for help.
In 1989, shortly before the seizure of Lincoln, DeConcini telephoned Federal Home Loan Bank Board member Roger F. Martin at 5:30 a.m. to encourage him to approve Keating's sale of the firm.
Glenn and McCain said they had nothing more to do with Keating after learning the regulators were referring evidence of possible criminal conduct by Lincoln officials to the Justice Department.
Sources said Robert S. Bennett, the special counsel appointed by the committee to investigate the senators' relationship with Keating, is seeking to continue to case against Riegle because Keating's 1987 fund-raiser for Riegle was held within a few weeks of the senator's intervention for Keating.
When the ethics committee first asked the senators last fall about their relationship with Keating, Riegle responded that an examination of "the relevant facts presented in this letter" would show he acted properly.
He noted that after the regulators at the April 9, 1987, meeting presented "a strong case against Lincoln, my closing comment was, 'Well, I guess that's pretty definitive.' " He said this indicated "acknowledgement that the regulators felt and had demonstrated that they had sufficient and necessary cause to proceed against Lincoln."
Riegle confined his first response to the committee last fall to the Detroit fund-raiser and the April 9 meeting. The letter was written before the senator reviewed his files and appointment logs and was not meant to be a comprehensive detailing of his contacts with Keating, Riegle aides have said.
Shortly after Riegle sent the committee his response, it was disclosed that in early March 1987, he had asked Edwin J. Gray, then the chief regulator, to meet with other senators about Keating's complaints. Riegle left the next day on a fund-raising tour of Arizona that included a stop at the headquarters of Keating's American Continental Corp..
Documents about Riegle's activities during that period illustrate the inner workings of congressional fund-raising, including the collection, or "bundling," of large groups of checks and members' setting up "reciprocal" fund-raisers for each other.
In preparation for the Detroit fund-raiser in March 1987, for example, Keating wrote one of his employees on Feb. 18 saying he had the "very serious task" of raising money for Riegle. He asked the worker to contact anyone he knew in Michigan or anywhere in the country to give to Riegle, who he noted would be the next chairman of the Senate Banking Committee. Keating asked the employee to mail a donation for Riegle to him, adding, "This is extremely important. I need invitees. . . . I need contributions." The employee wrote out a $500 check to Riegle's campaign within a week.
Keating sent that check and others to DeConcini's chief fund-raiser, Earl Katz, who mailed them to DeConcini's home in McLean so they could be passed on to Riegle.