Pressure From Keating Cited by Investigators : Lincoln: The House banking panel chairman makes public a letter that he says suggests a ‘fix was in at the Federal Home Loan Bank Board in 1988.’

Congressional investigators Thursday disclosed what they said was evidence indicating that Lincoln Savings & Loan owner Charles H. Keating Jr. and top federal regulators had privately agreed to a plan in 1988 that helped the troubled Irvine thrift avoid a government seizure for nearly a year.

House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) said a letter written to Keating by one of his lawyers, Margery Waxman, on May 10, 1988, suggests that a “fix was in at the Federal Home Loan Bank Board in 1988 to protect Charles Keating and Lincoln Savings.”

It was the first evidence uncovered by the committee that appears to support Gonzalez’s allegations that M. Danny Wall, then bank board chairman, was responding to personal pressure from Keating when he declined to take aggressive action against Lincoln prior to April, 1989.

In an interview, Wall, who recently resigned as chairman of the bank board’s successor agency under pressure from Gonzalez, strongly denied there was any private agreement or that he had succumbed to pressure from Keating and his attorneys. Wall said he never met with Waxman in her capacity as Keating’s lawyer.

Keating’s spokesman, Bradley J. Boland, said that Wall was simply agreeing to a just resolution of the government’s lengthy investigation of Lincoln’s financial affairs. “We weren’t conspiring with Danny Wall,” he said.

The Office of Thrift Supervision, the bank board’s successor agency, issued a statement saying that the Waxman letter “is riddled with errors and false conclusions.”

Lincoln was not seized by the government until April 14, 1989, even though bank board regulators in San Francisco had recommended action against the Irvine thrift stemming from allegations of mismanagement as early as 1987. The San Francisco regulators subsequently were stripped of their regulatory responsibility over Lincoln.

Gonzalez and other critics have charged that by delaying strong enforcement action against Lincoln, the government drove up the cost to taxpayers of the thrift’s collapse to an estimated $2 billion. Lincoln is expected to be the most expensive thrift failure ever.

In her letter, Waxman told Keating that “you have the (bank) board right where you want them” and predicted that Wall would agree to Keating’s demands during a telephone conversation between the two men later that day. Waxman indicated that Wall already had expressed a favorable attitude toward Keating’s demands.

“As you know,” she wrote, “I have put pressure on Wall to work toward meeting your demands, and he has so instructed his staff.”

The letter was written five days after the bank board voted 2 to 1 to remove the Lincoln case from the jurisdiction of the San Francisco office. It outlined five demands that Keating was to make during his conversation with Wall, most of which eventually were accepted by the bank board.

Although the five steps previously have been portrayed by Wall as tough enforcement actions that were resisted by Keating, the Waxman letter suggests that Lincoln officials actually were pleased with the way the bank board had agreed to resolve the matter.

“The letter . . . tracks with amazing accuracy the actions taken by the board--actions which were interpreted publicly as clamping down on Lincoln,” said Gonzalez. “In reality, as the letter carefully explains, the actions were to be shams designed not to punish but to allow Keating an escape route.”

Wall has acknowledged that he met with Keating personally at least three times while Lincoln was under investigation by the bank board and also talked with him occasionally on the telephone. But he has denied that those contacts influenced his handling of the Lincoln case.

On Thursday, Wall said that he initiated the telephone call to Keating on May 10, 1988, to tell him what the board had decided five days earlier and “to tell Keating to take it or leave it.”

At its May 5 meeting, the bank board decided to execute a so-called “supervisory agreement” against Lincoln, freezing the thrift’s investments at their existing levels. In addition, the board decided to send a team of examiners to perform “on-site monitoring” of all important business decisions undertaken by Lincoln officials.

After the exam, the board agreed, Lincoln could apply to be permanently supervised by another district office besides San Francisco, but only if the allegations raised by the San Francisco office were proven false.

In her letter to Keating, however, Waxman said that Wall was prepared to agree that the San Francisco office would never again have jurisdiction over Lincoln. At the end of the examination, she said, Lincoln would be permitted to choose the district office that would oversee its operations in the future.

Indeed, San Francisco was permanently barred from investigating Lincoln, and bank board officials tried without success to assign the Irvine thrift to the Seattle district office, which Keating had chosen. The proposed transfer was blocked by Seattle officials, however, and Washington retained responsibility for the investigation.

“San Francisco is finished,” Waxman wrote. “There is no going back to San Francisco, and nothing can be done to follow up their exam.”

In a statement, Waxman’s law firm, Sidley & Austin, denied that it had brought any political pressure to bear on Wall to remove the Lincoln case from the jurisdiction of the San Francisco office.

“The only ‘pressure’ beyond legal and policy arguments was our accurately advising the staff that (Keating) was considering filing a lawsuit against the board,” the firm said.