Cranston Alters Story About Keating Aid : Ethics: Senator now says he did not know the owner of Lincoln Savings & Loan was the target of a Justice Department investigation.

Sen. Alan Cranston (D-Calif.), seeking to avert possible prosecution by the Senate on charges of misconduct, has altered a key element of his account of actions he took in 1987 on behalf of a major contributor, Lincoln Savings & Loan owner Charles H. Keating Jr.

In a document Cranston submitted to the Senate Ethics Committee Jan. 15, but which has just been made available to reporters, the senator contends that throughout most of 1987 he was unaware that the thrift executive was the subject of a preliminary criminal investigation by the Justice Department.

Previously, Cranston had said he knew about the Justice Department inquiry early in 1987 but continued to intervene with federal regulators on Keating’s behalf because he thought the criminal inquiry was of little or no consequence.

His latest account of these events tends to bolster his long-held argument that when he intervened with thrift regulators on Keating’s behalf during 1987, he had no way of knowing about the widespread fraud and mismanagement that would later be found at Lincoln.

Cranston revised his story in a strongly worded, 16-page brief that he wrote himself and in which he made an impassioned plea for mercy from the committee. The panel, which cited Cranston Feb. 27 for possible misconduct, has been meeting this week in an effort to decide whether the senator’s case will be referred to the full Senate for prosecution.

The committee decided last February to drop its investigation of four other senators accused of acting improperly on Keating’s behalf. At the same time, it found that there was “substantial credible evidence” that Cranston had “engaged in an impermissible pattern of conduct” by assisting Keating while accepting nearly $1 million in contributions from him for political campaigns and voter-registration groups.

In his January brief, Cranston strongly denied allegations of wrongdoing.

“I have never asked for nor accepted a contribution of any kind, whether political or charitable, when I thought the contribution was being offered in order to secure my assistance on any issue or because of any assistance I might provide,” Cranston wrote. “I did not believe that any of the contributions at issue here were given for that purpose.”

Throughout the investigation of the five senators, one of the most important issues in the case has been the question of how they reacted after they learned that investigators at the Federal Home Loan Bank Board had referred a possible criminal case against Keating to the Justice Department in early 1987.

The four other senators said they learned about the criminal referral at a meeting with bank board officials on April 9, 1987. But Cranston, who attended that meeting only briefly, told the committee in a deposition in May, 1990, that he learned about the criminal referral “shortly thereafter” from one of the senators who attended the entire meeting.

Three of the four senators who learned of the criminal referral at the April 9 meeting--John McCain (R-Ariz.), John Glenn (D-Ohio) and Donald W. Riegle Jr. (D-Mich.)--said that they decided to stop assisting Keating thereafter. But Cranston and Sen. Dennis DeConcini (D-Ariz.) continued to assist him until Lincoln was seized by regulators a year later.

In testimony he gave to the committee in May, 1990, Cranston said he was unable to remember which senator had told him about the criminal referral but he expressed no doubt that he had learned it from one of the four.

“It (the referral) didn’t indicate who was involved, whether it was an individual, in California, Keating, somewhere else,” he said. “There was no indication there was a prosecution, no indication that there was a grand jury, no indication that there was a formal investigation, no indication that there was any conclusion about guilt.

“I checked with Caroline Jordan, my staffer, on this and she confirmed what I already felt I knew, that criminal referrals are made very, very often by bureaucrats who get frustrated by their inability to have their way on something and it is for retaliation, (to) try to escalate the situation, and that most of those criminal referrals are never heard from again.”

In addition, he recalled in May, 1990, that he learned about the criminal referral during the tenure of bank board Chairman Edwin Gray, who was replaced on July 1, 1987, by M. Danny Wall. Cranston added that Wall “never ever mentioned anything criminal to me at any time.”

But in the brief he filed with the committee last January, Cranston said he now thinks he may have learned about the criminal referral from Jordan “much later in the year.”

Cranston said that none of the senators remember telling him about the criminal referral after the April 9 meeting and that Jordan “remembers bringing it to my attention after she read about it in a newspaper much later in the year.”

By asserting that he did not know about the criminal referral until late 1987, Cranston undercuts charges that he flagrantly ignored evidence of wrongdoing at Lincoln when he made his initial contacts with Wall in the summer of 1987, asking for a swift conclusion of the bank board’s investigation of the Irvine-based thrift.

Furthermore, if he learned about it from Jordan, based on newspaper accounts, and not from his fellow senators, it supports his contention that he had no reason to believe that it was an indication of serious wrongdoing at Lincoln.

But no matter when Cranston may have learned about the criminal referral, he still contends that it was not unethical for him to continue assisting Keating after learning about it.

“I believe even more strongly now that the fact that some aspect of a business is the subject of a criminal referral does not make it improper for a senator to make status inquiries or urge prompt and fair consideration concerning that business.”

Keating is facing prosecution on a variety of charges and Lincoln’s collapse is expected to cost the government about $2 billion.