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Cranston Voices Regret for S&L; Ties : Thrifts: ‘I wish to God I’d never heard of Charles Keating,’ the senator says in deposition for Ethics Committee.

TIMES STAFF WRITERS

Sen. Alan Cranston (D-Calif.) has told the Senate Ethics Committee that even though he once was at the beck and call of Lincoln Savings & Loan owner Charles H. Keating Jr., he deeply regrets ever meeting the controversial thrift executive.

“Personally and politically, I wish to God I’d never heard of Charles Keating,” Cranston declared during a closed-door deposition last May. A transcript of the deposition was released Friday during hearings into the “Keating Five” scandal.

The transcript provides new details of Cranston’s efforts to encourage the Federal Home Loan Bank Board to permit Keating to sell Lincoln in early 1989, even though he had been informed that the prospective buyers were only fronts for Keating.

Cranston is one of five senators accused of assisting Keating in his efforts to delay a federal takeover of Lincoln in exchange for large contributions to their campaign organizations. When the Irvine thrift finally was seized by federal regulators on April 14, 1989, the cost to taxpayers had ballooned to an estimated $2 billion.

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Although Cranston strongly denied during the deposition that he served as “go-between” for Keating with the government during the final days before the seizure, he acknowledged that he had been available whenever the thrift owner called him.

Asked by Sen. Warren B. Rudman (R-N.H.), vice chairman of the Senate Ethics Committee, if Keating had “almost total access” to the senator and his staff, Cranston replied: “Yes.”

Rudman continued: “So that really any time Keating or people high up with Keating wanted to talk to you or (Cranston’s aide) Carolyn Jordan, they could do that?”

The senator said: “Yeah.”

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Cranston insisted that his actions on Lincoln’s behalf had nothing to do with the nearly $1 million that he solicited from Keating, a conservative Republican. At Cranston’s request, Keating contributed $60,000 to the senator’s campaigns, $85,000 to the California Democratic Party and $850,000 for voter registration groups with ties to Cranston.

Cranston said that he solicited such large sums because Keating had a reputation as a big donor to many causes. “You know he’s given lavishly to others, you don’t ask a guy like him for peanuts and you ask frequently,” he said.

Cranston and his staff contacted bank board officials several times at the thrift executive’s request in early 1989. He indicated his support for a sale of Lincoln to any of three potential buyer groups, all of whom ultimately were rejected on grounds they were fronting for Keating.

Cranston acknowledged that it would have been improper for him to formally recommend the sale of Lincoln but he said that he expressed enthusiasm about a possible sale because it would avert a takeover of the Irvine thrift.

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“I did feel that it would be wonderful if there would be a sale,” he said. ". . . But I did not urge them to approve or disapprove it, I just said it would be great, if it was a bona fide sale and a bona fide buyer, if it could be worked out.”

During the taking of the closed-door deposition, investigators showed Cranston a copy of a memo that he had received on April 8, 1989, indicating that the potential purchasers of Lincoln were not independent of Keating. The senator, who continued to inquire about a possible sale after that date, acknowledged that he knew at the time that the bank board had objected to one of the buyer groups. But he said he did not inquire about the independence of the other two.

“I didn’t advocate that there be any sale to the dummies of Keating,” Cranston said. “I just said (to bank board officials) ‘give a hard look, it would be great if a real sale could be made’.”

He helped Lincoln, Cranston said, because he had been persuaded by Keating that the thrift was being harassed by incompetent federal regulators in San Francisco. He said that he believed Keating even though another friend, Thomas Spiegel, then chief executive of Columbia Savings & Loan, admired the regulators.

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At Spiegel’s request, Cranston once met with Michael Patriarca, one of the San Francisco regulators. But he said that Lincoln was not discussed. In fact, he added, neither he nor Patriarca seemed to know why they were meeting.

Cranston and the four other senators met with Patriarca and other San Francisco regulators on April 9, 1987, when Lincoln officials were being investigated for mismanagement of the thrift and possible criminal activity. The senators have been accused of putting improper pressure on the regulators during the session.

Cranston appeared at that meeting only briefly.

In public testimony before the Ethics Committee Friday, Patriarca said that none of the five senators with whom he met on that day seemed to know anything about the true nature of Lincoln’s financial activities.

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Lincoln had invested hundreds of millions of dollars in raw land in Tucson and Phoenix without first conducting adequate studies of those markets, Patriarca said. It will be years before the land will be needed for commercial and residential development, he said.

Patriarca said that he was not alarmed by the senators’ inquiries. “It’s only when senators attempted to influence, to change the outcome of the (financial) examination, that propriety was breached,” he said.

Only Sen. Dennis DeConcini (D-Ariz.) acted improperly during that meeting, he said. DeConcini asked the regulators to go easy on Lincoln in enforcing a new regulation that required the thrift to reduce investments in risky real estate deals and other ventures.

“Did you consider Sen. DeConcini out of line?” Rudman asked Patriarca.

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“Yes, I did,” Patriarca said.

The April 9, 1987, meeting marked the end of the active involvement of Sens. Donald W. Riegle Jr. (D-Mich.), John Glenn (D-Ohio) and John McCain (R-Ariz.) in Lincoln’s affairs. They apparently were put off when they learned that Lincoln was under investigation by the Justice Department for possible criminal activity.

But Cranston and DeConcini persisted in their contacts with regulators.

In other testimony Friday, Roger F. Martin, a former bank board member, read a statement describing the unusual calls he received in the spring of 1989 from Cranston and DeConcini, who were urging an immediate board meeting to consider the sale of Lincoln.

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Cranston called Martin at home one night between 10 p.m. and 11 p.m., and DeConcini called him the next morning at 5:30 a.m., according to Martin. The senators wanted the board to meet with John H. Rousselot, a former California GOP congressman who was leading a group trying to buy Lincoln.

“I recall Sen. DeConcini used almost exactly the same words as Sen. Cranston,” Martin said. “It sounded like they were reading from the same script or memo.”

Thereafter, the two senators began calling Martin’s office regularly, he said. In fact, they called so often that Martin directed his assistant to contact the staff of both senators to request an end to the calls.

Martin said that he never received any other phone calls from members of Congress outside of normal working hours during his two-year tenure as a regulator.

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