The Senate ethics committee opened an unprecedented public inquiry into the relations between five senators and savings and loan executive Charles H. Keating Jr. yesterday and heard charges that three of the five were far more deeply involved with Keating and his failing thrift than they have acknowledged.
Two of the senators, Alan Cranston (D-Calif.) and Dennis DeConcini (D-Ariz.), were described by special counsel Robert S. Bennett as "important players" in Keating's "all-out war" with federal regulators. Moreover, Bennett told the committee, a third senator, Donald W. Riegle Jr. (D-Mich.), played "a much greater role than he now recalls" in attempting to help Keating in his dealings with the regulators.
In making his case at the start of the tense, politically charged hearings, Bennett drew pointed connections in timing between Keating's contributions to the three senators and their efforts on his behalf.
By contrast, the special counsel said, Sens. John Glenn (D-Ohio) and John McCain (R-Ariz.), who also received money from Keating and helped him to varying degrees, played lesser roles in the case. There is no substantial evidence of any connection between their intervention for Keating and the money he gave them, Bennett added.
After conducting a year-long investigation of the affair, Bennett warned that the Senate faces "utter ruin" of its reputation unless it breaks the link between campaign fund-raising and favors for constituents that led to the "Keating Five" case.
Keating, who faces trial on fraud charges in California, raised more than $1.3 million for the five senators' campaigns and political causes at the same time he was seeking their help in fighting off a regulatory crackdown on his failing Lincoln Savings and Loan, of Irvine, Calif.
In a preliminary report two months ago, Bennett recommended that the committee intensify its investigation of Cranston, DeConcini and Riegle but take no action against Glenn and McCain. Instead, the committee decided to hold the hearings, which are expected to last at least through the end of the month, on all five senators.
At separate tables across the huge Hart Office Building hearing room from the committee members, four of the five senators sat impassively, occasionally consulting their attorneys or family members, as their ethical behavior in the case was examined in relentless detail by Bennett.
The absent senator was Cranston, the Senate's assistant majority leader who is undergoing treatment for prostate cancer and watched the opening proceedings on television from his Capitol Hill office. But he plans to appear before the ethics committee today, when Bennett will present his case regarding Cranston and all five senators are scheduled to make their opening statements in response to the special counsel.
Howell T. Heflin (D-Ala.), chairman of the Senate Select Committee on Ethics, as the panel is formally known, was the first to jar the four senators in the room when he read a lengthy opening statement that included a surprisingly strongly worded assessment of public perceptions about the case.
"As we start these hearings, many of our fellow citizens apparently believe that your services were bought by Charles Keating, that you were bribed, that you sold your office, that you traded your honor and your good names for contributions and other benefits," Heflin said, adding that others "hold far different views."
Bennett was even more jarring as he departed from his assessment of the evidence to warn the Senate that its ethical dilemma is building toward disaster.
Lawmakers are "boxed in," he said, by mounting public demands for constituent service and by the sharply rising cost of political campaigns, leading lawmakers increasingly to seek contributions from the same people who are seeking favors from them.
What the Senate is getting now is a "booming warning that, unless these trends are recognized and dealt with, we will see more cases like this and the reputation of this body and its members will be in utter ruin," he added.
Bennett said the committee should give guidance to senators on the ethical limits of constituent service, even if this has a "chilling effect" on congressional powers. He added that abuse by senators causes even more damage.
On the committee, senator after senator, as well as Bennett, defended the legitimacy of lawmakers' intervention with the federal bureaucracy on the part of aggrieved constituents, including those who have given to their campaigns as long as the money and the intervention are not connected.
"A standard of conduct which places too much restraint upon the legislative branch could produce a legislature so timid in its contacts with the executive that, for all practical purposes, it will have abandoned its oversight responsibilities," Heflin said.
But, in addition to constituents with enough clout to get a senator's attention, Bennett asked the senators also to consider the "silent constituents," such as those who lost their life savings in what he and others have called the "looting of Lincoln" by Keating. Who, Bennett asked, is representing them.
Morever, he said, the "Keating Five" is "not, in all instances, a case of simple and routine constituent service."
In his nearly five-hour presentation, Bennett dwelt heavily on two April 1987 meetings held by the senators with federal regulators to discuss Keating's complaints about their handling of Lincoln, including a tough new regulation limiting high-profit, high-risk investments in projects other than home loans.
Despite what he described as Riegle's fuzzy recollections about most events, Bennett said Riegle set the meetings in motion with a suggestion to Edwin J. Gray, then-head of the Federal Home Loan Bank Board, that several western senators wanted such a meeting. He said there was "substantial evidence" that it was Keating, not western senators, who wanted the meeting.
Bennett also said evidence shows that DeConcini, despite his denials, offered a deal on behalf of Keating at the meetings under which the new regulations would be shelved in return for an agreement by Keating to make more home loans.
He also cited continued efforts by Cranston and DeConcini to help Keating up until just before Lincoln was seized by federal regulators, even after they warned that they were recommending a criminal investigation of "serious" violations at Lincoln and after former Arizona governor Bruce Babbitt (D) told Cranston that Keating was a "crook."
In the case of Cranston, Bennett charged that "hundreds of thousands of dollars" were solicited and received "in an office in this building," gesturing toward Cranston's Hart Building office and referring to $850,000 in corporate funds that Cranston received from Keating for three voter-registration groups.
Why would Keating, a "well-known Republican," want to give Cranston "hundreds of thousands of dollars so more Hispanics and black citizens could vote?" Bennett asked.
In response to suggestions that Senate rules on cases such as this are nonexistent or vague, Bennett said there are standards by which the senators can be judged, including one that bars conduct that "appears improper to a reasonable, nonpartisan, fully informed person." They are known to, and followed by, many senators, he said.
In the first testy exchange of the hearings, James Hamilton, attorney for DeConcini, objected to implications by Bennett that DeConcini agreed to vote for Daniel Manion, a controversial judicial nominee during the Reagan administration, in exchange for appointment of Lee Henkel, whom Keating was promoting for the Federal Home Loan Bank Board. Hamilton insisted that Bennett read an affidavit from former senator Barry Goldwater (R-Ariz.) in which Goldwater said he was hospitalized at the time of the Manion nomination and asked DeConcini to pair votes with him. Goldwater had planned to vote for Manion and DeConcini against him; the pairing canceled out their votes.
After the session, McCain and Glenn said they were pleased with the results, but DeConcini said he did not believe anyone believes it is a "fair process."
Staff writer Don Phillips contributed to this report.