Deukmejian Defends Samuelian : Politics: Governor says his friend and fund-raiser was simply doing an attorney’s job in representing Lincoln S&L; before state regulators.

In a strong defense of an old friend and chief fund-raiser, Gov. George Deukmejian said Friday that Los Angeles attorney Karl M. Samuelian acted “in a totally ethical and legal fashion” in representing troubled Lincoln Savings & Loan and its owner, Charles H. Keating Jr., before state regulators.

Samuelian “never discussed his work on behalf of his clients, or any other clients for that matter, with me or people in the governor’s office,” Deukmejian said in an interview with The Times, while attending the Western Governors Assn. conference. “He was simply doing a job as an attorney for a client.”

The governor’s remarks were his first detailed public statements in defense of Samuelian, who along with other members of his law firm represented Lincoln and its parent company, American Continental Corp., before state regulators.

Samuelian himself was present during meetings with the regulators, who eventually approved an application by American Continental to issue high-risk junk bonds that were sold through the S&L;’s branches.

In addition, Samuelian has said that he helped arrange meetings between Keating and Business, Transportation and Housing Secretary John K. Geoghegan--a member of Deukmejian’s cabinet whose agency oversees the state’s savings and loan and corporations commissioners.

The Arizona-based Keating, his companies, business associates and family have contributed $153,000 to Deukmejian campaign committees. Keating and his companies also contributed $100,000 through Samuelian to a statewide Republican fund-raising effort in 1988.

In April of this year, American Continental went into bankruptcy, leaving an estimated 23,000 investors--many of them retirees--holding worthless bonds that they had purchased for $250 million. A federal takeover of Lincoln is expected to cost taxpayers more than $2 billion.

Deukmejian expressed concern that a political ally has been subjected to increasing criticism for simply representing a controversial client: “We expect people to be involved politically and be involved in their government and then, at the same time, when somebody does get involved and does express this kind of interest (in elective politics), they shouldn’t be penalized for doing it.

“They shouldn’t be prohibited from conducting--in this case--their law practice, as long as they are doing it in an ethical fashion and a legal fashion,” said Deukmejian, himself an attorney.

“And from everything I’ve heard about this up to this point, I’m satisfied that Karl (Samuelian) did act in a totally ethical and legal fashion on behalf of the client,” the governor said.

Deukmejian said that much of the information about Keating and his enterprises that has emerged from congressional and legislative hearings was “probably news to him (Samuelian) as well. When you are retained by somebody, you don’t conduct an investigation at the time you are asked to represent the client as to all the dealings the client is involved in.”

When asked whether Keating had tried to take advantage of Samuelian’s closeness to the governor in choosing a law firm to represent him in California, Deukmejian said: “I don’t care who it is, if you have a matter before a government agency or regulator, you want to have representation that you believe will put forward your position in the most effective manner possible.”

Might Keating have been influenced by the fact that both the current state corporations commissioner, Christine W. Bender, and her predecessor, Franklin Tom, had worked in Samuelian’s law firm? “I would imagine that Keating probably considered that at the time,” Deukmejian said.

In testimony this week before a legislative committee, Samuelian said that he and Deukmejian met for the first time at a church banquet in 1971. He said he hosted his first fund-raising dinner for Deukmejian in 1978 when Deukmejian was a successful candidate for state attorney general.

By 1982, when Deukmejian was the Republican candidate for governor, Samuelian became his campaign finance chairman.

In his legislative testimony, Samuelian expressed concern about the 23,000 Californians who had lost their investments because of the collapse of American Continental. “I appreciate the problem,” Samuelian said. “It’s a horrible problem. But I don’t feel that our firm or our representation was responsible in any way for it.”

Paddock reported from Las Vegas and Jacobs from Sacramento.