Ethics Panel Says Cranston Broke Rules in Keating Ties : Thrifts: He is the only one of the five senators involved in the case who is judged to be in violation.

The Senate Ethics Committee ruled Wednesday that Sen. Alan Cranston (D-Calif.) engaged in “an impermissible pattern of conduct” by intervening with federal regulators on behalf of Lincoln Savings & Loan while soliciting large contributions from its former owner, Charles H. Keating Jr.

Cranston, 76, who already has announced plans to retire at the end of his fourth term in 1992, was the only one of the “Keating Five” senators whose actions were judged to be in violation of Senate rules. His case is expected to be referred to the full Senate after he is given one more opportunity to reply to the charges.

The Ethics Committee concluded that there was “substantial credible evidence” that Cranston engaged in improper conduct by soliciting $994,000 in political contributions from Keating during the mid-1980s while agreeing to intervene on his behalf with officials of the Federal Home Loan Bank Board, which was investigating mismanagement at Lincoln.

The senator was in California recuperating from treatment for prostate cancer. But his office in Washington responded to the committee action with a one-sentence statement that did not indicate how strenuously the senator intends to fight the charges.

“It’s clear that I’ve been unfairly singled out despite the evidence in all five cases,” the statement said.

Although the panel found no evidence that the four other senators broke any Senate rules, it concluded that the actions of Sens. Dennis DeConcini (D-Ariz.) and Donald W. Riegle Jr. (D-Mich.) “gave the appearance of being improper” and that Sens. John McCain (R-Ariz.) and John Glenn (D-Ohio) had exercised poor judgment in assisting Keating.

Although the six-member committee originally was divided along partisan lines, the final decision in all five cases was unanimous.

The ruling was a big victory for DeConcini, whose role in the Keating affair--after that of Cranston--caused the most controversy within the committee. Although Republicans initially insisted on citing DeConcini, a former county prosecutor, the panel’s Democrats refused to do so.

Common Cause, the self-styled citizens lobby that initiated the case against the five senators, condemned the committee’s decision to drop charges against DeConcini, Riegle, McCain and Glenn as “a cop-out” that compromises the integrity of the Senate.

Still, the Keating Five investigation long will be remembered as a watershed in the evolution of congressional ethics. Wednesday’s findings are expected to redefine the limits of propriety for all members of Congress who take action on behalf of campaign contributors.

Even though Cranston was the only senator charged by the committee, all five senators have witnessed a sharp decline in their home-state popularity as a result of the committee’s 15-month investigation and three months of televised public hearings.

Being singled out by the Ethics Committee was a devastating blow to Cranston, who has insisted that he did nothing wrong and believes that the panel is making a scapegoat of him because he has decided to retire from the Senate. Through nearly four decades as a dominant force in California politics, he always had enjoyed a reputation for honesty.

It is only the second time in modern Senate history that a member has been charged with wrongdoing by the Ethics Committee for behavior that did not involve allegations of bribery or improper personal gain. The previous offender was Sen. Joseph R. McCarthy (R-Wis.), who was condemned by the Senate in 1954 for charges stemming from his investigations of alleged communists.

The contributions Cranston received from Keating included $39,000 for his 1986 reelection committee, $85,000 for the California Democratic Party to conduct a get-out-the-vote drive in 1986, $10,000 to help retire debt from Cranston’s unsuccessful 1984 presidential bid, $10,000 to his personal political action committee and $850,000 to voter registration groups founded by the senator. This total far exceeded the amounts solicited from Keating by the other four senators.

Intervention by Cranston and others allegedly discouraged federal officials from placing the Irvine-based thrift under federal control for two years. The ailing institution finally was seized in April, 1989.

The failure of Lincoln is expected to cost taxpayers $2 billion. Keating’s mismanagement of the institution has made him a national symbol of the thrift executives whose high-flying investment techniques led to the industry’s $500-billion collapse.

The investigation revolved primarily around two meetings between the five senators and Home Loan Bank Board officials in April, 1987, in which DeConcini allegedly tried to negotiate with regulators on Keating’s behalf. Although the senators learned in those meetings that Lincoln was the subject of a criminal investigation, Cranston and DeConcini continued to assist Keating until the thrift was seized two years later.

The Ethics Committee listed four occasions on which Cranston “engaged in an impermissible pattern of conduct in which fund-raising and official activities were linked:”

--He solicited a $100,000 contribution from Keating in 1987 for America Votes, a voter registration organization, while attending the two meetings with federal regulators.

--After a $250,000 check for voter registration was delivered to the senator’s office in November, 1987, by Lincoln lobbyist Jim Grogan, Cranston called Keating and agreed to contact then-bank board Chairman M. Danny Wall on behalf of Lincoln.

--At a dinner in Los Angeles in January, 1988, Keating offered to make another contribution to the voter registration effort and Cranston agreed to arrange a meeting for Keating with Wall. Keating met with Wall on Jan. 28 that year as a result of the senator’s efforts, and Cranston received checks totaling $500,000 on Feb. 10.

--Cranston’s fund-raiser, Joy Jacobson, solicited another contribution from Keating in early 1989, at the same time the senator was trying to persuade the bank board to approve the sale of Lincoln to a group that later was accused of secretly fronting for Keating.

In addition, the committee found that Cranston’s “Senate office practices further evidenced an impermissible pattern of conduct” in which there appeared to be a link between fund-raising and actions taken by the senator on behalf of Keating.

It specifically cited the activities of Jacobson, who frequently attended meetings in Cranston’s office in which the senator was discussing legislative or regulatory matters with potential contributors. Jacobson was not a member of Cranston’s Senate staff.

When Keating or Grogan could not reach Cranston or Carolyn Jordan--his aide on the Senate Banking, Housing and Urban Affairs Committee--they contacted Jacobson, the committee noted. In addition, it said, Jacobson wrote several memos to Cranston that reflected “her understanding that contributors were entitled to special attention and special access to official services.”

On Jan. 2, 1987, for example, Jacobson wrote a memo to Cranston that listed Keating as one of several big contributors “who had been very helpful to you who have cases or legislative matters pending in our office (and) who will rightfully expect some kind of resolution.”

“Sen. Cranston never told her that her understanding was incorrect, nor did he inform her that such a connection between contributions and official actions was improper,” the committee said.

Technically, the committee action was comparable to the filing of formal charges against Cranston. The senator now has the right to respond before the committee votes formally to pass judgment on the case. He can request another hearing, although that is considered unlikely.

Committee sources said that the panel already has decided to refer Cranston’s case to the floor and that no further investigation by the committee is planned.

The Ethics Committee can recommend censure or expulsion of Cranston, although it is not expected to call for the latter. The full Senate can either accept or reject the committee’s recommendation.

Throughout the investigation, Cranston never quarreled with the facts uncovered by the committee, but he argued that his conduct was consistent with the standards of the Senate.

“I engaged in no unethical conduct,” he told the committee. “You know I broke no law; you know I broke no Senate rule.”

The panel acknowledged in its report that there are no written standards governing the conduct of senators who intervene with federal officials on behalf of a contributor. But it insisted that senators can find “general guidelines” for their conduct in the writings of the late Sen. Paul Douglas (D-Ill.) and in a House legal opinion.

In addition, it recommended that the Senate develop more explicit standards for senatorial conduct in the future. It also said any campaign finance reform legislation enacted by Congress should control “soft money” contributions, such as the $850,000 in tax-exempt donations that Keating made to Cranston’s voter registration drives.

The committee’s statements regarding DeConcini and Riegle were similar to letters of reprimand, even though they were not written as letters. The panel said that it could not condone their conduct, even though they did not act improperly.

DeConcini’s aggressive intervention with federal regulators was described as “inappropriate.” The committee said: “The totality of the evidence shows that Sen. DeConcini’s conduct gave the appearance of being improper and was certainly attended with insensitivity and poor judgment.”

Although the evidence indicated that Riegle played a bigger role in the Keating scandal than he acknowledged, committee members found no evidence that he deliberately misled them. Like DeConcini, Riegle was accused of insensitivity and poor judgment.

Glenn was criticized for poor judgment for arranging a meeting between Keating and then-House Speaker Jim Wright (D-Tex.) after learning in 1987 that the thrift executive was under criminal investigation. Although McCain was likewise cited for poor judgment, the panel said it had no jurisdiction to rule on the flights he took on Keating’s plane while he was a member of the House. McCain did not reimburse Keating for those flights until years later.