A U.S. thrift regulator testified Friday that Sen. Dennis DeConcini broke the bounds of propriety - but four other senators did not - when they intervened on behalf of savings and loan owner Charles H. Keating Jr.
Regulator Michael Patriarca, addressing the Senate Ethics Committee, drew the line between the behavior of DeConcini, D-Ariz., and four colleagues: John McCain, R-Ariz.; Donald W. Riegle Jr., D-Mich.; John Glenn, D-Ohio; and Alan Cranston, D-Calif.Patriarca said it was wrong for a senator to attempt to "influence, to change the outcome" of an examination that was highly critical of Keating's Lincoln Savings and Loan.
"My personal view is Senator DeConcini did that," he said. "It's not clear to me that any of the others did."
The regulator was referring to the senators' conduct at an April 9, 1987, meeting with four San Francisco-based regulators - including Patriarca - who were responsible for the Lincoln investigation.
Patriarca also said he would fault the senators generally, because they "appeared to have made up their minds in advance" that Keating was right and the regulators were wrong in finding serious problems at Lincoln.
Patriarca's two days of testimony backed the assertion of his ex-boss, former Federal Home Loan Bank Board Chairman Edwin J. Gray, that DeConcini took the lead in trying to negotiate a deal on Keating's behalf.
DeConcini denied that he sought a waiver for Lincoln of a rule prohibiting risky investments, in return for the thrift establishing a home mortgage loan program.
Patriarca was questioned by Sen. Warren Rudman, R-N.H., one of six Ethics Committee members who will judge whether the five senators improperly intervened for Keating.
Keating and associates donated $1.3 million to the campaigns and political causes of the five senators. The committee has held nine days of hearings in an effort to determine whether the money influenced the intervention.
The hearing adjourned until Monday after a former member of the Federal Home Loan Bank Board testified he received calls from Cranston and DeConcini in April 1989 - immediately before the government takeover of Lincoln.
In those calls, said Roger Martin, both senators urged the board to approve a sale of Lincoln rather than its seizure. The requests were rejected.
All the senators except Riegle met on Keating's behalf with Gray on April 2, 1987, in DeConcini's office. When the chief regulator said he lacked details of the Lincoln investigation, the four San Francisco-based regulators including Patriarca, were summoned to the April 9 meeting. That also was in DeConcini's office and this time Riegle joined the group.
Rudman asked Patriarca whether he thought DeConcini was "out of line" in the April 9 meeting, when he sought the waiver for Lincoln.
"Yes I did, senator," the regulator responded. He said that the proper way to challenge the regulation was through the courts and Lincoln "had a retainer with every significant law firm in the country" to do so.
Patriarca said McCain showed the "least prejudice" toward regulators at the April 9 meeting; DeConcini and "perhaps Sen. Glenn seemed to have their minds made up pretty substantially," and Riegle was "in the middle."
Meanwhile, the committee released a transcript of Nov. 7 closed-door testimony of M. Danny Wall, the chief thrift regulator when Lincoln was taken over by the government.
Wall said he did not learn of the criminal referrals in the case until May 5, 1988, more than a year after the San Francisco regulators told the five senators about the findings.
Wall also said he's now highly critical of Cranston's frequent intervention for Keating, because he learned that the senator often called when he was receiving large contributions from the businessman.