NEWS ANALYSIS : Friendships May Tarnish Image : Cranston Struggles to Save Career Amid Controversy

He has long been a major figure in California politics and a powerful behind-the-scenes player in the United States Senate. But now, at an age when most politicians are either retired or becoming elder statesmen, 75-year-old Sen. Alan Cranston is struggling to overcome a series of reversals that threaten to tarnish his long political career.

Although the four-term Democratic senator does not face the electorate again until 1992, political experts believe Cranston’s home-state popularity may have suffered substantially as a result of recent news stories linking him to indicted junk bond king Michael Milken and Charles H. Keating Jr., head of the bankrupt Lincoln Savings & Loan of Irvine, Calif.

Cranston acknowledges that he solicited hundreds of thousands of dollars in contributions for his campaign and other Democratic causes from Keating while at the same time defending Keating’s failing S&L; in dealings with federal regulators. Likewise, he sought contributions from Milken, whose cause he also championed in Washington.

Not only has news of his friendship with these big-money men undermined Cranston’s well-cultivated image as champion of the underdog, but critics suggest that some of his fund raising may have violated federal tax law.

And Cranston’s difficulties are by no means limited to the fallout from his relationships with Keating and Milken. Just two months ago, the senator was forced to pay a $50,000 civil penalty--the second-highest fine in the history of the Federal Election Commission--for the financing violations of his unsuccessful 1984 presidential campaign.

Among other things, he admitted taking $54,000 in illegal contributions from Mark R. Weinberg, a flamboyant Beverly Hills commodities broker.

Cranston is now the subject of an inquiry by Common Cause, the citizens lobbying group, whose crusade against congressional wrongdoing contributed to the recent ouster of House Speaker Jim Wright (D-Tex.) and the resignation of former Rep. Tony Coelho (D-Merced).

Apart from all that, Cranston’s influence seems to be waning in the Senate as a new generation takes over, even though he still holds the position of assistant majority leader. Senate Majority Leader George J. Mitchell (D-Me.), who was chosen to lead the Democrats earlier this year, appears to be broadening the leadership to include many younger senators.

And the turmoil in Cranston’s political career is reflected even in his personal life. Although the political impact remains unclear, he divorced his second wife, Norma, an invalid, last month, and he is finding himself regularly forced to deny rumors of a budding romance with actress Morgan Fairchild.

Does Not Seem Upset

Unflappable as always, Cranston himself does not seem particularly upset by the storm of controversy brewing around him. In an interview, he said these developments have not discouraged him from seeking reelection in 1992 or from continuing to raise money for a variety of Democratic causes, including voter registration.

“I don’t intend to let the hullabaloo drive me out of this effort,” he said flatly.

Cranston says he views his current problems as a tempest in a teapot: “I don’t see it as a major issue compared with 20 years of service in the Senate.”

Indeed, Cranston’s political career has endured many setbacks over the years, but his ability to bounce back has made him the most enduring politician in California. As state controller beginning in 1958, Cranston was defeated in Ronald Reagan’s 1966 gubernatorial landslide but then came back to be elected to the Senate two years later. In 1986, he managed to be reelected by a single percentage point in the wake of an embarrassingly unsuccessful presidential bid.

Momentum Feared Waning

Nevertheless, his political advisers are concerned that the recent fuss over Cranston’s fund raising has sapped the early momentum that they were hoping to build for him among California voters before his next reelection campaign in 1992.

“This could be a serious threat, and we need to counteract it,” acknowledged Kam Kuwata, the Santa Monica political consultant who already has been named manager of Cranston’s 1992 campaign. “We do have a perception problem.”

Some critics suggest that Cranston’s questionable fund-raising activities will sap the essence of his political strength in California. Republican campaign consultant Sal Russo said: “The one strong suit that Cranston has had is that he was always seen as a reformer, someone who was clean, and this certainly sullied that image.”

His involvement with Keating may also identify Cranston’s name more closely than he would like with the massive savings and loan debacle in general and the federal takeover of Lincoln in particular. But Kuwata argues that Cranston’s well-known liberalism will help him defuse charges that he was too close to his wealthy contributors.

‘Fighter for California’

“Politically,” he said, “the voters in California by and large know Alan Cranston. They know he is a fighter for California. As we laid out in the last campaign, he has done more for California than probably anybody. . . . That is what we will say in our campaign.”

Still, the Keating affair has one especially potent element that was lacking from most of the recent ethics controversies involving members of Congress--real victims.

The case puts Cranston directly at odds with thousands of elderly California voters who lost their life savings by investing in bonds issued by Lincoln’s parent company, American Continental. Unlike passbook savings, the bonds were not insured by the federal government.

In an effort to pacify these irate investors, Cranston recently called on the General Accounting Office to investigate whether federal regulators failed in their duty to protect the bond holders. The request was seen as an effort by the senator to demonstrate concern for the investors and separate himself from Keating.

But the Keating-Cranston relationship is well-documented.

Keating, a Republican, has been active in opposing abortion and pornography and has contributed heavily to both political parties. In his dealings with the government, he has a reputation as a highly litigious business executive who clashes with federal regulators at every turn.

In April, 1987, Cranston was one of several senators who sought to bring pressure on the Federal Home Loan Bank Board, which regulated the S&L; industry, on Keating’s behalf. Critics charge that their effort succeeded in postponing the federal takeover of Lincoln by two years. The delay allowed Lincoln’s losses to mount and helped push the cost of bailing it out as high as $2.5 billion--to be paid by taxpayers.

Former FHLBB Chairman Edwin J. Gray, in an interview, recalled that when he was summoned to Capitol Hill for the meeting with Cranston and three other senators, Dennis DeConcini (D-Ariz.), John Glenn (D-Ohio) and John McCain (R-Ariz.), he was told to come alone so that the senators would have--in his words--”inside-the-Beltway deniability.”

‘Our Friend’

Gray was stunned by the bluntness of the senators’ request for favoritism toward Keating, whom they referred to repeatedly as “our friend.” Among other things, he said, they asked him to withdraw a regulation that Keating was then challenging in the courts.

For his part, Cranston contends that he was only asking that the FHLBB conclude a two-year audit of Lincoln as quickly as possible before it undermined consumer confidence in the California institution. He said he did nothing to impede the federal takeover of Lincoln.

But Cranston acknowledges that he also intervened again with federal regulators in early 1989, urging them to permit Keating to sell Lincoln. Despite the senator’s pleadings, the government refused to allow the sale and took over the failing S&L; instead.

While Cranston was going to bat for Keating with federal regulators, the S&L; executive was contributing heavily to causes supported by the senator. Keating raised about $40,000 for Cranston’s 1986 reelection campaign, directed American Continental to give $85,000 to the California Democratic Party during Cranston’s reelection campaign and donated $850,000 to three voter registration groups closely identified with Cranston, including one once run by the senator’s son, Kim.

‘Pretty Stupid Thing’

When the extent of Keating’s giving to Cranston-related causes came to light recently, the senator admitted in a statement that he had done “a pretty stupid thing, politically” to solicit money from the S&L; executive--particularly in light of the current emphasis on ethics in Congress. But he also insisted that he had done nothing illegal or immoral.

“There was nothing improper in any of my contacts with Charles Keating,” Cranston said. “Nor was there anything improper in my joining with other senators to ask the Federal Home Loan Bank Board to take prompt corrective action--including seeking criminal action against Keating, if grounds existed.”

As Kuwata sees it, the story of Cranston’s efforts to help Keating are being stirred up by Gray, a California Republican who went to Washington in 1981 as an aide to Reagan. He described Gray as the California GOP’s “hatchet man”--a charge that the former FHLBB chairman hotly denies.

Says Many Receive Help

And Cranston argues that in seeking help for Keating in Washington, he did nothing more than he has done for an estimated 300,000 California constituents who have received personal assistance from his office over the last two decades.

“If we adopt the position that you can only take money from people you don’t help, then we’re creating an Alice-in-Wonderland world,” Cranston said. But he added: “Obviously people who make huge contributions do have some advantage over those who don’t. It gives them access.”

Cranston offers the same defense of his solicitation of contributions from Milken, who until earlier this year headed the Beverly Hills-based junk bond department of Drexel Burnham Lambert Inc. Although Drexel gave $10,000 to Forum Institute, one of Cranston’s voter registration groups, the senator says the money had nothing to do with his decision to intervene with the Securities and Exchange Commission on Drexel’s behalf.

Letter to SEC

In a letter to the SEC earlier this year, Cranston argued against government efforts to force Drexel to move its junk bond department to New York City as part of the settlement of securities fraud charges against Milken and Drexel. Cranston acted at the request of Coelho and Los Angeles Mayor Tom Bradley, whose ties to Drexel are being investigated by the Justice Department.

Aides claim that Cranston solicited money before Milken was indicted last Sept. 7, though Forum Institute records indicate that the money was contributed after the indictment. But the money was solicited before Cranston wrote to the SEC.

Not surprisingly, his solicitations of Keating and Milken have also caused some critics to question the legality of Cranston’s enthusiastic fund-raising efforts on behalf of nonprofit voter registration groups.

The chief recipients of Cranston’s fund-raising efforts have been two Washington-based organizations, Forum Institute and USA Votes, as well as the California-based Center for Participation in Democracy, which is headed by Cranston’s son.

Does Not Disclose Names

It is not known precisely how much Cranston has raised for these groups, nor has the senator been willing to disclose the names of the other contributors he contacted. A spokesman for USA Votes estimates that it funneled $7 million into voter registration drives in the 1987-1988 campaign cycle.

While Cranston himself claims that his effort is motivated by a strong desire to increase citizen participation in the American system, his critics view it as a thinly veiled effort to use tax-free contributions to bolster Democratic Party rolls.

“What the Cranston issue raises is whether the tax laws are being properly complied with or whether they are conducting partisan activities with a tax preference,” said Fred Wertheimer, president of Common Cause.

Acknowledges Loopholes

Although the Cranston-supported groups are technically nonpartisan, the senator acknowledges that their efforts are aimed primarily at registering Democrats. But he notes that Republicans as well as Democrats take advantage of loopholes in the federal election laws that allow them to collect large amounts of contributions for purposes loosely related to political campaigns--contributions known in the political trade as “soft money.”

Yet the controversy over his fund-raising activities clearly has taken Cranston by surprise. In the past, the senator has taken numerous precautions to avoid being accused of misusing his office--even declining to invest in stocks and bonds. Earlier this year, he also announced that he would no longer accept speaking fees.

But to those who have known Cranston for years, his close ties to big-money givers come as no surprise. The California senator has long boasted of being the biggest Democratic money-raiser in the Senate, and his own political action committee, the Committee for a Democratic Consensus, has raised millions of dollars for Democratic candidates.

Contributions From Banks

Between 1983 and 1988, Cranston accepted $63,495 in campaign contributions from political action committees representing banks and $27,450 from those promoting savings and loans. Consumer advocate Ralph Nader contends that Cranston, as a senior member of the Senate Banking, Housing and Urban Affairs Committee, has always sided with the banking industry.

“When it comes to banks,” Nader said, “his motto is: ‘My banks, right or wrong.’ ”

Cranston’s fellow liberals have never criticized his close ties to bankers, according to Nader, because they have no real interest in the banking industry. As a result, he said, “He’s gotten a free ride, which has induced him to become ever more reckless.”

Nader said Cranston was also guilty of defending the thrift industry instead of protecting the public interest when it became clear that taxpayers were going to be called on to foot the bill for the savings and loan failures.

‘Didn’t Perform’

“He neither warned the American people nor did he advocate the changes necessary to save us from this disaster,” Nader said. “He didn’t perform as a senator.”

In the writing of the new law to bail out failing S&Ls;, Cranston was particularly energetic in protecting the interests of home-state institutions with heavy investments in junk bonds.

Cranston’s ability to attract big-money contributors has always been a key to his success in California politics. But this is not the first time that Cranston’s fund raising has gotten him into trouble.

During his 1984 presidential campaign, according to FEC records, his violations included collecting $54,000 in illegal personal contributions from Weinberg and $101,000 in illegal letters of credit from several other individuals, including his sister.

Supports His Leadership

Cranston’s fund raising for other senators clearly helped him to retain his leadership position in the Senate earlier this year, even though Democrats replaced former Majority Leader Robert C. Byrd of West Virginia with Mitchell. Sen. Wendell H. Ford of Kentucky failed miserably in an effort to defeat Cranston as assistant majority leader.

As assistant party leader--or “whip,” as the job is often described--Cranston has long been known for his ability to predict the outcome of Senate votes. This is the primary job he performed under Byrd, and he continues to do it under Mitchell.

Mitchell, in an interview, said he often turns to Cranston for help “so I can tell on a timely basis where the votes are.” He said Cranston also participates in weekly meetings with House Democratic leaders.

‘Invaluable Help’

“He’s been an invaluable help to me,” Mitchell added. “He plays a very important role. Virtually every decision I’ve made came after consulting him on a daily basis.”

Nevertheless, Mitchell acknowledged that he has been expanding the Democratic leadership since he took over--a move that some Senate sources believe has diluted Cranston’s influence. Among other things, Mitchell has created a new position of “assistant floor leader,” currently occupied by Sen. Wyche Fowler Jr. of Georgia, who has assumed some duties normally carried out by the assistant majority leader.

Moreover, at 75, Cranston is clearly the last member of his generation to hold a position in the Senate Democratic leadership. In the Senate at large, Cranston is now the third oldest member behind 86-year-old Sen. Strom Thurmond (R-S.C.) and 81-year-old Quentin N. Burdick (D-N.D.).

Frustrating Defeat

On the Senate Foreign Relations Committee, where Cranston also serves, the California senator suffered a frustrating defeat June 20 when the panel ignored his opposition and voted, 12 to 7, to recommend that the full Senate confirm Donald P. Gregg as ambassador to South Korea. Cranston is expected to lose again when the matter is debated on the Senate floor next month.

Cranston, who had charged that Gregg had been involved in former White House aide Oliver L. North’s efforts to provide aid to the Nicaraguan resistance during a period when Congress had prohibited such funding, was particularly disappointed that three of his fellow Democrats on the committee voted in favor of Gregg.

Sources said Cranston failed to win the support of the Democratic leadership for a full-fledged partisan battle against the Gregg nomination because Mitchell and others were reluctant to challenge President Bush so soon after their bruising battle to defeat the nomination of former Texas Sen. John Tower as secretary of defense.

Admits Reluctance

“I didn’t relish getting into that myself,” admitted Cranston, referring to his opposition to the Gregg nomination. “I was stuck with it because of my position as chairman of the subcommittee on East Asian and Pacific affairs.”

Despite his age, according to aides, Cranston has not given up running for exercise and is no less a workaholic than he was many years ago. In fact, it is thought by many that the senator’s work habits were to blame for the dissolution of his marriage on July 28.

Gossip Stimulated

The divorce, his second, stimulated considerable gossip in the Senate, not only because Cranston’s ex-wife suffers from Parkinson’s disease but also because it coincided with news reports that Cranston had been seen in the company of Fairchild. Cranston denies any romantic relationship with the blonde actress.

Even before his recent troubles, political analysts were predicting that Cranston’s age would be a serious obstacle if he decided to seek reelection in 1992. And now, with the growing controversy surrounding his fund raising, some are even betting that Cranston eventually will be persuaded against running for a fifth term.

Staff writer John Balzar contributed to this story from Los Angeles.