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DeConcini & Keating

Page 6 of 12

In the fall of 1986--about the same time Ober and Cole were meeting with Keating on the Continental Ranch deal--Keating was successful in getting his proxy, Atlanta businessman Lee Henkel, named to the bank board. DeConcini backed Henkel for the post, calling the White House six times urging his appointment, according to testimony from the Senate Ethics Committee hearings. When the White House confirmed Henkel would be named, DeConcini's staff called Keating in October 1986 to relay the news.

At Henkel's first bank board meeting on December 18, 1986, he proposed a rule that would raise the investment regulation to 40 percent of assets, a move that would benefit only one thrift in the country--Lincoln Savings. On the same day, Keating had $3.7 million transferred into a "blind trust" for Henkel to conclude a complicated real estate deal between Henkel and American Continental. Before long, the Wall Street Journal got wind of the details of Henkel's financial ties to Keating and Henkel was forced out in March 1987.

But that didn't stop DeConcini from going to bat for Keating. In March 1987, Senator Donald Riegle of Michigan flew to Phoenix to meet with Earl Katz, who took Riegle over to visit Keating and collect campaign-contribution pledges. When Riegle returned to Washington, he suggested to DeConcini that DeConcini host a meeting with Ed Gray to discuss Keating's problems.

Keating met with DeConcini later in March in Washington, further emphasizing the depth of his problems with Gray. A few days later, Gray received a call telling him to come to DeConcini's office for a late-afternoon meeting. Gray also was told not to bring any staff members, which Gray considered to be an unusual request.

The stage was set for the infamous April 2, 1987, meeting in DeConcini's office where four of the Keating Five senators--DeConcini, John McCain, John Glenn and Alan Cranston--asked Gray to waive the investment regulation for Lincoln Savings if the thrift agreed to increase its home mortgages. According to Gray, DeConcini was the chief speaker in the meeting, pressing most vigorously on Keating's behalf.

Gray refused the request, and two years later Gray told a Dayton Daily News reporter that the meeting in DeConcini's office was an attempt "to directly subvert the regulatory process" to benefit Keating, whom the senators described as "their friend."

A second meeting between the senators and thrift regulators was held a week later, also in DeConcini's office. During the meeting, regulators told the senators that they were preparing to ask the Department of Justice to file criminal charges because of the extensive problems at Lincoln Savings. News of the criminal referral startled the senators and Glenn and McCain severed their ties to Keating. But Cranston, and particularly DeConcini, kept working on Keating's behalf for almost another two years.

Gray's description of the April 2, 1987, meeting came several weeks after American Continental had plunged into bankruptcy and banking regulators had seized Lincoln Savings. By the end of 1990, the Senate Ethics Committee had opened an investigation into the Keating affair.

While four of the five Keating senators eventually admitted they met with Gray and pressured him to withdraw the regulation on behalf of Keating, DeConcini continues to maintain that nothing improper occurred during the April 2, 1987, meeting.

DeConcini's bullheadedness on the matter isn't surprising to Gray.

"DeConcini still is lying," Gray says.


Hal Cole cut off his vacation early, leaving Hawaii the day after receiving the urgent telephone call from Ober. He flew to Tucson on Sunday, September 21, 1986, and early the following Tuesday, he and his attorney took an America West flight to Phoenix. There they met with Ober and drove over to the American Continental headquarters to finalize the biggest investment in their company's history.

Making deals with Keating's Lincoln Savings wasn't anything new to Ober. He was R.A. Homes' point man with the thrift. R.A. Homes and Lincoln had been busy the preceding year. Lincoln Savings extended real estate loans to R.A. Homes for $6 million on December 31, 1985, $11.9 million on July 2, 1986, and $1.5 million on July 17, 1986.

Ober also had done deals with Lincoln outside of R.A. Homes. Lincoln Savings extended a $3 million loan to R.A. Group II Limited Partnership on July 17, 1986, an Arizona limited partnership that included Ober and Katz.

Not surprisingly, Ober was emphatic with Cole that it was important to keep Keating happy so that credit lines to Lincoln would remain open. Keating already had made it clear to Ober that Continental Ranch was a do-or-die deal.

"If we don't do this deal with Charlie Keating, we will never do another deal with Lincoln or AMCOR [a Lincoln Savings subsidiary] or American Continental again," Cole said Ober told him while the men were driving to meet Keating.

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John Dougherty
Contact: John Dougherty