Sen. DeConcini Led ‘Keating 5,’ Regulator Says

A federal regulator told the Senate Ethics Committee today that he believed Sen. Dennis DeConcini (D-Ariz.) crossed the bounds of propriety--but four other senators did not--when the lawmakers met with examiners on behalf of Charles H. Keating Jr.

The San Francisco-based thrift regulator, Michael Patriarca, made that assessment in summarizing a meeting he and three other regulators held with the five senators on April 9, 1987, when the senators were trying to help Keating’s Lincoln Savings & Loan.

“It’s only where the senators attempted to influence, to change the outcome of the examination (of Lincoln), of the regulatory treatment for this specific institution, that impropriety was breached,” Patriarca said. “My personal view is Sen. DeConcini did that. It’s not clear to me that any of the others did.”

He was responding to questions from the committee’s ranking Republican, Sen. Warren B. Rudman of New Hampshire. A day earlier, Patriarca said the regulators faced “a full-court press” on behalf of Lincoln by the senators.

Patriarca also testified that his former boss, Edwin J. Gray, then head of the Federal Home Loan Bank Board, was upset after a meeting he held privately a week before with four of the senators.

He said Gray told him that one, DeConcini, had offered him a deal on behalf of Lincoln--that the thrift would make more home loans if the regulators would back off a regulation limiting Lincoln’s ability to make speculative equity investments.

“He was agitated,” Patriarca said of Gray. “He was stressed or distressed, and he told me that he was shocked by the meeting.”

Patriarca testified for a second day before the Ethics Committee’s hearing into allegations the five senators improperly intervened with regulators on behalf of Keating, a major financial contributor.

Patriarca also told Rudman that his own efforts to bend over backward to be fair to Keating’s thrift ultimately resulted in a delay of several months in completion of the regulators’ critical examination of Lincoln.

On Thursday, Patriarca depicted DeConcini as the leader of the senators’ efforts.