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Ethics Panel to Conduct Cranston Investigation : Lincoln S&L;: Outside counsel to be appointed over allegations involving influence peddling by senators.

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TIMES STAFF WRITER

The Senate Ethics Committee will appoint an outside counsel to investigate allegations of influence peddling against Sen. Alan Cranston (D-Calif.) and four other senators who intervened with federal regulators on behalf of Lincoln Savings & Loan after receiving campaign donations from the owner of the Irvine thrift, sources said Thursday.

The panel is believed to have settled on Robert S. Bennett, a Washington attorney who specializes in white-collar crime, to head the investigation of charges filed against the five senators by Common Cause, the citizens’ lobby.

The other four senators are Dennis DeConcini (D-Ariz.), John McCain (R-Ariz.), John Glenn (D-Ohio) and Donald W. Riegle Jr. (D-Mich.).

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Bennett, 50, is expected to meet with the committee members today to make final plans for the inquiry. He has served as special counsel in two previous investigations of senators--the 1981 probe of then-Sen. Harrison H. Williams (D-N.J.) and a pending inquiry into the book-publishing activities of Sen. Dave Durenberger (D-Minn.). He is the older brother of William J. Bennett, director of the White House Office of Drug Control Policy.

Born in Brooklyn, N.Y., Bennett received a law degree from Georgetown University and a master’s degree in law from Harvard. He represented Boeing Co. earlier this week when it pleaded guilty to two felony charges of trafficking in secret Pentagon planning documents.

The Senate Ethics Committee’s decision to conduct a full-blown investigation headed by an outside counsel is a major setback for Cranston, who had hoped that the charges against him would simply be dismissed on the basis of the legal defense that he had filed with the committee Thursday.

Cranston, who is assistant majority leader of the Senate and has served in the chamber 21 years, is accused of intervening improperly in 1987 along with the four other senators in an investigation by federal regulators of Lincoln. The Irvine thrift is owned by Charles H. Keating Jr., who had contributed about $1.3 million to campaigns and other causes supported by the senators.

On Thursday, Cranston’s aides acknowledged for the first time that the senator’s top adviser on banking matters, Carolyn D. Jordan, took a trip paid for partly by Lincoln a week after the senator first intervened for the thrift. Jordan also lobbied California Savings and Loan Commissioner William J. Crawford on behalf of Lincoln.

But in a letter and a 16-page legal brief filed with the Ethics Committee, Cranston insisted that he did nothing illegal or improper when he, along with the four other senators, contacted federal regulators on behalf of Keating.

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He also denied that his actions were in any way responsible for an estimated $2 billion in losses to the federal government caused by the collapse of Lincoln or for the personal financial losses suffered by 24,000 people--many of them elderly Californians--who invested in uninsured junk bonds sold at Lincoln branch offices. The bonds are now worthless.

“I am not responsible for loss of taxpayer funds through a delay in shutting down Lincoln or the losses of innocent California bond investors,” Cranston said.

He said that his efforts on Lincoln’s behalf never exceeded what a member of Congress can legally do for a constituent who is at odds with the government. Nor, he said, did Keating have any reason to believe that the senator was paying off a debt to him for his campaign donations.

Cranston noted that he never benefitted personally from Keating’s largess, which would have violated the law.

Although Cranston was responding officially to charges of influence peddling pending before the Senate committee, the 16-page document written by his attorney, William W. Taylor III, focused heavily on allegations that have arisen in recent House Banking, Finance and Urban Affairs Committee hearings into the Lincoln affair.

In fact, he devoted 3 1/2 pages of his legal brief to disputing a charge by Edwin J. Gray, former chairman of the Federal Home Loan Bank Board, that Cranston’s efforts on behalf of Keating were “worse than anything Jim Wright did.” Former Speaker Wright was forced to resign from Congress earlier this year after a year-long investigation in which he was found to have violated House ethics rules.

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One of the charges against Wright was that he intervened improperly with the bank board, which supervised savings and loans, on behalf of the owners of several Texas thrifts. Wright eventually was cleared of any ethics violations involving the thrifts.

Even so, Gray said that Wright’s alleged intervention was comparable to Gray’s meeting in April, 1987, with Cranston and three others senators who were seeking better treatment by the regulators for Keating.

“Sen. Cranston’s alleged ‘intervention’ with Chairman Gray is not even remotely comparable to that for which the committee exonerated the Speaker,” Taylor wrote.

He noted that Wright had been accused of seeking “specific regulatory results” from the bank board, of trying to get rid of a regulator on grounds he was homosexual, of trying to arrange special deals for constituents and of trying to delay the seizure of an insolvent savings and loan.

Although the charges against Wright were much more serious than those against Cranston, he added, they were dismissed by the House Ethics Committee on grounds that a member of Congress has a right to intervene in such matters.

Indeed, Cranston’s attorney cited the decision in the Wright case as proof that his client did nothing illegal or improper by asking the bank board to expedite the investigation of Lincoln, which claimed that it was being harassed by the regulators. He said that Cranston would still be innocent even if he had specifically asked the bank board to go easy on Lincoln.

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He cited a Supreme Court decision saying that it is within the rightful duties of a senator to “cajole and exhort” the executive branch regarding the enforcement of laws.

To underscore this point, Cranston listed three occasions on which he had intervened with federal agencies on matters involving immigration, the Legal Services Corp. and the semiconductor industry. In only one of the three cases did he receive campaign contributions from the interested parties, he said.

“The fact that a constituent who requests a senator’s help is subsequently accused or indeed convicted of violations of the law does not suggest that a senator acted improperly,” he wrote.

Cranston’s legal brief also disputed the testimony of three elderly California women before the House Banking Committee earlier this week. The three had said that they held Cranston personally responsible for the loss of their life savings as a result of investments in bonds issued by Lincoln’s parent company, American Continental Corp.

He noted that even Gray, whom he called a “discredited former bureaucrat,” acknowledged in testimony before the House committee that the actions of the five senators did nothing to deter him from investigating Lincoln.

Although Cranston received $35,000 in campaign contributions raised by Keating and solicited an additional $850,000 from him for voter registration organizations, there is no evidence that he pocketed any money.

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“When it is all said and done,” Taylor’s brief concluded, “the critical and undisputed fact is that Sen. Cranston received no personal gain from Charles Keating or any organization he owned or controlled.”

KEATING OUSTED--Regulators ousted Charles H. Keating Jr. from the management of two Arizona hotels. A3

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