California GOP Tied In With S&L; Affair : Scandal: Legislature should follow Washington and investigate roles of California officials in thrift’s demise.

The House Banking Committee is doing an admirable job of delving into the collapse of Lincoln Savings & Loan, the biggest U.S. thrift failure and one fraught with official malfeasance. Understandably, those hearings concentrate on federal regulators and the influence exerted by a quartet of U.S. senators, including Alan Cranston (D-Calif).

California legislative banking committees, meanwhile, have not aggressively looked into the Lincoln mess. That must change. While memories are fresh and witnesses are willing, they should explore what state savings-and-loan and corporate regulators did and didn’t do during the critical months preceding Lincoln’s collapse.

Lincoln’s owner, Charles Keating, contributed heavily to state Republican Party treasuries and the campaign fund of Gov. George Deukmejian. His interests before state regulators were represented by Karl Samuelian, a Deukmejian friend, adviser and chief political fund-raiser.

Specifically, the legislative committees should examine:

--Passage in 1982 of Lincoln-sponsored legislation that loosened investment authority on state-chartered institutions. The legislation was carried by Assemblyman Patrick Nolan (R-Glendale).

--The successful effort by Nolan and others in 1985 to block state regulators’ plans to curtail risky lending practices that had been authorized by Nolan’s bill.

Nolan has received heavy campaign contributions from Lincoln and its parent company, American Continental Corp.

--Actions by Lawrence Taggert, Deukmejian’s former savings and loan commissioner. Taggert has testified that, in 1984, he gave Lincoln permission to shift $800 million in assets to subsidiary firms, three days before a federal regulation would have barred such a move.

At the time he made that decision, Taggert had already accepted a job with TCS Financial, a San Diego investment firm that subsequently received an infusion of nearly $3 million in cash from Lincoln. Corporate records say Taggert was a director of TCS when he made the decision favorable to Lincoln. The firm, which was undergoing financial difficulties when it received the Lincoln money, is headed by Thomas Stickel, a prominent Republican fund-raiser.

--The role that Samuelian played in inhibiting state regulation of Lincoln and its subsidiary operations.

Samuelian personally represented Keating and American Continental in March, 1988, as they sought state Department of Corporations approval for selling unsecured, uninsured junk bonds through Lincoln. Those bonds became worthless when the firms declared bankruptcy.

Samuelian made his pitch for approval of the bonds, which were cleared, to Christine Bender, the California state corporations commissioner, who had been a member of the Samuelian law firm. She had succeeded Franklin Tom, who had returned to a position with the Samuelian firm and who also represented Keating’s interests before Bender. In approving the bonds, Bender ignored a staff warning about their financial viability.

--What occurred two years ago when Samuelian interceded with the state Department of Savings and Loan as the agency was planning to impose a strict limit on Lincoln’s high-flying real-estate investments. S&L; Commissioner William Crawford says he withdrew the investment-restriction order after the firm, through Samuelian, promised voluntarily to cut back on the risky investments--a promise it failed to keep. Had the order been issued, the scale of Lincoln’s losses would have been much smaller.

Samuelian and a Lincoln executive met with Crawford in late 1987 to temper the order. A 1988 Federal Home Loan Bank Board memo, outlining Lincoln’s failure to comply with its promise, noted that Lincoln’s legal counsel was a top political adviser to Deukmejian, and said that before Crawford’s order was withdrawn in favor of the promise, “Lincoln attempted to get the commissioner and his top aide fired.”

The Lincoln business stinks, and the California Legislature has an obligation to get to the bottom of it.