Senator Says He Refused to Act as Keating’s Negotiator

Sen. John McCain, once one of Charles H. Keating Jr.’s good friends, said Friday that he rejected Keating’s request nearly five years ago to act as a negotiator in resolving the long and bitter dispute between thrift regulators and Keating’s Lincoln Savings & Loan.

The Arizona Republican--a former Vietnam POW whom Keating admired but eventually called a wimp--testified in Keating’s criminal securities fraud trial that he told the Phoenix businessman in a heated March, 1987, meeting that it would be improper for a senator to negotiate with regulators.

Though Keating didn’t ask him directly to negotiate a resolution, McCain said that was the impression he got from the meeting. The senator said his refusal to act as a negotiator left Keating “quite angry” and “red in the face.”

Still, McCain told a Los Angeles County Superior Court jury, the information available to him on the Irvine thrift at the time “raised serious concerns” about the actions of regulators and indicated that Keating was justified in asking elected officials for help.

McCain’s testimony, a much more limited version of information he provided early this year to the Senate Ethics Committee, broke no new ground in the ongoing saga of Lincoln’s April, 1989, failure.

The committee reprimanded McCain and three other senators for helping Keating while at the same time soliciting political contributions from him. The committee has yet to reach a decision on a fifth senator, Alan Cranston (D-Calif.).

Thousands of small investors bought more than $250 million in bonds issued by Lincoln’s parent company, American Continental Corp. Their investments became worthless after Keating’s financial empire collapsed.