Sen. McCain May Testify at Keating Trial : * Securities: The district attorney wants to establish that there was an attempt to influence regulators.
U.S. Sen. John McCain, one of the so-called Keating Five, has been asked to testify by the prosecution in the state securities fraud trial of Charles H. Keating Jr.
The possibility that the Arizona Republican might take the stand came to light Friday after Robin S. Symes, a former Lincoln Savings & Loan chairman and a key prosecution witness, concluded three days of testimony. The cross-examination of Symes on Friday raised doubts about some key statements he made in the previous two days.
Dist. Atty. Ira Reiner is seeking to have McCain testify in an effort to establish that Keating tried to manipulate regulators. At a March 24, 1987, meeting, according to previous Senate Ethics Committee testimony, Keating asked his longtime friend to mediate his long-running feud with regulators. McCain refused, and Keating’s angry response ended their friendship.
Los Angeles County Superior Court Judge Lance A. Ito has not ruled on whether McCain’s testimony would be relevant to the trial.
McCain’s lawyer, John M. Dowd, said in a letter to Ito that McCain is willing to testify but didn’t believe that the senator’s testimony would be relevant. He also said McCain is busy and needed Senate approval to fly to Los Angeles to testify.
Earlier this year, McCain was reprimanded by the Senate Ethics Committee for his role in two 1987 meetings that five senators, acting on Keating’s behalf, had with thrift regulators.
Keating is accused in 20 counts of defrauding 22 small investors who bought American Continental bonds at Lincoln’s Southern California branches. They were part of thousands who lost more than $250 million when the company and the S&L; collapsed in April, 1989.
In cross-examination Friday, Symes admitted that Keating wanted to run a “squeaky clean” bond sales program at Lincoln. Symes said he and others told salespeople that the bonds were risky and uninsured and shouldn’t be sold to those who couldn’t afford to risk possible losses.
He said he and Ray C. Fidel, Lincoln’s president, were almost suspended because Fidel had instituted a plan to pay bonuses to the staff based on the success of the bond sales, an act forbidden by the terms of the bond prospectus. Symes said Keating “hit the ceiling” when he learned of the incentive plan and installed corporate lawyers to supervise Symes and Fidel on bond sales.
Questioned by Deputy Dist. Atty. William Hodgman, Symes also said that neither he nor Keating ever told bond sellers or buyers that as early as January, 1987--just after the bond sales began--regulators had serious reservations that Lincoln could meet its net worth requirement, the regulators’ standard test of financial strength.
But under questioning by Neal, Symes acknowledged that those concerns expressed by federal regulators in San Francisco were only preliminary and depended on then-undetermined values of a number of Lincoln’s assets.