The case against the so-called "Keating Five" suffered a setback when the former chief savings and loan regulator conceded that only one of the lawmakers "did something wrong" during a 1987 meeting central to influence-peddling allegations.
In the seventh day of hearings before the Senate ethics committee on Wednesday, Edwin Gray, chairman of the Federal Home Loan Bank Board from May 1983 to June 1987, singled out Sen. Dennis DeConcini, D-Ariz., as the sole senator attending an April 2, 1987, meeting who acted improperly.Gray, a key witness in the case against the senators, said the other three senators present at that meeting, Sens. Alan Cranston, D-Calif., John Glenn, D-Ohio, and John McCain, R-Ariz., acted ethically at the meeting.
The hearings are to determine whether the five senators exerted unacceptable pressure on Gray and other bank regulators to benefit indicted former S&L operator Charles Keating Jr., who contributed $1.3 million to the senators' re-election campaigns and other favorite causes.
Earlier in the day, lawyers representing DeConcini and Cranston attacked Gray's credibility, painting him as a public relations specialist mired in his own ethics problems and carrying a grudge against the senators.
Gray testified Tuesday he felt "pressured and awkward" at the April 2 meeting, which was held in DeConcini's office with aides excluded from attending - a step Gray said was to provide the senators "deniability" for improper actions.
On Wednesday, Gray accused DeConcini of offering a deal on behalf of Keating under which the bank board would withdraw a regulation limiting risky direct investments by thrifts in exchange for having Keating's California-based Lincoln Savings and Loan, which failed in 1989, make more home loans.
Under questioning from the committee's vice chairman, Sen. Warren Rudman, R-N.H., Gray admitted that he objected only to DeConcini's conduct at the meeting.
"As an actor, as someone who did something at the meeting, the only one who you felt did something wrong, from your point of view, was Senator DeConcini?" asked Rudman.
"Right," Gray responded.
Gray said the others would have been acting improperly if DeConcini were "speaking for" them at the session, but he said the other three neither embraced nor rejected DeConcini's alleged offer. Sen. Donald Riegle, D-Mich., was not present at the meeting.
That meeting and one held on April 9, 1987, with officials directly responsible for the Lincoln probe form the backbone of claims the five senators improperly pressed the regulators to assist Keating, who now faces criminal racketeering charges in California.
James Hamilton, DeConcini's lawyer, asked Gray whether he knew of any existing laws or Senate rules broken by DeConcini's alleged deal.
"I don't," said Gray, but he added, "in my mind, in my heart, I know that as a basic instinct" the offer was improper.
"This was a show of force, pure and simple," Gray said, on behalf of Keating, described as "a political benefactor and friend" of the senators.