Deukmejian Backer Helped Kill Thrift Plan : Banking: League of Savings Institutions proposal would have limited risky investments.

Working on behalf of Lincoln Savings & Loan, Gov. George Deukmejian’s top political fund-raiser participated in a behind-the-scenes effort in 1985 that killed a proposed regulation that would have limited the kinds of risky investments that contributed to the thrift’s failure, The Times has learned.

Los Angeles attorney Karl Samuelian, Deukmejian’s campaign finance chairman, joined other prominent supporters of the governor at a November, 1985, meeting in the office of then-Assembly Republican Leader Pat Nolan of Glendale in an effort to persuade the lawmaker to fight the proposed industry-backed regulation.

Also at the meeting were Deukmejian’s former savings and loan commissioner, Lawrence W. Taggart, and San Diego financier Tom Stickel, a top GOP fund-raiser and a gubernatorial appointee to the board of trustees for the state university system.

At the meeting, officials of the California League of Savings Institutions--trying to clean up its own industry--sought Nolan’s endorsement for a regulation restricting risky direct investments in real estate, stocks and junk bonds by state-chartered thrifts. But the opposition to their proposal by Nolan, Stickel and Taggart was so strong that the League simply backed down and abandoned its effort, industry officials said Thursday.

“We just felt whipped,” recalled Jerry Barrone, then the chairman of the League and president of Coast Savings in Los Angeles, who attended the meeting.

Barrone said he had not known who Samuelian was before the meeting, nor was Deukmejian’s name ever mentioned in discussing the regulation. In fact, he said, Samuelian was relatively quiet during the discussion. But, in the middle of the meeting, a Nolan staffer interrupted the session to tell Samuelian that the governor had telephoned him and he needed to return the call.

Samuelian could not be reached for comment but his attorney confirmed he attended the meeting.

“There was a call from Karl’s secretary saying that the governor was trying to reach him,” Robert S. Draper, Samuelian’s attorney, said. Although Samuelian was representing Lincoln at the meeting, “the call had nothing to do with (the investment issue),” Draper said.

However, Barrone remembers suspecting at the time that the interruption was done for effect. “We thought it was done for saber-rattling purposes,” he said, to show that “these people were in with the governor.”

Earlier this year, Deukmejian emphatically denied any knowledge of efforts by Lincoln and its owner, Charles H. Keating Jr., to pressure his Administration into approving expansion of its high-risk investments and authorizing bond sales of its parent corporation, American Continental Corp.

In April of this year, American Continental declared bankruptcy and federal regulators took over operations of the thrift. It has been estimated that Lincoln’s collapse could cost taxpayers as much as $2 billion.

In the wake of the American Continental bankruptcy this year, Samuelian was among a long list of people associated with the company who were named in a series of lawsuits filed on behalf of 23,000 investors in the Irvine-based thrift. The investors, many of them Southern California retirees, claim to have lost $250 million.

Keating and his thrift have been heavy contributors to Deukmejian and Nolan--as well as many major politicians of both parties. Keating, his business enterprises and associates have contributed an estimated $189,000 to Deukmejian’s campaign committees and at least $20,000 to Nolan.

Nolan was the author of 1982 legislation that lifted restrictions on savings and loans investments. The purpose was to make the thrifts more competitive with banks.

But as increasing numbers of savings institutions began to fail, the industry itself sought regulations to ensure the safety of its investments. It proposed that State Savings and Loan Commissioner William J. Crawford adopt a rule limiting high-risk investments to 20% of an institution’s holdings.

However, Nolan said Thursday that he was fearful that the California League proposal would be too restrictive and would not get at problems of poorly managed savings and loans. “I had strong feelings that arbitrary regulations wouldn’t help, that they would hurt the good (savings) associations,” Nolan said.

The assemblyman said he convened a meeting at his office at the industry’s request, but also invited Deukmejian fund-raiser Stickel and former Savings and Loan Commissioner Taggart to state their objections to the proposal. Confronted with opposition to their proposal from the Assembly Minority Leader and influential political allies of Deukmejian, the industry withdrew its proposal.

“The feeling was we got beat up pretty well at this meeting and we wouldn’t get anywhere with such a strong groundswell of opposition,” Barrone said.

After the meeting, Nolan said, he called Commissioner Crawford to argue against the proposed regulations. Crawford ultimatedly scuttled the proposal, but contended that he did it at the request of the League, not because of Nolan’s call.

Stickel’s opposition to the proposed regulation came less than a year after his company, TCS Enterprises, went public and Lincoln bought 19% of its stock for $2.9 million. Stickel had also hired Taggart as an executive, who was acting as a paid consultant to Keating.

Stickel said he tried to ensure that Nolan’s 1982 legislation was not tampered with and that regulators “were very careful before they revised the laws in any way that restricted savings and loans from doing business the way it had to be conducted in the 1980s to survive.”

In addition to Lincoln’s investment in TCS, the Irvine-based thrift had a further tie with Stickel’s fledgling San Diego company, which pulled off an industry coup by hiring Taggart after his resignation as the state’s savings and loan commissioner. Lincoln paid TCS an additional $200,000 in 1985 to use Taggart’s consulting services on industry and regulatory matters, Stickel said.

Stickel said Thursday that his opposition to the proposed 20% regulation was “absolutely not” connected to the fact that Lincoln was the second largest investor in TCS Enterprises.

But the San Diego Republican, who was one of those considered by Deukmejian for appointment to the state treasurer’s seat vacated by the death of Jesse Unruh, conceded that he sometimes did favors for Keating and his company.

“Charlie Keating’s political reach, in retrospect, was phenomenal,” Stickel said Thursday. “And I wasn’t the only one taken in as it relates to being an advocate for Charlie Keating. I had no reason--in 1985, 1986, 1987--not to be.

“People from his office would call me with concerns and if I shared their concerns, I could be an advocate on their behalf,” said Stickel. “If I ran into a state assemblyman here or a state senator there--and I am obviously a Republican activist--and, if given the chance to talk about issues relevant to savings and loans and deregulations, I probably would have been off of the same page as Charlie Keating.”

Stickel said there was only one time when Keating himself asked the San Diego financier for a favor.

“There was a prominent savings and loan executive who Charlie Keating wanted to meet and I tried to put them together but the other executive said ‘no,’ ” Stickel said.

Stickel said he was not going to be an “apologist” for Keating, now the center of several lawsuits, investigations and Congressional hearings.

“It’s pushing the clock back four years ago and Monday morning quarterbacking, but in 1985, I had no reason to believe that Charlie Keating was nothing other than a good and well-intentioned businessman,” Stickel said.