Keating Five Probe Appears Unfinished : Ethics: Panel seeks testimony of ex-Lincoln S&L; owner on possible roles of senators in attempt to sell the firm.

By JAMES S. GRANELLI

Feb. 25, 1992 12 AM PT

TIMES STAFF WRITER

The Senate Ethics Committee, which appeared to conclude its investigation of the so-called Keating Five senators last year, apparently hasn’t finished its probe of the Lincoln Savings & Loan influence scandal.

The committee, which reprimanded five U.S. senators, is now looking into the roles that certain senators may have played in trying to help former Lincoln Savings & Loan owner Charles H. Keating Jr. sell the Irvine-based thrift three years ago.

In a memo obtained by The Times, the committee asked Keating’s lawyer earlier this month if Keating would agree to testify about the “possible assistance of certain senators” in the sale that was pending shortly before the thrift collapsed three years ago.

The committee also asked in its Feb. 3 letter for testimony about “possible contact by a senator with Danny Wall,” then the top federal thrift regulator, about the proposed sale.

Keating’s lawyer, Stephen C. Neal, told the committee by letter Monday that his client would be “delighted” to testify before the committee, “assuming proper arrangements for immunity” can be made for his client. Keating, already convicted of state securities fraud charges, faces two federal indictments accusing him of fraud, conspiracy and racketeering.

The committee has also sent subpoenas to a number of possible witnesses, including Keating’s personal secretary, Carol Kassick, according to a source who wished to remain anonymous.

“This is news to me,” said Murray Flander, press secretary to Sen. Alan Cranston (D-Calif.), one of the Keating Five. “I don’t know what there is now to be looking into that hasn’t already been fully explored.”

Cranston and Sen. Dennis DeConcini (D-Ariz.) said shortly after Lincoln’s collapse that they had contacted regulators in the weeks before the thrift was seized simply to urge them to consider a sale seriously because the company was one of Arizona’s largest employers and one of California’s larger thrifts.

“I never told them to do anything. I said if there’s any way to permit the sale, let him do it,” Cranston said at the time. He and DeConcini could not be reached for comment Monday.

Neither committee staff members nor Sen. Warren Rudman (R-N.H.), the Ethics Committee’s vice chairman who had been trying to get Keating to appear, were available for comment Monday.

Last year, the committee reprimanded Cranston and four other senators for intervening with thrift regulators on Keating’s behalf, while at the same time accepting more than $1.3 million in political contributions from Keating fund-raising.

Cranston and DeConcini--along with Sens. Donald W. Riegle Jr. (D-Mich.), John McCain (R-Ariz.) and John Glenn (D-Ohio)--had met with regulators in 1987 during the lengthy federal audit of Lincoln. Small investors who lost more than $250 million after Keating’s empire fell apart claim that the politicians’ intervention gave the thrift’s parent company more time to sell risky bonds.

Before its public hearings in November, 1990, the Ethics Committee had issued a subpoena for Keating to testify. He invoked his Fifth Amendment privilege against self-incrimination, and the committee did not offer any immunity to obtain his testimony.

The committee’s subsequent reprimands of the senators were believed at the time to represent the end of the its long investigation.

But on Feb. 3, Wilson R. Abney, staff director and chief counsel for the committee, sent Neal a letter asking him if Keating would testify on limited issues. The issues related to a memo that Kassick wrote to Keating in February, 1989, about the pending sale of Lincoln.

Neal’s response Monday charged that the televised committee hearings in November, 1990, “were basically a worldwide television trial of Mr. Keating” that presented a false picture. The transcripts, the letter said, “made it abundantly clear that there are substantial misrepresentations, discrepancies and errors throughout much of the testimony.”