Five Senators Face Ethics Inquiry Over Lincoln S

The Senate Ethics Committee announced Friday that it will begin a formal investigation of possible influence peddling by five senators accused of improperly interfering with government regulators on behalf of the failed Lincoln Savings & Loan of Irvine.

The inquiry will seek to determine whether Sens. Alan Cranston (D-Calif.), Dennis DeConcini (D-Ariz.), John McCain (R-Ariz.), John Glenn (D-Ohio) and Donald W. Riegle Jr. (D-Mich.) violated ethics rules by intervening for Lincoln after receiving contributions from its owner, Charles H. Keating Jr.

The five senators, all of whom have denied wrongdoing, said the investigation would clear their names.

The Ethics Committee said that it also plans to investigate Sen. Alfonse M. D’Amato (R-N.Y.) for alleged influence peddling in the scandal at the Department of Housing and Urban Development during the Reagan Administration.

In both cases, the committee will conduct preliminary inquiries, the first of three possible investigative steps, to determine whether Senate rules were violated.

Last month, the committee took the first major step in its investigation when it appointed Robert S. Bennett, a Washington attorney, as outside counsel to head any inquiry of the Lincoln case. It said that its decision to launch a formal investigation was based in part on advice from Bennett, the older brother of William J. Bennett, director of the White House Office of Drug Control Policy.

The five senators are alleged to have helped Keating improperly by meeting with federal savings and loan regulators in 1987 during an investigation of Lincoln. Keating contributed about $1.3 million to reelection campaigns and other causes supported by the senators.

The government seized control of Lincoln on April 14. The eventual cost to taxpayers of losses generated by Lincoln is expected to exceed $2 billion, making it the largest single thrift failure on record.

“It’s a good move,” Murray Flander, press secretary to Cranston, said of the investigation. “The fact that they are conducting a full preliminary investigation and the fact that he will be cleared, this will obviate any charges of whitewash afterwards.”

Cranston, who has said he plans to run for reelection in 1992, accepted $47,000 in direct campaign contributions from Keating, Keating associates and family members between the time the Arizona developer acquired Lincoln in 1984 and the government seizure earlier this year.

In addition, Cranston persuaded Keating to contribute a total of $850,000 to voter-registration groups supported by Cranston, including one headed by the senator’s son, Kim Cranston. Critics have complained that the ostensibly nonpartisan groups targeted new voters likely to register as Democrats, a charge denied by the Cranstons.

Riegle’s office said in a statement that the senator “strongly supports this review and knows it will determine his conduct to have been entirely proper.”

The lawmakers generally have defended their actions on behalf of Keating as nothing more than normal help for a constituent.

The Ethics Committee, headed by Sens. Howell Heflin (D-Ala.) and Warren B. Rudman (R-N.H.), said in a statement that “fairness to all concerned requires a thorough and complete review of all relevant facts and circumstances.”

But the panel emphasized that “it has taken no position as to the merits of the allegations or the weight of the evidence.”

Spokesmen for DeConcini, McCain and Glenn said that the lawmakers welcomed the inquiry because they did nothing wrong.

D’Amato told the Associated Press that the inquiry would exonerate him of charges that he improperly influenced the awarding of HUD grants and subsidies. “My actions are going to be proven to be correct, responsible and the work appropriate in every matter,” he said.

Nonetheless, the Ethics Committee inquiry represents a setback for the lawmakers in their efforts to dismiss the charges quickly as unfounded.

The so-called “Keating Five” case involves actions taken by the senators in 1987 when Lincoln was under investigation by the Federal Home Loan Bank Board, the agency then responsible for regulating the savings and loan industry.

Edwin Gray, then the bank board chairman, testified that Cranston, DeConcini, McCain and Glenn offered during an April 2, 1987, meeting to persuade Lincoln to increase its traditional home lending if regulators would stop pressuring the thrift to pull out of other, more speculative investments. The senators have denied Gray’s account of the session.

A week later, the four senators were joined by Riegle in a meeting with regulators from the San Francisco office of the bank board. According to participants, that meeting ended when the regional regulators said they were pursuing a criminal case against Lincoln.

Earlier this year, just before the government took control of Lincoln, DeConcini and Cranston contacted the chief federal regulator, M. Danny Wall, to push for a sale of the S&L; to forestall a government seizure.

DeConcini and Cranston have said that they contacted Wall in an effort to save jobs and taxpayers’ money.

Last month, in a letter and a 16-page legal brief filed with the Ethics Committee, Cranston denied any wrongdoing and insisted that his actions did not contribute to the losses to the federal government. He also denied any responsibility for the personal financial losses suffered by 22,000 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.

Cranston also noted that he never benefitted personally from Keating’s largess.

In the other case, D’Amato was accused by a former Democratic opponent, Mark Green, of helping political supporters improperly obtain federal housing grants for projects in Puerto Rico and of irregularities in the award of HUD projects in the early 1980s in the senator’s hometown of Island Park, N.Y.

The Ethics Committee already is investigating allegations that Sen. Dave Durenberger (R-Minn.) circumvented limits on honorariums through a book-publishing arrangement.